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Further fall in cotton prices




  • LAHORE (June 11 2004): Lint prices dipped at least another Rs 50 per maund (37.32kg) this week following the general decrease in New York cotton futures prices since last week and also because mills in Pakistan have booked more imported cotton recently and are thus adequately covered.

    Spinners here are said to have bought another 10,000 tonnes of imported cotton from sundry origins, which has increased their total purchases of foreign cotton in recent months to an estimated 50,000 tonnes.

    Mills in Karachi said that after counting for lower moisture, relatively even growth, better grades and lower contamination, imported cotton gives higher productivity and output in the spinning department.

    Thus several mills said that imported cotton generally provide hassle-free spinning with relatively little carrying costs.

    The spinners claimed that they are also buying on unfixed basis so that they retain the option to determine their purchase price later on, which may be more economical.

    Mills are now frequently utilising New York futures facility, which enables them to hedge their cotton purchases and can thus co-ordinate their yarn and fabric sales accordingly.

    They thus avoid most of the risks arising out of cotton price fluctuations, which effects them adversely.

    Some of the mills in Pakistan are selling local lints to other mills, which they had purchased earlier.

    In turn, they are booking more imported cotton to maintain their inventories. Domestic ginners have reportedly sold about 100,000 bales from the current crop (2003-04) from the first of June till the tenth of this month, but are still said to be carrying an unsold inventory of 550,000 to 600,000 bales. Therefore, domestic lint prices continued to remain under pressure.

    Mills were willing to lift better grade cotton within the price range of Rs 2,900 to Rs 3,000 per maund (37.32kg) without 15 percent sales tax. However, the ginners were quoting Rs 3,100 per maund for the higher grades.

    Early this week, a prominent ginner from Sultanabad, Seth Khushi Ram, sold 200 bales of new crop (2004-05) cotton at Rs 2,800 per maund (37.32kg) without 15 percent sales tax, delivery being stipulated from August 15-25, 2004.

    In other news, new crop (2004-05) seed cotton (Kapas/phutti) has started to trickle in from such stations in Southern Sindh as Jhudo, Pangrio, Digri and Tando Jan Mohammad.

    The price of new crop (2004-05) seed cotton is reportedly ranging from Rs 1,100 to Rs 1,200 per 40 kilogram’s.

    In current crop (2003-04) sales, 300 bales of low grade cotton from Sanghar were reportedly sold by an exporter at Rs 2,500 per maund (37.32kg) without 15 percent sales tax on Karachi delivery basis; 600 bales from Sanghar and Shahdadpur were sold by an exporter to a mill at Rs 2,900 per maund; 2,200 bales from Haroonabad in Punjab sold at Rs 3,000 per maund, while 200 bales of Punjab station were sold by an exporter to a mill at Rs 3,175 per maund on Karachi delivery basis. There were sellers for low Mike cotton such as three at Rs 2,500 per maund.

    About 50,000 bales of domestic cotton were reportedly sold by some spinners to other mills and larger offers are still available. Some mills are apparently importing more cotton and at the same time offering/selling their domestic stocks to other mills.

    Contrary to their previous pronouncements, now more and more official agencies and the weather department are saying that water supply from various dams and reservoirs is decreasing appreciably.

    While priority to supply irrigation water is being given to the cotton crop in both Sindh and Punjab as compared to rice or sugarcane, the growers in lower riparian tracts of the cotton belt in both Sindh and Punjab are complaining about water shortage.

    According to one estimate, there is about 10 percent shortage of water supply in the irrigation channels which could delay or decrease cotton planting which remains to be done.

    Some observers, however, believe that “water politics” is presently being played on an inter-provincial level and that with more melting of the snow in the Northern Areas, the volume of water should increase and the crop target for the new season (2004-05) could be met.

    In the evening, brokers in Karachi said that lint prices should be presumed to have lost Rs 50 to Rs 100 per maund (37.32kg) this week.

    The price tone in the ready cotton market was described to have ranged from weak to bearish on Thursday.

    Sentiment was further dampened in commodity, finance and security markets owing to shootout in Karachi where several personnel of the armed forces were said to have died and injured.

    Curtesy: Business Recorder

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