KARACHI: (March 15 2004) Holiday prevailed in the cotton market on Saturday as everyone watched the crucial one-day cricket match between Pakistan and India; resultantly, the trading hall wore a deserted look.

The prices ruled steady but with no business interest. Both buyers and sellers preferred to enjoy the match instead of indulging in the drudgery of buy and sell.

Official spot rate was unchanged at Rs3,000. Price for premium lot was quoted at Rs3,000/3,100 on the cash counter but there was no matching response from spinners.

Apart from the cricket match, other factors, which inhibited buying, were the falling yarn prices and a steep decline in local demand.

A broker said that the cotton market is in the throes of a grave crisis following the decline in the lint price from the peak level of Rs3,400/3,600 to Rs3,000/3,100 dashing the hope of the ginners to realise a price of Rs4,000 in the coming weeks.

This decline in lint price is attributable to the anticipated shortfall in crop and expected flurry of speculative buying in world cotton in the wake of failure of the Chinese cotton crop and its entry into the world market to meet its requirements.

Now the ginners who have purchased phutti at the exorbitant price of Rs1,700 per 40 kg are not in a position to reduce the asking price over-much while the spinners too express their inability to lift cotton above the export parity of yarn.

A stalemate has thus developed leaving both the spinners and ginners in a quandary. The spinners are complaining of having accumulated heavy stocks at the forbidding price of Rs3,400/3,600 in the beginning of the season.

The building of long position is thus causing the spinners serious financial crunch and they do not know how to get out of the impasse.

The ginners too have been placed in a serious financial predicament due to the accumulation of huge unsold stocks, estimated at 2 million bales, as they failed to dispose them off when the prices were at their peak.

Spinners resorted to panic buying following the rumour of heavy shortfall in the cotton output and now have to face the music because of strong indications that the domestic cotton output may exceed 10 million bales.

They even opted for the import of foreign cotton at a time when international lint prices were at the 15-year peak level but now have to stew in their juice as the world cotton prices have declined by 15 cents per lb, eroding their competitive edge in the international market completely.

The May and July contracts in the New York futures recorded a loss of 131 cents per lb each at 64.62 and 66.04 cents, respectively on Friday last in a flurry of speculative selling making the cotton outlook all the more gloomy and cheerless. Analysts said that with the sharp drop in lint prices, the sale price for many textile items have also declined drastically.

With this depressing scenario, the sale momentum of cotton has been withering over the past several weeks. Enquiries for cotton have become sparse while a disturbing quietness continues to envelop the market.

According to some brokers, there are still some quantities of seed-cotton, which are reportedly arriving in the ginning factories from DG Khan in Punjab and some other stations in Sindh.

According to agents for international merchants in Karachi, the offers for most varieties of shipment cotton from the CAS (Central Asian States), West Africa and the United States have suffered a decline of 4 to 5 cents a pound recently.

Some analysts are projecting that because the growers received a good return this year (2003-04), they are likely to plant more cotton in many countries which could restrain prices from rising in the forthcoming season (2004-05). Anyhow, it is too early to project anything at present due to many uncertainties.

The ginners still maintain that cotton crop will be less than officially projected and are resisting further decline in prices, steep decline in world prices notwithstanding.

It is not possible to sell below Rs3,000 after having purchased phutti at Rs1,500/1,700 per 40 kg. However, to many astute brokers, the future outlook of cotton appears to be gloomy in view of the bearish world market outlook.

But the ginners do not take such a pessimistic view of the situation as they hope to cash in on a short crop.

The News International, Pakistan