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Reasons for declining tendency in cotton market




  • Though a large turnover was reported in ready cotton business on last Wednesday erosion of lint prices was said to have set in on Thursday amidst news of good seedcotton (kapas/phutti) arrivals and rekindling of hope that Pakistan is likely to harvest a record crop this season (2003-2004).
    Traders said in Karachi that seedcotton equivalent to 9.3 million to 9.4 million bales (170 kgs) had already arrived at the ginning factories and the figure is likely to swell to 10 million bales by the 1st of December 2004.
    In line with the current assessment and mode of thinking traders hope that Pakistan will reap a record crop of 13 million bales (170 kgs) this season (2004-2005) on ex-gin basis.
    According to trade talk, mills have lifted an estimated 6.3 million to 6.4 million bales till now. The Trading Corporation of Pakistan (TCP) has bought more than one million bales by now from which they have lifted about 350,000 bales while the exporters are said to have lifted about 300,000 bales till this period of time.
    Despite aggressive buying by the Trading Corporation of Pakistan (TCP) who have bought more than ten million bales and have thus prevented a possible downslide of larger proportions, cotton market remained subdued and appeared under visible pressure on Thursday.
    Even though the Trading Corporation of Pakistan (TCP) has announced to purchase up to 7,000 bales from each ginning factory instead of 6,000 bales announced earlier, the cotton market continued to portray a subdued condition.
    Seedcotton (kapas/phutti) prices were said to have gone down by Rs 15 to Rs 20 per 40 kgs on Thursday. Thus the seedcotton prices in Sindh was said to have ranged between Rs 775 to Rs 870 per 40 kgs according to the quality, in the Punjab the seedcotton prices extended from Rs 800 to Rs 920 per 40 kilogrammes.
    On Thursday the prices of ginned cotton in Sindh reportedly ranged from Rs 1775 to Rs 1975 per maund (37.32 kgs) while in the Punjab they are said to have also generally prevailed in the same range as Sindh, according to the quality.
    Therefore, it appeared that the volume of business had declined at the approaching weekend and some sort of pressure was evident on lint prices in the market.
    Moreover, New York cotton futures market will also remain closed from Thursday through Sunday due to thanksgiving holidays and also the weekly closures. Thus any new initiative in the cotton market will essentially be offered to next week
    Bulk of the domestic cotton crop had hitherto been of good to excellent quality, but now news of deteriorating grades and mixing of cotton is being reported in the market. Complaints of low quality have started to trickle in from both Sindh and Punjab.
    Till the afternoon on Thursday buying was reportedly restrained in the cotton market. However reports for yarn prices were encouraging.
    Sindh quality of cotton has relatively deteriorated much more than in Punjab. Brokers in Sindh said that a majority of Sindh ginners are keen to sell their cotton to the TCP, where as many of the Punjab ginners are offering their lint to the spinners.
    Private exporters and open-end spinners are also quite interested to buy Sindh cotton for the lower counts which they find to be remunerative. Discoloration has also been reported from cotton being received from Sindh due to rains which had been fallen on the plants in the previous weeks.
    In the meantime, the inter-ministerial committee held a meeting on last Tuesday under the chairmanship of Commerce Minister Humayun Akhtar Khan which was also attended by the Minister of Food and Agriculture Sikandar Hayat Bosan.
    The meeting appreciated the aggressive cotton buying by the Trading Corporation of Pakistan (TCP) to stabilise the cotton prices and reportedly turned down the demand of the All Pakistan Textile Mills Association (APTMA) to ask the Trading Corporation of Pakistan (TCP) to stop buying in the market and let the market forces of supply and demand determine the cotton prices.
    The President of Liverpool Cotton Association (LCA) Andrew MacDonald, OBE (Order of the British Empire) is visiting the Karachi Cotton Association (KCA) on Friday morning and will address prominent members of the KCA on certain changes in the Liverpool Cotton Association (LCA) rules which should be beneficial to the members of the Karachi Cotton Association (KCA).
    A large portion of international cotton trade is conducted under the rules and arbitration of the Liverpool Cotton Association (LCA) which has evolved and encoded the bylaws for international cotton trade over the past several decades and which are very helpful to both the buyers and the seller alike.
    According to Gerald Estur, statistician of the International Cotton Advisory Committee (ICAC) the worlds cotton production for the current season (2004-2005) is being estimated at 24.4 million tons which is 3 million tons more than the record cotton production achieved in the year 2001-2002, Estur added that besides high cotton prices in 2003 favourable weather conditions had led to reaping of record or near record cotton crop in the five top cotton producing countries namely China the United States, India, Pakistan and Brazil.
    Gerald Estur added that low cotton prices had stimulated consumption which is expected to grow by 5 percent this season to reach a record 22.4 million tons.
    Gerald Estur said that the elimination of quotas would benefit Pakistan, India and China substantially. The vice-chairman of the Pakistan Central Cotton Committee (PCCC) Dr Ibad Baddar Siddiqui said on the occasion that the cotton output in Pakistan was being assessed at 12.1 million bales against a target of 10.7 million bales.
    Higher cotton production would be due to a 7 percent increase in cotton cultivation, favourable weather condition and lesser pest infestation this season (2004-2005)

    Courtesy: Business Recorder

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