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ANALYSIS: cotton prices steady on
aggressive buying
S A AZIZ SHAH
KARACHI: The robust seed-cotton arrival figures, equivalent
of 3.6 million bales, in the first fortnight of this month
do indicate a larger cotton crop this season, but field
reports indicate some damage to cotton crop due to pest
attack and rains.
As such, earlier crop estimates have been trimmed by 10
percent. One prominent cotton man was still estimating
around 14.0 million bales while others now expect a crop of
12.0-12.5 million bales.
Reports of spread of boll worm attack in Punjab cotton
areas, damage by rains in lower and central Sindh cotton
belt and stress on wheat sowing by November 15, not fully
harvesting third pick of cotton make some sense in revising
the earlier production estimates.
Government estimates are at 11.5 million bales. Some circles
think that larger third pick of cotton had increased cotton
production last year but this season it may reduce the crop.
Arrivals may not last longer this season and may stop
abruptly. Cotton arrivals on October 1 were 86 percent
larger than same time last year while that of October 15,
the increase was reduced to 53 percent and, finally, it may
come down to 20-25 percent to make the crop stand at 12.0 to
12.5 million 375-lb bales.
Domestic cotton consumption is estimated around 13.5 million
bales. However, our seasonal exports may go up to 500,000
bales and imports up to one million bales in 2004-05 season.
Field reports indicate deterioration in quality of cotton
both in Sindh and Punjab. Trading Corporation of Pakistan is
understood to have made contracts of some 375,000 bales from
ginners against which about 30,000 bales are reported
received in TCP Korangi warehouse.
The ginners are not bound to offer deliveries against
contracts and are free to sell their cotton in the market if
they get better price.
Reportedly, TCP is making preparation for floating a tender
of 20,000 bales for export sale next week. Since the
international market is still looking for direction and
prices have not stabilised so far, the international
merchants may not show the required interest and eagerness
in bidding.
Exporters are understood to have sold some 170,000 bales in
export and are aggressively making shipments.
They are already offering around 44 - 44.50 cents per lb for
Grade III Staple 1-1/32" on FOB Karachi basis and TCP may
not get better price than this.
Lint prices in local market have appreciated by Rs 75 to Rs
100 per maund during last week when Spot Rate was raised by
Rs 75 to 1,975 on close of the week. The exporters were
quite active in covering their export sales. The spinners
were also buying cotton.
Lint prices in Lower Sindh were quoted around Rs 1,850-1,900
per maund of 37.324 kg, whereas in central Sindh up to Rs
2,000 and in Punjab between Rs 1,850 and Rs 2,025 per maund.
The growers are still not getting the government-assured
rate of Rs 925 per 40 kg for their phutti which ranges
between Rs 850 and Rs 900 per 40 kg.
Cottonseed prices are weak, around Rs 350, and are not
supporting seed-cotton prices. Trade circles expect the
prices to come down by Rs 100 to Rs 150 per maund in the
months of November and December when accumulating of unsold
cotton stocks would cross the level of two million bales and
the spinners would take a break after covering bulk of their
seasonal requirements.
In New York Cotton Exchange, lint prices showed mixed trend.
December contract closed at 45.67 cents losing marginally 15
C/Pts and March contract finished at 45.54 cents, losing 87
C/Pts.
US export sales for the week ending October 14 were 187,100
Running Bales and shipments 103,800 R/Bales. US
Export/Shipments details are as under: (In 480-lb bales).
======================================================
Sales Shipments
------------------------------------------------------
Upland cotton 5,882,300 1,293,600
Pima Cotton 194,200 44,600
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Totals Bales 6,076,500 1,338,200
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Prominent buyers of US cotton were: Mexico 1,371,000 bales,
Indonesia 733,000, Turkey 635,000, Thailand 457,000, Korea
Rep 430,000, China 394,000, Pakistan 336,000, Canada
266,000, Japan 221,000, Taiwan 174,000, Hong Kong 131,000
and India 98,000 bales.
A study of cotton figures in the table would be of great
interest for the readers and some conclusion may be drawn
regarding trend of cotton prices in world market.
This report has mentioned Pakistan's cotton production at
9.0 million 480-lb bales(equivalent to 11.52 million 375-lb
bales) and imports as 1.6 million bales (=2.048 million
375-lb bales).
Trade circles estimate production at 12.5 million local
bales (=9.765 million 480-lb bales) and imports around 1.0
million 480-lb bales instead of 1.6 million bales.
Also, India's cotton production has been officially
estimated around 19.0-19.5 million 375-lb bales equivalent
to 14.84-15.23 million 480-lb bales, against 14.2 million
bales mentioned in USDA report.
Thus, in India and Pakistan both, USDA has mentioned about
1.75 million 480-lb bales less than local estimates.
International merchants are playing very cautiously on the
backdrop of financial losses made in cotton business last
season. China is slowly and steadily buying cotton without
any bullish effect on the market.
Last season, China had lost heavily in cotton buying when
the prices were pushed above the level of 80 cents. The
start of WTO regime from January is also a problem for many
countries.
How textile economies would perform in the post-quota era is
only a guess and every country would face problems of
different kinds which would require correct and immediate
solution to take benefit of the market.
Taking availability and consumption figures of globe,
general idea is bearish, but how far is a matter of thinking
and research.
Cotton Balance-sheet of World & some countries updated in
October,2004, by USDA (million bales).
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Beginning Production Mill Imports Exports End-
Stock -use Stock
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World 33.5 109.7 101.4 31.9 31.7 42.0
USA 3.5 21.5 6.1 00 12.3 6.7
China 6.2 29.5 34.8 6.9 0.2 7.6
Pakistan 2.0 9.0 10.0 1.6 0.2 2.4
India 4.1 14.2 14.0 0.8 0. 4.6
Central Asia 1.5 7.7 2.0 00 5.2 2.0
Australia 0.6 2.2 0.1 00 1.6 1.2
Brazil 4.6 6.0 4.0 0.5 2.2 5.1
Indonesia 0.4 00 2.2 2.3 00 0.4
Selected Asia 1.9 0.2 8.3 8.5 0.1 2.2
Mexico 1.1 0.6 1.9 1.5 0.2 1.0
Turkey 1.4 4.4 6.1 2.2 0.3 1.6
=========================================================================
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Courtesy:
The DAWN
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