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Analysis: cotton market revives after earlier
regression
LAHORE (April 23
2004): This week saw some revival in cotton prices
from the earlier depression as lint values gained
from Rs 25 to 50 per maund (37.32 kgs).
Gain in New York cotton futures on last Wednesday
had a salutary effect on domestic cotton prices as
ginners hiked their asking rates further.
The reported increase in prices indicated the
enhanced interest of the spinners and also a few
exporters to procure more cotton.
A section of the domestic press reported that
Punjab irrigation minister Chaudhry Amer Sultan
Cheema told a group of growers this week that
delay in the release of water in the canal system
would delay sowing in Punjab up to one month.
Generally speaking, however, no shortage of water
is feared as with arrival of the summer season
soon the snows in the northern mountains are
expected to melt and thus provide ample water to
cotton fields for the forthcoming season
(2004-2005).
In view of the improvement in cotton prices this
week, the Karachi Cotton Association (KCA)
increased the ex-gin price of grade-3 cotton by Rs
50 per maund (37.32 kgs) and fixed it to Rs 2850
per maund which computes to a spot rate of Rs
3327.25 per when the upcountry expenses and 15
percent sales tax are added.
Despite problem with some of the spinners who
picked up cotton at higher rates earlier in the
season, it is still estimated in the textile
circles that most of the installed spindles in
Pakistan will remain operative so it is expected
that this year the textile industry will consume a
record 12.5 million domestic size bales.
Thus the ginners continue to harbour the hope that
the cotton prices should improve in the near
future.
In the mean time, the chairman of the Pakistan
Cotton Ginners Association (PCGA), Seth Jeth Anand
presided over a meeting last Sunday accusing the
mill owners of forming a cartel to suppress the
cotton prices.
He reportedly called upon the government to induct
the Trading Corporation of Pakistan (TCP) to lift
more than one million bales of cotton still lying
unsold with the ginners from the current season
(2003-2004).
In this context, traders in Karachi said that the
State Bank of Pakistan Governor, Dr Ishrat Hussain
has told the members of the Karachi Cotton
Association (KCA) early this month that trading in
cotton had been made entirely free and the prices
would follow the dictates of supply and demand in
the market.
Dr Ishrat Hussain informed the traders that the
Trading Corporation of Pakistan (TCP) or the
Cotton Export Corporation (CEC) will no more be
available in the cotton market as they do not have
any role to play in this regard.
In other news, one ginner in Mirpurkhas in
southern Sindh promises to make new crop
(2004-2005) cotton available in the market by
June, 2004 because sowing in southern Sindh has
been phenomenal and plants have attained good
height.
He added that water supply is also quite
satisfactory in his area.
According to trade talk, imported cotton booked
over the past few months is arriving in the
various mills in large quantities which is one of
the reason that was delaying any increase in lint
prices over the past several weeks.
Karachi traders add that though the New York
cotton futures prices have dived down in previous
weeks and are now recovering, the prices for
shipment cottons at various origins had remained
relatively steady and had not suffered much in
line with the futures prices.
According to the seed cotton (kapas/phutti)
arrivals report for the current season (2003-2004)
issued by the Pakistan Cotton Ginners Association
(PCGA) up to the 15th of April, 2004, 9,770,827
lint - equivalent bales had entered the ginning
factories throughout Pakistan.
Traders opined that the PCGA would issue its final
report for the period ending 1st of May 2004,
which is not expected to exceed 9.8 million bales
on an ex-gin basis.
Out of the above cotton output this season the
exporters have produced about 200,000 bales, thus
leaving a net of about 9.6 million bales for home
consumption from the domestic crop.
From this scenario, it appears that Pakistani
mills still have to shop for more cotton from
abroad before the advent of the next season (July
2004/August 2005).
In the evening, the ginners were reported to have
notched up their asking prices and were even
demanding Rs 3,000 to 3100 for their higher class
of cottons.
On Thursday, an exporter purchased 800 bales from
Meharpur in Sindh at Rs 2600 per mound (37.32 kgs)
without the 15 percent sales tax; 600 bales from
Salehpat were sold at Rs 2650 per mound, 200 bales
from Nawabshah were sold at Rs 2700 mound while
1200 bales from Daharki were sold at Rs 2900 per
mound.
In the Punjab, 1600 bales from Khanewal were sold
at Rs 3000 per mound.
Brokers added that the exporters had bought some
low grade cottons from Sanghar in Sindh at prices
ranging from Rs 2300 to Rs 2400 per mound.
In fact some very low quality cotton from Punjab
equivalent to grade 4 or 5 was also sold earlier
at Rs 1900 to Rs 1950 per mound.
Most of lower grades of cotton are being purchased
for shipment to Bangladesh.
Cotton prices have been jumping up and down in
recent sessions at the New York Futures market
creating lot of volatility and uncertainty for the
traders.
Anyhow, last Wednesday the cotton futures prices
rose up despite reported increase in short
positions created by the speculators.
Traders and mills fixation lent support to the
market. The switch operations from May 2004 to
July 2004 continued, while the overall firmness
was reported in both the current and forthcoming
crops.
Outgoing May 2004 delivery settled higher at cents
63.45 per pound, July 2004 closed for the day at
cents 62.61 per pound, while the October 2004
delivery ended the session at cents 63.90 per
pound.
Courtesy Business Recorder |
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Pakissan.com; Advisory Point
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