free-fall in cotton prices

LAHORE (July 02 2004): Cotton prices in Pakistan plunged sharply during last fortnight and lost anywhere from Rs 100 to Rs 200 per maund (37.32 kgs) with tendency to concede further ground.
The perception that new crop (2004-2005) which is around the corner will provide abundant lint from several origins including the USA, China and India, and domestic crop having started to trickle in has put cotton prices into a tailspin.
Net losses in the New York Cotton Futures over the previous months is also putting big pressure on lint prices in Pakistan.
The only favourable features in our market are that the textile manufacturers have invested more than 5 billion dollars over the past couple of years to upgrade and expand their industry.
According to Shaukat Aziz, the prime minister designate who is to take charge within a couple of months, textile industry in Pakistan will make further progress when world quotas and artificial barriers are removed commencing from the beginning of 2005.
Mills in Pakistan have booked an estimated 100,000 tonnes of imported cottons during the previous two months which have mostly been done at “on call” basis. Thus the domestic spinners are likely, to gain considerably as they have bought cotton on unfixed basis in a very bearish market and can determine their prices later on in case cotton rates fall further on the New York Futures Market.
However, the considerable stocks of cotton being carried by the domestic mills which they acquired at higher prices earlier in the season both domestic and imported will weigh negatively on their current performances.
Yarn prices in the domestic market are said to have gone down by Rs 5 and the off take is also discouraging.
This dull scenario on both the cotton and the textile fronts is putting a big burden on the domestic ginners who are still said to be carrying unsold stocks of nearly 400,000 for which there is little enquiry.
Top class Punjab cotton for which the ginners were asking Rs 3100 per maund (37.32 kgs) a few weeks ago in now being reportedly offered between Rs 2800 to Rs 2900 per maund (37.32 kgs) according to the quality.
Ginners are now even willing to sell their lint on one or two months credit basis.
The prices of good grade Punjab lint which was being offered from Rs 2900 to Rs 3000 last month is now being offered from Rs 2700 to Rs 2800 per maund (37.32 kgs).
Sindh styles of relatively lower grades which were previously being offered from Rs 2400 to Rs 2500 per maund (37.32 kgs) are now said to be under offer at prices ranging from Rs 2100 to Rs 2200 per maund.
New crop (2004-2005) seedcotton (kapas/phutti) prices have also fallen from Rs 1,150 last week to Rs 1,050 per 40 kilogrames now.
However, the ginners appear to be in no hurry to process new crop cotton because the sale prospects and the ensuing returns are not attractive.
The ginners continue to be despondent with their existing stocks and are not enthusiastic to proceed with the new season (2004-2005) hastily as there appear to be no buyers for the new crop in the market at present.
Prospects for new cotton crop (2004-2005) production in Pakistan are mostly being reported in optimistic terms with output ideas ranging widely any where from 10 million plus to 13 million bales (170 kgs) on an ex-gin basis.
Mostly, enough water is likely to available for the forthcoming crop (2004-2005), but the ultimate output would also depend on weather behaviour and pest management in case of any infestation.
Monsoon rains for the next cotton crop are projected to be normal and satisfactory.
On Thursday, sale of 200 bales of lower grade lint from Tando Allahyar in Sindh was reported at Rs 2100 per maund (37.32 kgs); 2253 bales from Moro were sold at Rs 2425 per maund, while 2,293 bales from Dadu and 2300 bales from Tando Jam, also from the current crop (2003-2004), were said to have been sold at Rs 2600
per maund (37.32 kgs) each. The mood remained subdued in the evening.
It appears that after much jostling over the previous weeks, the New York Cotton Futures Market has opted for a lower landing.
Thus on last Wednesday, the July 2004 delivery on the New York Cotton Futures Market settled at US cents 48.25 per pound (down by 145 points), the October 2004 delivery ended the session at US cents 51.20 per pound (down by 132 points) while key December 2004 delivery closed for the day at US cents 51.36 per pound (down by 155 points).
The fall in prices was due to bearish textile markets as also because the United States Department of Agriculture (USDA) issued the acreage report for the next season (2004-2005) on the higher side viz 13.947 million (13,947,000) planted acres which also pulled down the market.
Apparently, favourable rains in west Texas and the south-east in the United States are lending credence to a higher output.
The acting chairman of the Karachi Cotton Association (KCA), Anwer Yasin, has congratulated Shaukat Aziz on his nomination as the Prime Minister of Pakistan. Anwer Yasin said that the vast experience of Shaukat Aziz in the field of banking and international finance will bring more economic stability in Pakistan leading to faster growth and development in the country.

Curtesy: The Dawn

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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