ANALYSIS: cotton market gains stability

Cotton prices achieved an element of stability on Thursday after many days which saw incessant fall of lint values. Last Wednesday saw current season’s (2004-2005) lowest level of lint prices when Sindh styles from Tando Allahyar and Mirpurkhas sold at Rs 1700 to Rs 1725 per maund (37.32 kgs), while in the Punjab ginned cotton sold as low as Rs 1800 per maund on an ex-gin basis.
Thursday saw some relief for the growers when the market called a halt to the seemingly interminable free fall of cotton prices seen over the past several weeks.
Thus lint prices gained by Rs 25 to Rs 50 per maund on Thursday in both Sindh and Punjab. A strong entry of exporters in the market, better closings of New York cotton futures and announcement of the Trading Corporation of Pakistan (TCP) that they had purchased 112,300 bales from the ginners appeared as positive factors in the market.
The debacle arising from downdrift of cotton prices since the past several weeks appeared to have been presently contained. Pakistani cotton still remains the cheapest in the world and this year the quality and fibre characteristics are exceptionally good.
Moreover, if the cotton output during the current season (2004-2005) is being projected to produce 13 or more million domestic size bales due to ideal weather, the mills consumption in Pakistan is also expected to show a matching increase.
These preliminary presumptions are very heartening for the entire cotton economy of Pakistan including its vast and continually growing textile sector. Thus there prevails a veritable optimism in the overall economy of Pakistan. With these features having entered the market, a further fall in lint prices met a resistance due to the buyers who emerged in the market in the form of exporters.
Moreover, the overall mill buying at various rates over the past several weeks also ensured a fair uptake of cotton from the ginners.
With this scenario, import enquiries into Pakistan for upland cottons with medium staple lengths are drying up from day today.
However, it is noteworthy that domestic mills are continuing to show an abiding interest to import longer staple cottons.
This development shows that the Pakistani textile industry is slowly but surely moving towards adding more value to its manufactures and exports.
Now ginners in Khairpur district in central Sindh have also become operative while some ginners in Sukkur in upper Sindh have also started their operations.
Traders in Multan said that most ginners in Punjab are also now running their factories. We thus hope that very soon all the ginners in Sindh and Punjab will become fully operative.
Most possibilities of bad weather and allied problems are going into the background as fruits and flowers on the cotton plants are appearing in full bloom. Indeed there are reported to be more and bulkier bolls on the cotton plants the likes of which have not been witnessed over the past many years.
This should presumably provide higher yield to the growers and more ginning out turn (GOT) to the ginners leading to a higher output and consequent profits.
In view of improvement in lint prices, the seedcotton (kapas/phutti) prices also moved up by Rs 25 to Rs 50 per 40 kgs on Thursday.
Thus seedcotton from Sindh sold from Rs 750 to Rs 850 per 40 kgs, while in the Punjab the seedcotton prices reportedly ranged from Rs 800 to Rs 875 per 40 kilogrammes. In the evening there were reports that seedcotton arrivals had slowed down.
Possibly the growers are waiting for the cotton prices to go up following purchases by the exporters and the Trading Corporation of Pakistan (TCP).
The prevailing prices of lint reportedly ranged from Rs 1800 to Rs 1900 per maund (37.32 kgs) in both Sindh and Punjab. Moreover, the exporters are reported to be buying cotton regularly from the market.
Thus the offtake of cotton has been mostly quite regular and steady since the inception of this season viz. 1st of August 2004. It may be surmised that given the current information and projections, an equilibrium between supply and demand of cotton and also that of prices is likely to prevail in the domestic market.
In actual sales reported on Thursday 400 bales from Sanghar in Sindh were sold at Rs 1800 per maund (37.32 kgs), 400 bales from Shahdadpur sold at Rs 1850 per maund; 1000 bales from Nawabshah sold at Rs 1900 per maund, while 1000 bales of cotton from the Khairpur district sold variously from Rs 1900 to Rs 1925 per maund.
In the Punjab, 500 bales each from Rahimyar Khan and Sadiqabad and 1000 bales each from Harunabad, Bahawalnagar, Chistian, Burewalla and Gojra were all said to have been sold at Rs 1900 per maund. In the evening, the cotton market was showing a steadier appearance.
According to the Pakistan Cotton Ginner’s Association (PCGA) seedcotton (kapas/phutti) arrivals for the current season (August 2004/july 2005) till the 1st of October 2004 were 2,174,206 domestic size bales compared to last years (2003-2004) 1,169,557 bales, a whopping increase of nearly 86 percent.
Traders remain hopeful of harvesting a bumper cotton crop in Pakistan this season.
Haji Abdul Shakoor Dada, a leading cotton merchant has been unanimously elected as the chairman of the Karachi Cotton Association (KCA) for the year 2004-2005. Sohail Naseem, a prominent exporter has unanimously been elected as the vice chairman.

Curtesy: Business Recorder

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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