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ANALYSIS: steady condition in cotton market




  • Cotton prices remained fairly steady on Thursday as seedcotton (kapas/phutti) arrivals are increasing progressively indicating a very good cotton season this year (2004-2005) under the prevailing circumstances.
    Most quarters in cotton trade are looking forward to Pakistan harvesting a fairly large cotton crop with output estimates ranging widely from 11 to 12 million bales (160 kgs 170 kgs) with some optimists even forecasting an ex-gin production close to 13 million bales. Arrivals or seedcotton are gaining rapidly and the quality of cotton in both Sindh and Punjab is being described as very good. While the price of cotton in lower Sindh (Mirpurkhas) was said to be Rs 2225/Rs2250 per maund ex-gin. The better quality of cotton from both Sindh and Punjab provinces ranged from Rs 2275 to Rs 2300 per maund.
    About 400,000 bales from the current crop (2004-2005) had arrived till the 1st of this month. By the end of this month (September 2004), seedcotton equivalent to another 1,500,000 to 1,600,000 bales are likely to reach the ginning factories raising the total output to about 2 million domestic size bales.
    Daily arrivals of seedcotton (kapas/phutti) have now increased to nearly 50,000 bales and they are expected to increase further. The current seedcotton and lint prices seem to be satisfactory to all the sectors of the trade, namely the growers, the ginners and the spinners. The transition from the previous season (2003-2004) to the current season (2004-2005) seems to have materialised smoothly.
    Prime Minister Shaukat Aziz reviewed the cotton situation last week and directed the Trading Corporation of Pakistan (TCP) to remain active and vigilant to procure all cotton to ensure that the growers get the support price for seedcotton fixed at Rs 925 per 40 kilogrammes in case the prices start going down in the free market. On its part, the TCP is taking all necessary steps to enter the market in case the cotton prices start to fall.
    Textile circles mostly said on Thursday that the present yarn prices were workable with the current level of lint prices prevailing in the country. Furthermore, some spinners are reported to have received enquiries for yarns from foreign markets. Some observers in the Pakistan textile industry are reporting that more and more investment is continuing to increase capacity and also to modernise and balance the units. In fact, the spinning capacity in Pakistan is still said to be increasing, which should further increase the cotton consumption in Pakistan to record levels according to the current reckoning.
    Mills in Pakistan are currently consuming nearly 1 million bales (170 kgs) of cotton every month. With the increase in capacity the consumption is likely to go up sizeably. Last year the mills in Pakistan imported 2,173,048 bales (170 kgs) from August 2003 to June 2004. Current year’s (2004-2005) cotton imports into Pakistan will depend on the size of the domestic crop and the increase in the spindleage, both of these variables being presently conjectural.
    On Thursday the seedcotton (kapas/phutti) prices in Sindh were reported to have ranged from Rs 960 to Rs 980 per 40 kgs according to the quality, while in the Punjab the seedcotton prices were said to have ranged from Rs 1000 to Rs 1025 per 40 kilogrammes.
    Brokers said in Karachi that nearly all the 50,000 bales from the current crop which are being ginned every day are sold out readily. In fact, some ginners are said to be carrying an oversold position.
    In Sindh, 1000 bales from Mirpurkhas were reportedly sold at Rs 2225 per maund (37.32 kgs); 1000 bales from Tando Adam were sold at Rs 2250 per maund; 1000 bales from Sanghar were sold at Rs 2250/2275 per maund, while 1000 bales from Nawabshah and 2000 bales from Shahdadpur were sold at Rs2300 per maund each.
    In the Punjab, 400 bales from Rahimyar Khan and 1000 bales from Bahawalnagar were sold at Rs 2275 per maund each.
    Last week the chairman of the Karachi Cotton Association (KCA) Iqbal Umer expressed his concern over news reports that water supply to cotton fields may be reduced to conserve water for the forthcoming Rabi crops. Iqbal Umer advised the government not to interrupt water supply to the standing cotton crop which not only promises to provide a bumper output but is also the mainstay of the country’s economy.
    Last Wednesday the Sindh Minister for Food and Agriculture Arif Mustafa Jatoi visited the Karachi Cotton Association (KCA) and met the board of directors and prominent members of the association and discussed matters relating to the cotton trade with them. Anwar Yasin the vice chairman of KCA welcomed the minister and stressed the need to increase cotton production in Pakistan to 15 million bales to cater to the fast growing need of the domestic textile industry. He also urged the minister to ensure continuous supply of irrigation water to the cotton crop to avoid ultimate losses in textile production and exports which earn valuable foreign exchange. He also stressed the need to construct more dams and reservoirs in the country to overcome the problems of water shortage.
    Anwar Yasin also urged upon Sindh Agriculture Minister Arif Mustafa Jatoi to use his good offices and accord permission to the KCA to resume hedge trading as the KCA has the necessary means and infrastructure for this purpose. Anwar Yasin elaborated on the utility and usefulness of resuming hedge trading in cotton which will bring stability to cotton prices and benefit all the sectors of the trade.
    Sindh Agriculture Minister Arif Mustafa Jatoi assured the KCA that the government is taking all measures to increase cotton production in the country. He, however, emphasised the need to protect the interest of the growers by providing them fair return and to encourage them to grow more cotton. Arif Jatoi conceded that water shortage is a serious problem but the government is taking all measures to tackle the situation so that cotton crop may not suffer.

    Curtesy: Business Recorder

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