Speculators spend the final two days of the week probing the downside support between 61 and 62 cents, but backed off as decent mill business was uncovered. The new crop December contract did climb to its highest level since the first week in January, 63.56 cents, but lost ground the remainder of the week.

Chinese reserve offerings were as expected as some two-thirds were U.S. and Australian Good and Strict Middling types as had been advertised. Essentially all of the Chinese stocks offered by the government were sold. U.S. exports sales lagged, but shipments continued at an excellent pace. The five cent trading range shows all prospects of holding through the June time period.

The market uncovered little if any impactful news on the week. The Chinese sales finally came online and true to the announced plans imported cotton was the highlight of the sale. The government confirmed that 99.6% of the offered cotton was sold with 80% being imported high grades and the remaining 20% being domestic production. The imported U.S. and Australian offerings were fully subscribed, or some 72,400 metric tons (1 metric ton equal 4.593 statistical bales). Some 17,900mt of domestic cotton were sold.

The mills response to the sale confirmed the immediate delivery needs of Chinese mills and the hand to mouth import buying that has been in place for some time. It is believed that the sales of imported cotton represented only about 10% of imported stocks held by China and that imported cotton will continue as the feature of the upcoming weekly offerings. As previously announced by the Chinese –  their plan is to insure adequate offerings of high grades until the new crop Xinjian crop becomes available, expected to be in the September-October time frame. Essentially the only high grade cotton held in the reserve stock is of U.S. and Australian origin.

Weekly U.S. export sales, impacted by the prior weekΆs price averaging above 63 cents, were less than impressive, but did represent a measurable increase above the prior week when prices were flirting with 64 cents and above. Net sales of Upland cotton totaled 61,300 RB with Brazil, China and Pakistanrepresenting the primary buyers. Again, the disappointing Brazilian crop yields showed in that it was the leading buyer followed by China and Pakistan. Sales of 24,800 RB were made for 2016-17 delivery. Exports continued their impressive two month run with 277,600 RB of Upland shipped with to Turkey, Vietnam andMexico being the primary destinations. Weekly Pima sales were 11,400 RB led byIndia, China and Pakistan. Export shipments were 12,000 RB.

LACK OF DEMAND

The increasing U.S. imports of denim coming into the U.S. from China is of growing concern.

Just as U. S. consumer demand for denim is finally beginning to register a slight increase, China is beginning to replace Mexico as the primary source of imported blue denim into the U.S. market. The reality is that raw U.S. cotton exported to Mexico, and returned to the U.S. as denim, are now being replaced by denim imports from China that have been manufactured mostly from Chinese grown cotton–at a time when China has stated it will limit U.S. cotton imports.

Granted, I am a free-trader – after all I have an “I am smart degree” in economics. Yet, U.S. cotton appears to have been abandoned by the international trade desk in Washington. The trade deficit in cotton fiber, textiles and apparel has reached a record level and the U.S. has been silent.

China exported $3.4 billion worth of textiles and apparel to the U.S. in February. This was a growth of over $500 million from a year ago and was up 17.5 percent. It is clear that the U.S. has allowed record world subsidies by China to go unchallenged. U.S. textile and apparel imports expanded 14% in February reaching $9.2 billion. China had a 37% market share. The February growth in shipments to the US in volume grew by 23 percent. This means 1 out of every 3 garments purchased in the U.S. came from China.

Evidence is also surfacing that non textile producing countries are exporting cotton textile products to the U.S. Such begs the question: How does a country without a textile industry export textile products to the U.S?  That is, I wonder where the imported product was actually manufactured.

The trading range continues, absent an unusual announcement from Mother Nature.

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