Pakissan.com; ANALYSIS: lethargy continues in lint market

ANALYSIS: lethargy continues in lint market

LAHORE (April 09 2004): Lethargic conditions, which started many weeks ago in the cotton market, continued this week where lint prices fell by another Rs 25 to Rs 50 per mound (37.32 kgs).

Arrivals of seed-cotton (kapas/phutti) are going down but still some leftover cotton is being received in such areas as Sanghar in Sindh and in Chishtian and Harunabad in the Punjab, but in decreasing quantities.

The prices of seed-cotton (kapas/phutti) have fallen further this week. Seed-cotton prices in Sindh ranged from Rs 750/Rs 800 to Rs 950 per 40 kilogram's, while in the Punjab the seed-cotton prices reportedly ranged from Rs 750 to Rs 1100 per 40 kgs on Thursday.

Overall ginned crop for the current season (2003-2004) is still estimated to be around 10 million bales on an ex-gin basis.

Brokers in Karachi said that though reported business is not large, but cotton continues to be sold at lower prices but the figures are not altogether announced in the market.

Traders said that from the estimated 1.1 m1llion bales still left unsold with the ginners, about 25 percent is of average or better quality with micronaire readings above 4, where as considerable quantities of cotton are below average in grade with mike values said to be as low as 3.

For the new crop (2004-2005) Agriculture Minister Yar Mohammad Rind announced that the government has set a production target of 10.7 million domestic size bales on an ex-farm basis which target is likely to be achieved if he weather remains favourable.

However, new crop cotton is unlikely start arriving in appreciable quantities before the end of July or the beginning of August.

This year the favourable features for the forthcoming crop (2004-2005) include abundant waters in the northern dams and reservoirs following the melting of snow and very good planting intentions on part of the growers who received the highest price for seed-cotton in the history of Pakistan vis Rs 1600 per 40 kgs during the current season (2003-2004).

More hopes have arisen that cotton yarn sales are likely to pick up. Moreover, the Polyester-Cotton (PC) yarns are already said to be in a better position.

Fortunately for the spinners, domestic, cotton prices continue to be considerably lower when compared with the similar cottons at different foreign origins.

We may keep in mind that though the New York cotton futures market has dropped in a big way in recent weeks but the price of shipment cottons from different origins has not dropped correspondingly.

On Tuesday, the price idea for cotton from Mirpurkhas in Sindh reportedly ranged lower from Rs 2350 to Rs 2400 per mound (37.32 kgs); cotton prices in Shahdadpur, Sanghar or Tando Adam ranged from Rs 2350 to Rs 2500 per mound; Cotton in the Nawabshah district was being offered from Rs 2700 to Rs 2725 per mound; Cotton in the Khairpur district was being quoted from Rs 2550 to Rs 2750 per mound.

In Upper Sindh (K-68) cotton prices ranged from Rs 2500 to Rs 2850 per mound, while in the Punjab the price idea for cotton reportedly ranged from Rs 2150 to Rs 2900 per mound.

The price tone of domestic cottons continued to be under pressure. Traders said that some of the mills who had imported cotton during the previous months are offering it for sale to other mills.

Last Wednesday, the chairman of the Karachi Cotton Association (KCA) Iqbal Umer, invited the Governor of the State Bank of Pakistan Dr Ishrat Hussain to discuss the cotton situation and related problems.

After welcoming Dr Ishrat Hussain to the association, Iqbal Umer informed the Governor of State Bank about the wide and comprehensive services, which they are offering to the entire cotton trade in different forms.

The Cotton Association (KCA) Chairman told Dr Ishrat Hussain, that Karachi Cotton Association (KCA) was established in 1933 and represents all segments of the cotton trade including the growers.

The ginners, the spinners, the exporters and commission houses who enjoy excellent reputation around the world.

Amongst the points, which, Iqbal Umer highlighted for the Governor of the State Bank of Pakistan, was the necessity to devise ways and means to increase the domestic cotton crop to 15 million bales (170 kgs), to seek technical guidance on the production of organic cotton, advocate the cultivation of BT cotton and also bring additional area under cotton cultivation to meet the rapidly increasing requirements of the Pakistani Textile Industry.

Chairman KCA also pleaded with Dr Ishrat Hussain to create economic environment which would allow growth of large industrial and trading houses in the country so that they may be able to achieve economies of scale to face the incoming competition from large business houses in Japan, Korea and other Far Eastern countries.

Iqbal Umer also pleaded with Dr Ishrat Hussain to allow resumption of cotton hedging as its need is urgently being felt by all the sections of the cotton trade.

On his part, Dr Ishrat Hussain, an expert economist and financier who speaks with authority and implements his decisions post haste, concurred with the KCA Chairman that more area should be brought under cotton cultivation and yield, per acre must also be increased to meet the rising requirements of the domestic textile industry.

Dr Ishrat Hussain advised the ginners to improve the quality of cotton, train the factory workers and install better machinery to produce clean and contamination free cotton.

Dr Ishrat Hussain also exhorted the textile millers to set up workers training institutes so that they may meet the challenges of the World Trade Organisation (WTO) regime adequately.

Dr Hussain also clarified that fluctuations in cotton prices are a natural phenomenon and that the government is following a free trade policy which continues to allow free exports and imports of cotton without any quantitative or qualitative restrictions.

The government cannot bail out any section of the trade who may have speculated in their dealings.

Dr Ishrat Hussain observed that Pakistan was better placed to meet the WTO (World Trade Organisation) challenges.

Indian farm products are being subsidised whereas no farm products are being subsidised in Pakistan.

However, the Governor SBP cautioned the cotton traders and industrialists that India has switched over to modern techniques and scientific methods of production and trade since 1991, whereas Pakistan is still maintaining the conventional system.

He called for the adoption of modern manufacturing and marketing techniques to meet the contemporary needs in today's world.

Dr Ishrat Hussain stated that as an economist he clearly understands and advocates the necessity of a future market which is a very important tool against risk management.

However, he suggested that a consensus should be achieved amongst all the stakeholders which would be in the best interest of cotton trade.

It is now left with the concerned government department and the council for Islamic ideology to speed up the approval for the quick resumption of cotton hedge trading under the aegis of the Karachi Cotton Association (KCA) which has the necessary experience and expertise to run and regulate it properly.

Courtesy Business Recorder

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