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ANALYSIS: 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
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Pakissan.com;
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