The disruption of Greek cotton in the nontraditional markets is one factor and another is a development we discussed several weeks ago which is the result of the Lira crisis and its impact on cash flows and credit which is moving Turkish cotton into export channels. This has continued to occur and the volume will likely exceed all estimates. The situation is due to cash constraints and the lack of credit which has caused a decline in local prices to the point that international merchants see them as very attractive.  Turkish cotton is machine picked and the only issue is rains during harvest which reduces color grades to Strict Low Middling and increases leaf content.  Rains this season have again occurred with SLM grades now dominating with a shortage of Middling’s and above grades occurring.  This abundance of 41, or SLM, grades has pushed basis levels to 70.50 to 71.00 US cents FOB gin in the Southeast, approximately 800 point off Dec futures basis for a SLM 1 1/8.  To put this in perspective, this compares to an ex gin basis of 200 off for a Memphis Territory 41-5-36 and 450 off in West Texas. Another contributing factor is the location of the largest Turkish cotton producing regions in Adana and in the GAP, or Southeastern region, is near the major export ports.

Turkish cotton can currently move cheaply into several markets vs the US E/MOT.  This was illustrated in the active Pakistan market last week when the ex gin price and lower shipping cost resulted in sales of a SLM 1 1/8 (a bit leafy) into Pakistan at 78/79 cents which was 100-200 on Dec.

US 2017/18 recaps could be found in the same market with a 41-5-37 + offered at 800-850 on Dec. Pakistan mills have limited experience with Greek or Turkish but at these discounts to US recaps they are willing to try these machine picked cottons.

In recent years the booming domestic spinning market has resulted in an increase in Turkish cotton acreage. 2018/19 domestic production is expected to actually reach a record at 4.5 million bales which during the booming domestic consumption markets of 2017/18 the increased production was not an issue. It does reflect, however, a near doubling of production from 2015/16 production of 2.650 million bales. Amid the Lira crisis cash flow and credit are the drivers for all business. The international merchant’s access to USD credit makes them the price maker and at such discounts this cotton will move into the export markets, possibly 500,000 - 750,000 bales could move to export. Due to color grade and leaf this cotton does not appear to be attractive to Chinese mills thus it will likely be a disrupter for US cotton in Pakistan, Vietnam and Indonesia. The weekly export sales report for US cotton for the week ending October 18^th illustrated this as demand from all these markets were very soft for US cotton.