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ANALYSIS: cotton prices stay weak due to
sluggish yarn market
KARACHI (March 29 2004): The speculation about the
size of current cotton crop has now come to an end
when it has been determined around 10.0 million
bales ex-gin.
The size of unsold stock is the most important
factor directly affecting the prices of cotton.
The final crop figures may be available in the
first week of April. Sowing of new crop is already
in progress in Lower Sindh while preparation of
land and arrangement of necessary inputs are in
hand in central Sindh.
The government is preparing details of sowing
intentions / targets for 2004-05 crop which is
expected around 3.1 million hectares with
production target around 11.4 million 170-kg bales
on the basis of average yield of 625 kg per
hectare.
This is not an over-ambitious target but is quite
realistic, and achievable. All concerned
government, semi-government and private agencies/
organisations should pool all their resources and
energy to achieve the production target of 11.4
million bales of cotton.
Simultaneously, the government and all cotton
stakeholders should make all-out efforts to
implement the Cotton Standardisation/ Grading
System at ginning stage which would, to a great
extent, bring all-out improvement in quality of
our lint cotton.
Cotton trade expects that Tariq Mahmood, the newly
appointed Secretary, Ministry of Agriculture, Food
and Livestock (Minfal) to play a positive role in
the implementation of the provisions of Cotton
Standardisation Ordinance, from the new cotton
season, which was promulgated by the President of
Pakistan in October, 2002.
Yar Mohammad Khan, Federal Agriculture Minister,
is already reportedly very much anxious to take
all necessary steps for improving the quality of
Pakistan cotton.
The implementation of Cotton Grading /
Standardisation System at the ginning stage would
be a historic event as it would improve quality of
our cotton to international level and would
immensely benefit all cotton stakeholders,
specially cotton growers.
Local cotton market remained dull during last week
and small business was transacted.
The spinners were not showing much interest in
cotton purchases in view of slack demand and weak
prices of cotton yarn in local as well as
international market.
The Karachi Cotton Association reduced Spot Rate
by Rs 25 to Rs 2,950 per mound ex-gin. Better
grade cotton was selling between Rs 2,900 and Rs
3,000 per maund; Average Grade prime micronaire Rs
2,800 to Rs 2,900; and low grade low micronaire
down to Rs 2,500.
In the final cotton report of 2003-04 cotton
season, which is likely to be released in the
first week of April by Pakistan Cotton Ginners'
Association, the most important figure would be of
unsold stocks which would guide the cotton market.
Some circles think that the unsold stocks are much
more than what is reported by the PCGA.
However, unsold stock of 1.3 million bales by the
end of March would exert pressure on cotton prices
which may tend to ease further in the wake of weak
prices and poor off-take of yarn.
Actually, yarn problem is global which has
depressed cotton prices.
New York cotton futures market put an easy show
last week when ruling May closed at 64.62 cents
and July at 66.04 cents a pound, losing 330 and
308 cent-points respectively.
The New York futures market appeared to be under
the control of speculators who were playing with
the market by buying and selling, alternately. May
contract is reportedly long by around 4 percent.
The speculators have almost squared up their
position but traders/merchants are holding large
cotton stocks for sale.
The psychological pressure of a next bumper cotton
crop is resisting increase in cotton prices.
The speculators are building up their long
position in new crop contracts like October,
December, and March. In the next couple of months,
the New York futures market is likely to be ruled
by speculators till physical arrivals of new crop
start.
US has made export sales of 122,700 Running Bales
in the week ended on March 18, 04. Total export
sales have reached 11.991 million 480-lb bales and
shipments 7.143 million bales including Pima
cotton.
The top ten buyers of US cotton were: ( all in
million bales) China 4.484, Mexico 1.661, Turkey
1,176, Indonesia 0.762, Korea Rep 0.452, Canada
0.419, Pakistan 0.384, Thailand 0.346, Japan
0.330, Brazil 0.294 (million bales).
The share of these top ten countries is 89.28
percent. US has export target of 13.8 million
bales for the running season and this target would
easily be achieved.
Cotton prices in China are also showing weakness
and are ruling lower in view of low buying
interest.
This cotton season perhaps benefited only cotton
growers while ginners, merchants and spinners
sustained losses perhaps due to unreasonably high
cotton prices touching the level of '84.
The China factor did work but disturbed global
market and it also hurt Chinese textile industry.
Revival of cotton prices is dependent on
improvement in yarn prices.
Courtesy Business Recorder |
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Pakissan.com; Advisory Point
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