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ANALYSIS: prices collapse on cotton
market
DR ZAFAR HASSAN
LAHORE: Cotton prices collapsed over the past two or three
days conceding about Rs 200 to Rs 250 per maund (37.32 kgs)
only since yesterday, lint prices have lost Rs 100 per maund.
Traders attribute the heavy fall in cotton prices to early and
large arrivals of seedcotton (kapas/phutti) into the ginning
factories.
The quality of lint continues to remain good in Sindh while in
the Punjab it is said to have improved substantially. Slower
yarn offtake is also contributing to the slackness in lint
prices.
Cotton prices have generally been bearish both globally and in
the domestic markets in recent past. The sudden fall in local
lint prices in Pakistan is therefore hardly surprising.
However, despite official pronouncements, brokers said in
Karachi that the presence of Trading Corporation of Pakistan
(TCP) is not yet being felt in the market to stem the big
decline in cotton prices.
Ideal weather prevailing in the cotton belt and early
commencement of the current cotton season (2004-2005) by one
month triggered the fall in cotton prices.
Now traders are estimating the present crop to be in the range
of 12 to 13 million domestic size bales.
Field studies and ginners are also reporting that due to
absence of any rains in September which could be harmful to
the cotton crop in case they fell in large quantities, the
crop is generally progressing very well.
Seedcotton (kapas/phutti) prices also fell sharply by about Rs
50 to Rs 75 since last 2 or 3 days and were said to have
ranged from Rs 750 to Rs 800 per 40 kgs in Sindh.
In the Punjab, seedcotton prices ranged from Rs 825 to Rs 900
per 40 kgs on Thursday.
On Thursday, 600 bales of cotton from Tando Allahyar in Sindh
and 1000 bales from Mirpurkhas reportedly sold at Rs 1,800 per
maund; 1000 bales from Mirpurkhas also sold at Rs 1,850 per
maund; 1000 bales from Tando Adam sold at Rs 1,850/ Rs 1,875
peer maund; 1000 bales from Sanghar sold at Rs 1,850 / Rs 1900
per maund, while 1000 bales from Shahdadpur were said to have
been sold at Rs 1,900 /Rs 1,925 per maund.
The price idea for lint from Nawabshah in Sindh was said to be
about Rs 1,950 per maund (37.32 kgs), while the price idea for
cotton from Mehrabpur in the Khairpur district was about Rs
2,000 per maund on Thursday.
The price idea of ginned cotton from Punjab was said to have
ranged from Rs 1,975 to Rs 2000 per maund.
According to Naseem Usman, a prominent broker in Karachi, the
chairman of the Pakistan Cotton Ginner's Association (PCGA),
Haji Mohammad Ebrahim had a meeting with the chairman of the
Trading Corporation of Pakistan (TCP), Syed Masood Alam Rizvi,
who said that the TCP is making arrangements to lift about
100,000 bales from the ginners initially to support the cotton
market where both seedcotton and lint prices have been
tumbling precipitously.
However, according to Haji Ebrahim, even a purchase of
1,000,000 bales of cotton by the TCP will not halt the fast
falling cotton prices,
Haji Ebrahim added that the Trading Corporation of Pakistan
(TCP) has neither the infrastructure nor the wherewithal of
handling such a large onslaught of cotton arrivals.
Press reports indicated that last week the growers and the
ginners had rejected the procurement price of Rs 2,159 per a
maund (37.32 kgs) of lint for Grade 3 cotton with a staple
length of 1-1/32 inch, the micronaire value to range from 3.8
to, 4.9 NCL and moisture not to exceed 8.5 percent.
Chairman of Farmers Vision Forum (FVF) in Multan, Khawaja
Muhammad Shuaib, is said to be seeking procurement prices for
lint to be in consonance with the international prices.
Anyhow, the ginners are not carrying any large quantities of
seedcotton at this time so that they are not losing any money
presently.
However, if lint prices continue to pall further because the
international cotton prices are also bearish, the domestic
growers are unlikely to make any profit. In fact with further
decline in cotton prices, the growers could start making
losses.
Reported decline in yarn prices by about Rs 5 to Rs 7 for 10
pound recently has accentuated the depression in cotton
prices. However, the entry of several raw cotton exporters
into the market for purchase of lint in the reported range of
Rs 1,800 to Rs 1,850 per maund (37.32 kgs) may provide some
support to lint prices.
However, the overall bearishness in the market is likely to
accentuate because the torrent of seedcotton arrivals may
initially deluge the market before any possible recovery later
on.
In the evening the price of cotton had shown some inclination
to stabilise, but the brokers added that volatility would
remain until a clear policy for price stabilisation is
available from the Trading Corporation of Pakistan (TCP).
Curtesy: Business Recorder
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Pakissan.com;
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