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ANALYSIS: sellers resist falling trend in
cotton prices
KARACHI (April 19
2004): The current cotton season 2003-04 has
almost come to an end with the ex-gin production
of about 10 million local bales.
Preparation for sowing of next cotton crop
(2004-05) is already in progress and some tail-end
areas of Lower Sindh have almost completed their
sowing operation. Other districts of Sindh
province like Hyderabad, Sanghar, Nawabshah and
Naushero Feroze are in the process of sowing.
A recent report from Sindh Agriculture Extension
Department indicated that against the target of
45,000 hectares, cotton has been sown on 55,000
hectares in Mirpur Khas district of Sindh and in
Sanghar district 104,000 hectares against 102,000
hectares.
The same report said that Sanghar has a potential
of cotton sowing on 130,000 hectares.
This shows that in the next season cotton would be
sown on larger area than current season thus
increasing the prospects of a bumper crop.
The provincial governments and their agencies
should make sure that sowing operation is
completed satisfactorily in all cotton belt
districts.
The sowing operation will be extending to other
cotton districts of Sindh and Punjab as the time
passes.
However, national target of 3.1 million hectares
(in 2003-04 area sown was 2.94 million hectares)
should be achieved to produce a cotton crop of
11.5 million local bales on the basis of yield of
630 kg/hectare.
Let us hope that weather remains conducive to
cotton growing and development. The hard fact is
that our seasonal cotton production is stagnated
around 10 million local bales while our domestic
consumption is around 12.0 to 12.5 million bales,
and the shortfall is met through import of some
1.5 to 2.0 million local bales.
Quality-wise, Pakistan has not made any progress
in the last decade. We have to be very serious in
implementation of Cotton Standardisation/Grading
System to improve the quality of our lint cotton
to international level.
Despite these facts, government agencies often
make tall claims of improving quality and
production of cotton.
Recently, the Prime Minister announced to create
Textile Ministries in Centre and Punjab province.
It is a good news for cotton and textile sectors
as it was an old demand of this sector.
When Punjab will have a Textile Ministry then,
naturally, Sindh would also have the same, as both
are important provinces in cotton and textiles.
Local cotton prices remained under selling
pressure during last week and spot rate was
reduced by Rs 75, to Rs 2,800 per mound of 37.324
kg ex-gin.
Practically, Grade 3 staple 1-1/32 prime
micronaire cotton was selling around Rs 2,600 per
mound instead of 2,750 ex-gin.
As such, Spot Rate was higher by Rs 150 per mound
than market rates. If Spot Rate is adjusted
accordingly, the pledged stocks of cotton would
fall short of the advances and the banks would be
in a difficult position.
In view of large unsold stocks of low grade/mike
cotton its prices remained under selling price
which pushed the prices down to Rs 1950 to Rs2000
per mound.
However, better grade cotton was quoted around Rs
2,600 - 2,800 and average grade cotton around Rs
2,400 - 2,500 per mound.
Some of the low grade cotton lots were picked up
by exporters which found way in Far Eastern
countries at comparatively better price.
Spinners were selective in buying. The ginners
were quite upset on low cotton prices. Only by the
end of the last week, some buying interests were
seen on recovery of New York cotton futures last
week.
Reports of some improvement in yarn market,
specially in lower count yarns, was received which
had positive impact on local cotton prices.
New York futures market witnessed wide
fluctuation. On two occasions, prices touched
limits one lower and the other high.
May contract went high by 460 points and went down
by 434 points while July contract went up by 322
points and down by 450 points.
Net result was May contract up 28 points and July
contract down 128 points. May contract closed at
61.99 cents and July contract at 62.36 cents per
pound.
US made export sales of 1,86,000 running bales for
the week ended April 8. Total sales were reported
at 12.491 million 480-lb bales including 449,000
bales of US Pima, while 8.467 bales were reported
shipped, including 400,000 bales of US Pima
cotton.
PROMINENT BUYERS WERE:
(Figures are in million 480-lb bales) China 4.715,
Mexico 1.664, Turkey 1.205, Indonesia 0.796, Korea
Repub. 0.468, Canada 0.413, Pakistan 0.396
(including 83,600 bales of US Pima cotton),
Thailand 0.386, Japan 0.355, Brazil 0.301, India
0.191 and Bangladesh 0.150.
US retail sales position was reported to have
improved and was still improving. This would have
a very positive effect on cotton and textile trade
globally.
Press reports indicate that prices of polyester
fibre are increasing in view of increase in prices
of petroleum products in the international market.
Polyester prices are rising in China also.
Reports from China indicate decrease in local lint
prices due to slack spot sales and pressure of
large arrivals of imported cotton. China is
reported to have withdrawn the quality inspection
system of imported cotton which has impacted
positively on world cotton prices.
On April 16, in Cotton Exchange, Beijing, May
contract closed at yuan 17,700 per ton (96.72
cents/pound), June yuan 17,820/ton 97.38 cents)
and July at Yuan 17,840/per ton (97.49 cents).
Cotton imports in China are subject to taxes
around 14 percent.
Below is a table which gives comparative study of
commodity exports of some important Asian
countries. Its study and analysis would be of some
interest for the readers. Among the 13 countries,
Japanese exports have registered the lowest
increase of 22 percent in 10 years (1992-2002)
while Pakistan is second lowest from US $7.351
billion in 1992 to $9.9 billion in 2002 with an
increase of 38 percent.
Japan's economy being very large was suffering
from slackness / stagnation. Pakistan's
performance in exports is very poor. Even
Bangladesh has made good increase of 190.48
percent (From $2.1 billion to $6.1 billion) in
their exports in ten years period.
Vietnam ranks first with 534.61 percent increase
from $2.6 billion to $16.5 billion.
China the biggest economy in Asia made robust
increase in its commodity exports at 283.51
percent from $84.9 billion to $325.6 billion in
2002 and at 415.90 percent to $438.0 billion in
2003.
India has made very good progress in exports from
$19.6 billion in 1992 to $49.2 billion in 2002,
improving by 151.02 percent.
Apart from this, many countries also export
commercial services in billions, such as China
$39.38 billion, Hong Kong $45.16 billion, Japan
$64.91 billions, Singapore $26.94 billion,
Malaysia $14.75 billion, India $23.52 billion and
Pakistan only $1.32 billion (almost same in 10
years).
If we compare our export performance with other
countries of this area we cut a sorry figure.
Perhaps the instability in our political system
contributes much to our poor performance of our
economy beside other factors. Faults of a few
makes all to suffer. We should think seriously and
make positive changes in our thinking.
Courtesy Business Recorder
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Pakissan.com; Advisory Point
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