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Monthly Economic Letter June 2023

June 12, 2023

Jon Devine


Movement in NY/ICE futures was erratic, but most cotton benchmarks were rangebound over the past month.

  • Over the past month, NY/ICE contracts continued to swing back and forth within the limits of the ranges that have contained them since late 2022.  Open interest has been migrating out of the July contract and into December.  July prices rose from below 80 cents/lb to 88 cents/lb before easing back to current values near 84 cents/lb.
  • Prices for the December NY/ICE contract (reflective of market expectations after the onset of the 2023/24 harvest) rose from levels below 80 cents/lb to as high as 84 cents/lb after the release of last month’s report.  Values then retreated below 80 cents/lb near the end of May before recovering to reach the current level near 82 cents/lb.
  • The A Index followed the same pattern as NY/ICE futures.  Values climbed from 91 to 98 cents/lb, dropped back to 91 cents/lb, and later recovered to recent levels near 94 cents/lb.
  • Chinese prices, represented by the China Cotton Index (CC 3128B), increased slightly over the past month (from 107 to 110 cents/lb).  In domestic terms, prices rose from 16,300 and 17,400 RMB/ton.  The RMB weakened against the dollar, from 6.94 to 7.13 RMB/USD
  • Indian spot prices (Shankar-6 quality) decreased from 94 to 87 cents/lb between the middle and end of May.  More recently, prices recovered some ground, and the latest values are near 91 cents/lb.  Domestic prices decreased from 60,700 to 56,200 INR/candy before recovering to 58,000 INR/candy.  The INR was steady against the dollar, holding near 82 INR/USD.
  • Pakistani prices were steady around 85 cents/lb during the past month.  In domestic terms, prices held at exactly 20,000 PKR/maund since late April but ticked up to 20,300 in the latest data.  The Pakistani rupee was generally stable near 285 PKR/USD.


The latest USDA forecast featured increases to figures for 2023/24 global cotton production (+1.0 million bales to 116.7 million) and mill-use (+765,000 bales to 117.0 million).  Mill-use estimates for 2022/23 were lowered -538,000 bales (to 109.1 million) and contributed to higher 2023/24 beginning stocks. 

The net result of the latest revisions was to lift the projection for 2023/24 ending stocks +515,000 bales relative to the number released in May.  At 92.8 million bales, the current forecast is virtually even with the figure for 2022/23 (92.9 million bales) and ranks among the top five volumes on record (only behind 2013/14 and 2014/15 when Chinese reserves were exceptionally high, 2019/20 with the onset of COVID, and marginally behind 2022/23).

At the country-level, the largest changes to production figures were for the U.S. (+1.0 million bales to 16.5 million), Pakistan (+600,000 bales to 5.9 million), and China (-500,000 bales to 27.0 million).

For mill-use, the largest updates were for Pakistan (+200,000 bales to 9.8 million), Vietnam (+200,000 bales to 7.1 million), Bangladesh (+100,000 bales to 8.1 million), Indonesia (+100,000 bales to 2.3 million), and Turkey (+100,000 bales to 8.0 million).

The global trade forecast for 2023/24 was lifted +901,000 bales to 43.7 million bales.  In terms of imports, the largest revisions for 2023/24 were for China (+500,000 bales to 9.5 million), Vietnam (+200,000 bales to 7.1 million), Bangladesh (+100,000 bales to 8.1 million), Indonesia (+100,000 bales to 2.3 million), Turkey (+100,000 bales to 4.4 million), Pakistan (-200,000 bales to 4.5 million).  In terms of exports, the largest revisions for 2023/24 were for Brazil (+550,000 bales to 9.3 million), the U.S. (+500,000 bales to 14.0 million), and Mali (-100,000 bales to 1.2 million).


After three years of drought, significant rainfall finally arrived in West Texas.  In certain areas, precipitation was heavy enough to cause flooding.  While flooding may have a detrimental impact on some farm operations, the arrival of rain has already caused projections for abandonment to decrease.  The USDA lowered its national abandonment figure by 700,000 acres month-over-month, dropping its forecast abandonment rate for the U.S. from 23% (May figure) to 16% (June figure).  As the season progresses, additional rain will be needed to support plant health, but recent precipitation will encourage germination and any moisture accumulated within the soil will be beneficial.

The weather will remain an important variable to watch in other major growing regions. In China, there were some challenging conditions early in the season, and the crop is expected to be smaller than one year ago due to a combination of lower acreage and yield (27.0 million bales in 2023/24 versus 30.7 million in 2022/23).  The Indian government just announced a 9-10% increase in the minimum support price for cotton (guarantees vary by quality).  Despite the addition, Indian acreage is expected to fall due to price-related competition from other commodities (USDA forecasting a 5% drop in Indian planting, but Indian production is expected to increase 2% due to a forecast calling for higher yields).  The monsoon season, which brings most of India’s annual rainfall, just got underway.  This year’s monsoon arrived a little later than usual, and Indian government projections suggest slightly less accumulation than the long-term average.  Pakistan has suffered from recent hailstorms, but the crop has otherwise been reported to have been progressing well so far this season.   The USDA indicates the Pakistani harvest will be two million bales larger than last crop year’s flood-affected figure (5.9 million bales in 2023/24 versus 3.9 million in 2022/23).

As the weather unfolds, understanding of the global supply situation will improve.  More persistent questions for the market will likely come from the demand side of the market.  Global economic growth is expected to be sluggish and there have been widespread reports of inventory accumulation throughout supply chains.

Disclaimer: The information contained herein is derived from public and private subscriber news sources believed to be reliable; however, Cotton Incorporated cannot guarantee its accuracy or completeness. No responsibility is assumed for the use of this information and no express or implied warranties or guarantees are made. The information contained herein should not be relied upon for the purpose of making investment decisions. This communication is not intended to forecast or predict future prices or events.