ANALYSIS: prices collapse on cotton market

LAHORE: Cotton prices collapsed over the past two or three days conceding about Rs 200 to Rs 250 per maund (37.32 kgs) only since yesterday, lint prices have lost Rs 100 per maund.
Traders attribute the heavy fall in cotton prices to early and large arrivals of seedcotton (kapas/phutti) into the ginning factories.
The quality of lint continues to remain good in Sindh while in the Punjab it is said to have improved substantially. Slower yarn offtake is also contributing to the slackness in lint prices.
Cotton prices have generally been bearish both globally and in the domestic markets in recent past. The sudden fall in local lint prices in Pakistan is therefore hardly surprising.
However, despite official pronouncements, brokers said in Karachi that the presence of Trading Corporation of Pakistan (TCP) is not yet being felt in the market to stem the big decline in cotton prices.
Ideal weather prevailing in the cotton belt and early commencement of the current cotton season (2004-2005) by one month triggered the fall in cotton prices.
Now traders are estimating the present crop to be in the range of 12 to 13 million domestic size bales.
Field studies and ginners are also reporting that due to absence of any rains in September which could be harmful to the cotton crop in case they fell in large quantities, the crop is generally progressing very well.
Seedcotton (kapas/phutti) prices also fell sharply by about Rs 50 to Rs 75 since last 2 or 3 days and were said to have ranged from Rs 750 to Rs 800 per 40 kgs in Sindh.
In the Punjab, seedcotton prices ranged from Rs 825 to Rs 900 per 40 kgs on Thursday.
On Thursday, 600 bales of cotton from Tando Allahyar in Sindh and 1000 bales from Mirpurkhas reportedly sold at Rs 1,800 per maund; 1000 bales from Mirpurkhas also sold at Rs 1,850 per maund; 1000 bales from Tando Adam sold at Rs 1,850/ Rs 1,875 peer maund; 1000 bales from Sanghar sold at Rs 1,850 / Rs 1900 per maund, while 1000 bales from Shahdadpur were said to have been sold at Rs 1,900 /Rs 1,925 per maund.
The price idea for lint from Nawabshah in Sindh was said to be about Rs 1,950 per maund (37.32 kgs), while the price idea for cotton from Mehrabpur in the Khairpur district was about Rs 2,000 per maund on Thursday.
The price idea of ginned cotton from Punjab was said to have ranged from Rs 1,975 to Rs 2000 per maund.
According to Naseem Usman, a prominent broker in Karachi, the chairman of the Pakistan Cotton Ginner’s Association (PCGA), Haji Mohammad Ebrahim had a meeting with the chairman of the Trading Corporation of Pakistan (TCP), Syed Masood Alam Rizvi, who said that the TCP is making arrangements to lift about 100,000 bales from the ginners initially to support the cotton market where both seedcotton and lint prices have been tumbling precipitously.
However, according to Haji Ebrahim, even a purchase of 1,000,000 bales of cotton by the TCP will not halt the fast falling cotton prices,
Haji Ebrahim added that the Trading Corporation of Pakistan (TCP) has neither the infrastructure nor the wherewithal of handling such a large onslaught of cotton arrivals.
Press reports indicated that last week the growers and the ginners had rejected the procurement price of Rs 2,159 per a maund (37.32 kgs) of lint for Grade 3 cotton with a staple length of 1-1/32 inch, the micronaire value to range from 3.8 to, 4.9 NCL and moisture not to exceed 8.5 percent.
Chairman of Farmers Vision Forum (FVF) in Multan, Khawaja Muhammad Shuaib, is said to be seeking procurement prices for lint to be in consonance with the international prices.
Anyhow, the ginners are not carrying any large quantities of seedcotton at this time so that they are not losing any money presently.
However, if lint prices continue to pall further because the international cotton prices are also bearish, the domestic growers are unlikely to make any profit. In fact with further decline in cotton prices, the growers could start making losses.
Reported decline in yarn prices by about Rs 5 to Rs 7 for 10 pound recently has accentuated the depression in cotton prices. However, the entry of several raw cotton exporters into the market for purchase of lint in the reported range of Rs 1,800 to Rs 1,850 per maund (37.32 kgs) may provide some support to lint prices.
However, the overall bearishness in the market is likely to accentuate because the torrent of seedcotton arrivals may initially deluge the market before any possible recovery later on.
In the evening the price of cotton had shown some inclination to stabilise, but the brokers added that volatility would remain until a clear policy for price stabilisation is available from the Trading Corporation of Pakistan (TCP).

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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