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ANALYSIS: selling offers of imported cotton
weaken market
KARACHI (April 12 2004): The months-long
controversy on the crop size(2003-04 season)
finally came to an end with the general agreement
of 10 million local bales. The Government of
Pakistan has fixed production target of 10.7
million of 170-kg bales ex-farm for the next
season ie 2004-05.
For the last some years, the government has been
found hesitant in fixing higher cotton production
targets. It is believed that the production of
ex-farm 11.5 million bales appears more realistic
on the basis of already achieved yield on an area
of 3.128 million hectares.
The new crop sowing has already been completed in
tail-end area of lower Sindh while it is in
progress in Hyderabad and Sanghar districts of
Sindh.
The growers have high sowing intentions for
cotton, and may achieve the sowing target of 3.1
million hectares for 2004-05 season.
The matter of early sowing is discouraged on the
perception of higher possibility of pest-attack on
timely sown crop.
This season about 15 percent fields in Sindh
missed wheat sowing for getting cotton from last
boll, and this area is being sown earlier than
normal period. The growers prefer early sowing for
getting better price of their proceed and getting
enough time for sowing wheat crop.
Irrigation water is reported short, but supply has
been ensured on turn. Previously, even when there
were reports of shortage of canal water supply, a
normal cotton crop was harvested.
It is hoped about normal weather conditions
specially rains which affect much to cotton crop.
At present, the ginners are holding an unsold
stock of some 1.1 million bales of this season,
and local lint prices are under selling pressure
because of slackness in yarn market.
Qualitatively, about 25 percent cotton is of
average grade with prime micronaire while 75
percent is of below average grade and low
micronaire. Better to Average Grade cotton is
selling between Rs 2,800 and 3,000 per mound
ex-gin while low grade/low mix is selling down to
Rs 2,200 per mound.
The Karachi Cotton Association (KCA) reduced Spot
Rate by R 25 to Rs 2,875 per mound ex-gin on
Saturday last.
Taking advantage of the low cotton prices, some of
the exporters made good sales of around 20,000
bales generally in low grade cotton for shipments
to Indonesia, Thailand, Taiwan, Korea and
Bangladesh.
The local cotton market has been at low ebb for
the last some weeks because of low buying
interest.
Main reasons is the slump in yarn market and
larger imports of foreign cotton which are stated
at 1.2 million bales in 7.5 months period (August
3 - March 15, 04) about more than half in last one
and half months.
The spinners had booked cotton some months back
when cotton prices were ruling high above the
level of US Cents 70.0/lb.
Some reports indicate that the spinners are
offering to sell the imported cotton naturally at
price lower than cost price, but buyers are
showing very little interest.
Local prime cotton is available even at lower
prices around Rs 2,800 per mound. The ginners
holding unsold stocks are in very bad situation,
and if this state of affairs continues further for
a couple of months, many of the ginners may
sustain very high losses beyond their capacities,
but hopes are also there for revival of cotton
prices to some extent as yarn market picks up.
The reports of settlement of cotton bargains with
USA are also there in the market.
The local sale of imported cotton by some of the
importers-spinners is a negative development for
an increase in local cotton prices. It appears
that either the spinners are offering sale of
imported cotton for easing liquidity position or
are overstocked.
NEW YORK COTTON FUTURES:
The New York futures market was featured by dull
conditions. In four-day working; fifth day being
holiday on 'Good Friday', May and July contracts
were marginally lower, finishing at 61.71 and
63.64 cents, respectively on last working day.
US export sales for the week ending April 1, 04 is
reported at 254,700 running bales. Thus US total
export sales up to April 1, 04 is reported at
12.303 million of 480-lb bales (upland 11.855 and
Pima 0.448) and shipments at 7.987 million bales
(upland 7.591 and Pima 0.396).
Prominent buyers of US cotton are: China 4.648
million bales, Mexico 1.629 million bales, Turkey
1.198, Indonesia 0.788, Korea Republic 0.463,
Canada 0.413, Pakistan 0.391 million bales
(including 83,600 bales of US Pima cotton),
Thailand 0.369, Japan 0.350, Brazil 0.301, India
0.186 and Bangladesh 0.143 million bales.
Interestingly, shipments of US Pima has been made
more than 88 percent while upland cotton shipments
are at 64 percent only. US would easily meet its
export target of 13.8 million bales this season
ending July 04.
CHINESE COTTON PRICES:
Cotton prices in China are reported weak in view
of dull domestic demand. As the international
prices are coming down, the gap from Chinese
cotton prices is widening to around US Cents 6.5
/lb.
China is looking forward for an increase in sowing
area for cotton in coming season to about 12
percent.
There were reports that some of the Chinese buyers
are trying to settle with USA some cotton
bargains.
Here is a table showing exports and imports of
merchandise and commercial services of the world
and 10-Top countries of the world.
The study of these figures would be very
interesting for the readers. Among the Top-10
countries, only two viz: China and Japan are from
Asia while all eight giants are from west (US and
Europe). The interesting point is that these
Top-10 countries earn a huge amount of $3887.7
billion (52 percent of world exports) by exporting
their commodities, but also earn a substantial
amount of $992.9 billion (56.3 percent of the
world) through exports of their commercial
services.
Some 30 top countries share 85.6 percent of world
exports of commodities and 86.3 percent of world
export of commercial services.
In exports of commodities, United Arab Emirates
(UAE) ranks at 30, and its export was $58.1
billion, whereas in export of commercial services,
Mexico ranks at 30 and its export was US $12.5
billion.
Among the top 30 countries in export of
commodities, only four are from Islamic world viz:
Malaysia ranking 19 at $100.7 billion, Saudi
Arabia ranking 23 at $88.5 billion, Indonesia
ranking 29 at $60.7 billion, and UAE ranking 30 at
$58.1 billion.
Among top 30 countries in export of commercial
services only two countries are from Islamic world
ie Turkey ranking 26 at $17.3 billion and Malaysia
ranking 29 at $12.8 billion.
Where does Pakistan with a population of about 145
million people second in Muslim world stand? Not
perhaps but regretfully, there is no place for
Pakistan. Just see that very small countries even
1/10th of Pakistan's population are earning in
exports 20 to 30 times larger than Pak exports.
The country's economic and financial managers
would burst with joy if Pak exports exceed the
target of $12.1 billion in 2003-04 season.
It is proudly said that in the last four years,
Pakistan has made great progress, and amassed
foreign exchange of about $12 billion.
Of course, four years back, Pak economy was at the
brink of bankruptcy, and now the country is in
safe economic zone, but with larger people below
poverty line and illiteracy.
Do the Pak economic managers think still there is
lot of time to progress or have lost hope of
progress in almost all sectors.
They should seriously think and act vigorously and
sincerely to let coming generations live a
respectable life in Pakistan.
Courtesy Business Recorder
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Pakissan.com; Advisory Point
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