A lack of finance programs and the movement of the domestic cotton crop have left Turkish mills out of the market for imported cotton at a time when the US and Greek cotton are normally selling in volume. Last year by Oct 19 the US had already sold Turkey 631,900 running bales of upland and 4,500 of Pima. Turkey is an even more important market for Greek cotton when in some seasons up to half of all Greek exports goes to Turkish buyers. In 2018/19 Greece is a major exporter with exports expected to reach 1.2 million bales, which will be the second largest volume on record and only marginally behind the record of 1.285 Million bales set in 2013/14. Greece has improved its quality in recent years offering up to 1 5/32 staple in Strict Middling and below grades. Traditionally rain is always a risk during harvest which means normally the Strict Low Middling color grade makes up a large percentage of the offering. The Greek crop is machine picked and last season it sold at a premium to US styles, sometimes by a wide margin. The crop normally moves heavily the first half of the season.
The disappearance of Turkish mill import demand is causing some merchants who are long the Greek basis to turn very aggressive sellers of Greek cotton. In recent years Turkey has purchased
365,000 to over 587,000 bales from exports of 959,000 to 1.168 Million bales. Indonesia and Egypt have been the other major markets taking nearly 150,000 bales each. China has not been a steady buyer but sporadic in its offtake while Bangladesh and Vietnam have become new buyers in recent years. With exports expected to near a record after a great crop the need to find buyers for an extra
500,000 bales is a challenge. China has appeared a large buyer but not in the lower grade volume needed. Chinese mills are generally unfamiliar with Greek and don’t fully know just how much the quality has improved. China has focused its demand on the Strict Middling and Middling. The most difficult and competitive market is the SLM styles.
Last year at this time the Greek Middling and Strict Middling 1 5/32 was selling at 1375-1475 points on Dec and a SLM 1 1/8-1/532 was selling at 1275-1325 points on Dec. Offers of the 2018/19 crop started off at similar offers but after the Turkish Lira crisis broke the offering basis dropped just over 200 points. Now, as the Greek harvest is underway and cotton is moving and demand overall has weakened the basis has weakened further, which is especially evident in the SLM offers. Spinners with needs to cover in Middling-SM 1 5/32 styles Greek offers of 1200 points or so reflect real value given the shortage of these color grades out of the US. Middling 1 1/8 offer are very aggressive at 925 points on Dec putting it at a discount to US E/MOT styles which has drawn new sales from traditional buyers of US cotton.
It is in the Strict Low Middling color grades that have experienced the most aggressive competition. Merchants appear to have unsold inventories of 2017/18 US SLM, or 41 color grades, in Memphis/ Eastern and MOT and now they are receiving 2018/19 41 color grades in volume. It was the average color grade in the Memphis Territory the last two weeks. Greece SLM 1 1/8 offers are now occurring at large discounts to US of the similar grades, Greek SLM 1 1/8 has sold at 600-650 points on Dec into Pakistan which has traditionally been a larger buyer of this description. This reflects a big discount to US offers, US E/MOT 41-4-36 offers are at 925 points on Dec, 41-4-37 are at 950 and 4-4-38 are at 975 points on. Memphis Territory offers are bringing a 125-150 point premium. Memphis Territory offers extend to 41-4-40 which is offered at 1100 points on. MT 41-5-38 offers are discounted to 850 points on Dec., in CFR Asia terms. The need by merchants to sell Greek in nontraditional markets is putting major pressure on US offers, especially the lower color grades.
Source: Jernigan Global