Amid the US/China trade war and the slowdown in the Chinese economy, a major crisis appears to be developing in the makeup of the 2018/19 exportable crops. The combination of the excessive rainfall at harvest in the US and untimely rains in the producing areas of other exporters, along with a drought in Australia, has left world supplies of long staple, low leaf, with a color grade of 31 or better in extremely short supply. The Strict Low color grade with a 4-5 leaf has become the dominant quality available, and spinners have begun to pay a higher basis to obtain the needed quality.

First off, the 2018 Australia crop is gone, sold out, and the 2019 crop is close to being over committed. In the US, to find a 31-3 on a merchant’s offering sheet is now a rarity. Strong demand for the 2018 Brazilian crop has also firmed its basis levels. Some merchants have trimmed their inventory of Brazilian and have raised the basis back to 1000 points on March or higher for a Middling 1 1/8. A small supply of Middling 1 5/32 is offered at 1050-1200 points on. A record volume of the 2018 Brazilian crop moved to Chinese buyers. The quality of the US crop has declined as classings have advanced; US merchants and coops expected another US crop with 50% high color grades were over 21 & 31, as was the case the past two seasons. The large forward sales mean that the US supply of 31 and higher long staple cotton has been oversold.  The dominant color grade has been 41 or Strict Low Middling with a 4-5 leaf content. Bark has become a major issue in several areas in the latest classing results.

Offers from Greece and Turkey have also been dominated by SLM color grades following untimely rains at harvest. The Indian crop shortfall has denied the market the normal supply of Shankar-6 higher grades. This shortage has caused spinners to seek the longer staple high grades wherever they can find them. West African SM 1 1/8 are proving popular with spinners in the Subcontinent and other locations. The African Franc Zone crop was up sharply in 2018/19 at 5.86 million bales, which has provided increased supplies to the market. The African harvest has been good, allowing a large supply of traditional 1 1/8 and longer staple high grades. Basis levels have been firm and moved to a premium to many of the machine picked styles.

Many merchants offer West African as a SM 1 1/8 style with the shipment origin at the merchant’s discretion. Others are offering it by country, which has allowed a premium to develop for Mali T-Juli/s 1 1/8, which is now offered at 1200-1300 point on March and May. The second origin to command a premium is Benin Kaba/S 1 1/8, which is offered at 1100-1200 on March and May. The volume is limited, but Cameroon and Burkina Faso have developed a premium market for a longer staple SM 1 5/32 style at 1350-1400 on for Cameroon Plebe and 1250 points on for the Burkina Faso Bola/s. The cheapest and most aggressive offers are Ivory Coast Manbo/s 1 1/8 at 1100 to 1150 Points on March and May, and Togo Alto/s 1 1/8 and 1 3/32 at 1000 points on.

The US catalog is dominated by 41 and below color grades with higher leaf and bark discounts showing up in volume. The catalog of long staple, discounted color grade is, however, making US cotton quite popular in the Subcontinent and in Turkey. This cotton is simply the cheapest in the world. Sales were active last week as prices of many popular styles moved off at 500 on, CFR for styles such as an E/MOT 41-5-37. The volume of US sales, which have occurred since the halt in the release of the USDA weekly export sales, could now be approaching 800,000 to 900,000 bales, or more.