Pakistan Cotton Crop Problems Boost Demand For US Exports

January 15, 2016 – US cotton export sales have risen, as production problems in South Asia boost demand there.  Net export sales of upland cotton over the last week were up 68% from the 4-week average, at 171,000 running bales.

And sale of pima, a variety of extra-long staple cotton, which provides a higher quality fibre, were strong as well, as 27,000 running bales.

“It was a positive report, one of the better sales report we’ve seen recently,” Jack Scoville, analyst at Price Futures group, told Agrimoney.

Mr Scoville pointed out that Vietnam, which is a major exporter of yarn for the Asian textile market, has returned buying US cotton.  And China and Indonesia, which have been slow buyers recently, were also represented.

He also noted rising sales to South Asia.  “There’s been problem with the production over in India and Pakistan,” Mr Scoville said.

The week the US Department of Agriculture downgraded prospects for Pakistan’s cotton crop to a 17-year low, after extensive whitefly damage reduced production.

And Indian production has also been poor.  “Indian export volumes have been weak,” said Mr Scoville. “It could be thirty percent lower”.

Although India is a net cotton exporter, there is still demand for high quality cotton for blending in its yarn and textile industry.

There was potential pressure on cotton prices on yesterday, as reports said that China’s government is preparing to launch another attempt to sell off some of its huge cotton inventories.

Reports stated that Chinese officials met with representatives of the textile and cotton industry, in consultations over the move.

Chinese state cotton stocks, which are now estimated at around 11m tonnes, were swollen by a price support scheme, which saw large volumes of fibre being purchased from farmers.

The unspun cotton is degrading over time, becoming more brittle.

An attempt to draw down stocks met with little buyer enthusiasm last year. Of the 1m tonnes made available for purchase, just 64,000 tonnes were bought.  Authorities were unwilling to price the fibre to move, out of fear that a flooded local market would hit farmer incomes.

But Mr Scoville was sanguine over the prospects.  “I don’t’ view that as a big game changer,” he said, adding that if the selling prompts a fall in Chinese domestic cotton prices, it would be Chinese production that was hit hardest, giving support for US prices in the long term.

“I think at the end of day that helps to reduce the overall stockpile would be positive.”  March cotton futures in New York were down 0.3% at 61.95 cents a pound in afternoon deals.


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