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ANALYSIS: downturn in New York depresses domestic cotton
prices
LAHORE (June 18 2004): Further free fall in New York cotton
futures prices has depressed domestic lint values so that
little activity is being reported in the market.
In fact, agents for international merchants in Karachi have
reported that domestic spinners are booking more imported
cottons ranging from early delivery till the next 12 months on
both fixed and unfixed basis from several origins.
Cotton futures prices in New York are lowest since one year
and are presenting a very depressed picture.
On last Wednesday, spot July 2004 settled at US cents 51.53
per pound (down by 279 points), the October 2004 delivery
finished for the day at US cents 53.75 per pound (down by 126
points), while the December 2004 delivery ended the session at
US cents 54.13 per pound (down by 124 points).
Some mills in Pakistan have found it feasible to fix their
earlier purchases at the current levels of New York futures
prices, while others are making new purchases on unfixed
basis.
On Thursday, brokers said in Karachi that business in domestic
cotton is sparse and lacks normal activity.
The domestic cotton market is, therefore, quiet with a weak
disposition. Some of the ginners who were harbour1ng the hope
that cotton prices would revive because domestic spinners have
st1ll to cover sizeable quantities of cotton before the
arrival of the new season (2004-05) are very disheartened
following the massive slump in New York cotton futures prices.
Slump in New York cotton futures has provided the mills the
opportunity to capitalise on cheaper purchases from sundry
foreign origins.
The new crop (2004-05) cotton sale from Sultanabad which made
its debut at Rs 2,800 per maund (37.32kg) last fortnight for
delivery in August was later sold at Rs 2,600 per maund, but
spinners are not interested even at this price now.
The presumptive price for this new crop lint could now be as
low as Rs 2,500 per maund. Rains have been reported in some
stations in the cotton belt, which could delay seed cotton
(Kapas/phutti) arrivals but are otherwise good for the
incoming crop.
Brokers sa1d that while it drizzled in Mirpurkhas in Sindh, it
rained in Liaquatpur and Khanpur in the Punjab and some other
areas.
Two truck loads of seed cotton from the new crop (2004-05)
were sold in Jhudo in Sindh at prices ranging from Rs 1,125 to
Rs 1,150 per 40kg, which were reportedly destined for Burewala
in the Punjab.
Naseem Usman, a prominent broker reported that Bismillah
Cotton Factory (BCF) in Chichawatni in Punjab had bought
indigenous Punjab grown seed cotton (Kapas/phutti) from the
new crop (2004-05) at Rs 1,100 per 40kg, but the quantity was
small.
It is generally believed that regular arrivals of seed cotton
in Sindh would commence during the end of July or early
August, whereas in Punjab it would be during the first or
second week of August.
Thereafter, the seed cotton arrivals will increase in pace and
gain speed in the ensuing months. If the weather remains
conducive, we can expect above normal output for the new
season (2004-05) as the growers have shown good enthusiasm in
planting cotton due to highest prices they reviewed for their
seed cotton during the outgoing season (2003-04).
Though yarn and fabr1c prices may go down in line with the
drastic fall in New York cotton futures and subdued domestic
prices, overall impression in cotton trade and textile
industry remains positive as throughout the last year both
manufacturing and exports of textile goods in Pakistan
expanded 12 percent to 15 percent in various categories.
Most trade bodies and industrial associations have extolled
the federal budget for 2004-05 announced by Finance Minister
Shaukat Aziz on last Saturday except the stock exchanges in
the country which have opposed the proposed levy of 0.1
capital value tax (CVT). However, the tax is under
review/reconsideration of the government.
All Pakistan Textile Mills Association (Aptma) Chairman Waqar
Monnoo had said earlier this week that zero-rated sales tax on
ginned cotton is a landmark decision taken by the government
which would give sudden boost to exports, which would be
cumulatively increased by $2 billion.
He thanked the government for accepting major demands of Aptma
in formulating the federal budget.
Karachi Cotton Association (KCA) Acting Chairman Anwar Yasin
also extolled the federal budget early this week and called it
balanced, realistic and a step forward towards promotion of
growth and investment.
He said that the abolition of 15 percent sales tax on the
supply of ginned cotton would give a boost to our textile
sector and enhance our competitive ability in the global
markets.
Curtesy: Business Recorder
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Pakissan.com;
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