September 2024 Market Summary
International cotton prices, as measured by the Cotlook A Index, reached 85.80 cents per lb on September 25, the highest level since May 31, before falling back slightly to end the month at 84.40 cents per lb, up by 320 cent points from the end of August. The upward trend reflects the pattern observed in New York: the December contract gained 362 cent points to close the month at 73.61 cents per lb.
The bullish movements were attributed at least in part to speculative buying, perhaps encouraged by the US Federal Reserve’s 50-point interest rate cut on September 18 and an economic stimulus package announced in China a week later. In addition, weather systems that threatened cotton supply first in South Asia and then in the US (detailed below) may have also provided some support to prices. However, attempted rallies in ICE futures faced resistance as demand remains subdued overall, while the growing influence of Southern Hemisphere cotton hedged in New York, most notably Brazilian, perhaps also renders price movements less responsive to US crop prospects.
In its September report, USDA further cut its forecast of domestic production by 600,000 bales (480 lbs) to 14.51 million bales. Some observers considered the figure at the lower end of expectations, however as destructive weather systems including Hurricanes Francine and Helene developed during the month, the large proportion of open cotton (resulting from previously hot weather) standing in fields in the Southeast was put at risk. While official damage assessments were awaited, early estimates in circulation suggested several hundred thousand bales may have been lost. Crop health ratings thus declined in the affected states, as well as elsewhere in the cotton belt.
Meanwhile in China, the most active January contract on the Zhengzhou cotton futures platform reversed direction to gain considerable ground during September, advancing by 735 yuan to close the month at 14,540 yuan per tonne.
As alluded to above, Beijing announced a range of measures to support the Chinese economy on September 24, aiming to combat slower growth in the second quarter of the year. The Reserve Requirement Ratio for banks was reduced to provide more liquidity for lending, while a 0.2-percent cut was made to the benchmark interest rate. On the same date, the Shanghai Composite Index registered a daily increase of 4.2 percent – its largest since July 2020, followed by further consecutive gains including an eight-percent rise on September 30.
That country remains largely absent from the international market as local supplies are abundant and a substantial domestic output is expected this season.
Elsewhere, the rise in international prices served to dampen demand that was especially active in South Asia the previous month as heavy rains flooded some fields and disrupted harvesting. In both India and Pakistan, local prices fell during September as arrivals picked up pace, so mills increasingly turned to domestic supplies for their requirements. In Pakistan, the PCGA reported that seed cotton arrivals totalled 2.04 million lint-equivalent bales by September 30, substantially behind the same moment last year, although commentators indicate a considerable portion of the crop is moving unreported. Meanwhile in India, the Monsoon was withdrawing and picking gradually expanded, but scattered showers were reported in some fields with open cotton toward the end of the month.
Bangladesh, on the other hand, continued to issue enquiries actively for the customary West and East African and Brazilian supplies, mostly to cover nearby requirements and perhaps encouraged by improved yarn prices later in the month. Nonetheless, buyers’ and sellers’ price ideas were still difficult to reconcile, and the familiar problems associated with accessing Letters of Credit persisted. Several weeks of protests were also staged at garment factories in the Ashulia industrial zone, adding further delays to those discussed in our previous report. Demands included implementing the minimum wage where it had not yet been applied, settling outstanding payments and increasing night shift bonuses. Local press reports indicated that demands had largely been met by late September and many plants had thus reopened.
Meanwhile, early picking in Greece was interrupted by wet conditions and increased pest infestations were reported following earlier hot weather. The damage to open cotton was thought to be minimal, but the possibility of delays to harvesting and an impact on the grade composition of the crop emerged. Picking was also expanding in Turkey during September and initial quality reports were promising. Growers and ginners were reluctant sellers, though, in view of the weakness of the local currency versus the US dollar. Nevertheless, buyers in Pakistan and Bangladesh issued enquiry, including for organic lots.
In the Southern Hemisphere, the Brazilian harvest was effectively complete by the end of the month. The official forecasting agency, CONAB, placed lint output in 2024 at a record 3.65 million tonnes, while ABRAPA, the producers’ organisation, put forward its first forecast for 2025 production at 3.97 million tonnes. Picking was also complete in Argentina, but inclement weather may have hindered processing later in the month. In Australia, early seedlings were developing well in Central Queensland while growers in New South Wales prepared fields for sowing. However, temperatures were cooler than would be ideal.
In September, Cotton Outlook increased its forecast of global raw cotton production in 2024/25 by 170,000 tonnes to 25,285,000. Upward adjustments for China and Brazil were partially offset by lower figures for the United States, Pakistan and Greece. Our consumption number was meanwhile reduced by 76,000 tonnes to just under 24.3 million, attributed to Pakistan. As a result, world stocks by the end of the season were expected to rise by 990,000 tonnes, up from the 774,000-tonne increase put forward in August. For 2023/24, a minor addition was made to our output figure. Therefore, the margin by which production was estimated to have exceed consumption in that campaign was raised slightly, to 961,000 tonnes.