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ANALYSIS: 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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Pakissan.com;
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