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Cotton prices reach new apogee
DR ZAFAR HASSAN
LAHORE (April 16 2010): With almost all ready stocks from the current crop (2009-2010) having been sold out except a meager 100,000 bales or so, lint prices attained a new unprecedented peak to reach Rs 6,000 per maund (37.32 kgs) in the ready market. With bullish commodities and equity markets around the world and clearer signs and signals that global economic and financial condition stands fair chance to extricate itself from its two year old morass, cotton as well as yarn prices continue to follow an upward path.
In Pakistan, with the current cotton crop signing off at 12.7 million running bales on an ex-gin basis, besides the earlier import bookings and arrivals of nearly one million bales (170 kgs), there is still fear that another 2.0 million domestic size bales are needed for the industry. Even if a sizeable quantity of cotton may have been booked and is presumed to be in the pipeline, at least one to one and a half million bales have yet to be purchased to meet the entire seasonal deficit (August 2009-July-2010).
Under the circumstances, several spinners are said to be importing finer cotton like CIS LS/ELS, MCU-5 or similar styles to produce higher counts of yarn to cope with the prevailing cotton deficit. It is even been mooted in trade circles that close to ten thousand tons of CIS long staple cotton has already been received into Pakistan via the land routes.
Till a couple of days ago some of the mills who were not been buyers and were putting off their purchases are back into the arena and are showing extra interest to lift the available quantities remaining in the market. Much of the remaining quantities of unsold cotton in the market are said to be of lower grade. However, whether the spinners lift the meager quantity remaining in the market or opt for imports, they must decide soon if they must pay more for their cotton to keep their units functional. About 50 to 60 textile units in Pakistan have partially or fully closed.
Due to imposition of export duty on raw cotton in India at Rs 2500 per metric ton applicable from the 9th of April, lint imports from India will also become more expensive. There remain rumours in Indian markets that the government there will also do away with the 1.5 percent export incentive which was being enjoyed by raw cotton exporters.
In a general way, all markets have become bullish including cotton, cotton waste and also yarns following global firmness of physical and futures prices of cotton and other commodities. Thus cotton prices in the local market took a quantum jump by Rs 150 to Rs 200 per amund (37.32 kgs) over the last couple of days to range from Rs 5400 to Rs 6000 per maund according to the quality.
Likewise, the ex-gin price of grade three cotton has been catapulted to a new record level of Rs 5750 per maund by the Karachi Cotton Association (KCA) following unmistakable firmness in the market. Textile circles said on Thursday that yarn prices have risen in tandem with the cotton prices and have recorded an increase of Rs 50 per 10 pounds in recent dealings.
While this may not totally offset the rise of lint prices seen over the latter part of the cotton season, it is of some consolation to the spinners. Of course the wise guys in the spinning industry who accumulated cotton locally throughout the course of the season and also imported some are now reaping a bonanza.
With these changes at hand with paucity of cotton facing the spinners, mills consumption may be scaled down to now range between 14.50 to 15 million domestic size bales which at one time had been optimistically estimated in the range of 15 million to 15.5 million local size bales during the earlier part of the season.
Therefore, much of the statistics regarding consumption of domestic mills and their unshipped import quantities remain in a state flux pending further market developments and consequent clarifications. Seedcotton (Kapas/Phutti) from the current season (August 2009-July 2010) has virtually been exhausted and its notional price remains in the range of Rs 2200 to Rs 2400 per 40 kilogrammes.
Ready business in lint cotton on Thursday included 500 bales of cotton from Shahdadpur in Sindh at Rs 5800 per maund, 200 bales from Ghotki at Rs 5950 per maund and 400 bales also from Ghotki at the all time high rate of Rs 6000 per maund. At the end of last week, Pakistan signed a memorandum of understanding (MoU) with Monsanto Company of the United States, a pioneer in the development and production of transgenic cotton where cotton genotypes are developed through the technique of genetic engineering.
It is said that transgenic plants show resistance to some bollworms and insects and therefore cost of pesticides is reduced and cotton yields increase substantially. This memorandum of understanding followed protracted discussions between the government of Pakistan and Monsanto Company so that Monsanto will introduce an advanced technology called "Bollgard-II".
The MoU was signed by Mohammad Zia-ur-Rehman, federal secretary of the ministry of Food and Agriculture and Rick Gaudat of Global Cotton Marketing Lead on behalf of Monsanto. Pakistani growers are particularly interested in obtaining a BT (Bacillus Thuringiensis) which will also resist the destructive and dreaded cotton leaf curl virus (CLCV) which inflicts larger damage to the cotton crop.
Anyhow, though much belated, it is now assuring despite undue delay and procrastination, Pakistan will now embark into the era of producing genetically modified cotton to give a big boost to its cotton output. Death occurred on last Wednesday of Mian Reyaz Shaffi, a former Chairman of the Karachi Cotton Association (KAC).
Before his retirement, Reyaz Shaffi had business and industrial interests in cotton exports, rice exports, fisheries, poultry farming of which he was a pioneer in Pakistan, textile mills and petrochemical industries. May Allah Almighty rest his soul in peace and give courage to the family to bear the loss.
On the foreign economic and financial front, equity markets around the world continued their overall advance into the second year in a row. However, economists and analysts following the unprecedented wreckage caused to the global economic infrastructure reckon that it will take many, many years to rehabilitate the global economy on a viable footing.
Asia continues to lead what may be deemed the beginning of a global economic recovery. China has confirmed the posting a phenomenal growth rate of 11.90 percent during the pervious quarter. The increase in the prices of commodities, some base metals and crude oil prices give hope that global economic recovery may be in the offing, but the damage already wreaked on the global socio-economic landscape may yet take several decades to clear up.
Courtesy Business Recorder |
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