Pakissan.com; ANALYSIS: slump continues in cotton market

ANALYSIS: slump continues in cotton market

LAHORE (April 16 2004): Slump conditions continued in the domestic market this week as lint prices suffered further losses ranging from Rs 100 to Rs 150 per mound (37.32 kgs) compared to last week.

While prime mike cotton may find outlet sooner or later, the lower grades could suffer further battering particularly lint having micronaire value around 3.

Brokers in Karachi said on Thursday that mills carrying large inventories of cotton bought earlier at higher prices are finding it hard to obtain yarn price parities as they have gone down substantially in recent weeks.

However, the mills not carrying large quantities of cotton in their stocks are faring better, as they can sell their yarns at comparatively lower prices because cotton prices have gone down by about Rs 700 per mound (37.32 kgs) over the past six months.

Despite limit up increase in New York cotton futures prices on last Wednesday following large decreases over the previous several days, local market was not impressed.

In fact the weak and sagging tendency in the domestic cotton market was all too apparent on Thursday, much to the chagrin of the ginners.

Traders in Karachi said that the ginners are still carrying an estimated 900,000 to 950,000 bales of unsold cotton with them from the current season (2003-2004) which remains a veritable burden for them.

Next few days may truly show how the domestic cotton prices will move because the mills in Pakistan still need more cotton before the advent of the next season (August 2004/July 2005).

Till the evening, no sale report was available and the condition of the cotton market continued to be dull and drab.

The massive fall in New York cotton futures prices over the previous several months obviously took its toll on the local lint values.

Local agents for international merchants said that anywhere from 900,000 to 1 million bales (480 lbs) of imported cotton from sundry sources including USA, CIS, West Africa, India, Australia and brazil have already arrived since August 2003 while another 200,000 to 300,000 bales are likely to be imported before the close of the season in Pakistan viz. July 2004.

However, presently mills have been reluctant buyers in both domestic and the foreign markets.

The direction of the New York cotton future prices are being keenly observed by the domestic spinners who export a large portion of their textile products.

So all the variables in the raw cotton and textile markets remain in a flux, which is breeding a fearful volatility for the cotton economy at large.

Fresh and unfavourable developments in the Iraqi war arena are also likely to cast their dark shadows on different aspects of the global economy.

Further escalation of tension in the Middle East could also cast a gloom in the world economy which had started to pick up since about a year or so.

The price idea for cotton from Mirpurkhas in Sindh ranged lower from Rs 2300 to Rs 2350 per mound (37.32 kgs) on Thursday without the 15 percent sales tax; in Sanghar, Shahdadpur or Tando Adam, the cotton prices extended from Rs 2250 to Rs 2400 per mound; in Nawabshah district ginners quoted Rs 2600 to Rs 2700 for a mound of cotton; in the Khairpur district cotton was being offered anywhere from Rs 2450 to Rs 2600 per mound; in upper Sindh (K-68), the price of cotton reportedly ranged from Rs 2400 to Rs 2650 per mound, while in Punjab the lint prices ranged widely from Rs 2100 to Rs 2750 to Rs 2800 per mound.

Later in the evening cotton prices continued to exhibit a lethargic and lacklustre response.

However, the market also faced an element of uncertainty, as no clear direction regarding cotton prices was perceivable.

After a losing streak stretching for more than a week, the New York cotton future prices rebounded to a limit up position in the frontal months on last Wednesday.

In recent sessions, the prominent feature in the market had been to switch from may 2004 10 July 2004 positions.

Thus on last Wednesday, the May 2004 delivery posted limit up gains to settle at 60.37 cents per pound (up by 300 points), the July 2004 delivery also recorded limit up gain to end the session at 62.41 cents per pound (up by 300 points while the October 2004 delivery closed for the day at 63.80 cents per pound (up by 265 points all subsequent deliveries from December 2004 to May 2005 recorded gains from 267 to 270 points.

The recoveries in cotton future prices on last Wednesday have been described as remarkable.

Courtesy Business Recorder

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