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ANALYSIS: declining tendency in
cotton market
DR ZAFAR HASSAN
LAHORE : Though a large turnover was
reported in ready cotton business on last Wednesday erosion
of lint prices was said to have set in on Thursday amidst
news of good seedcotton (kapas/phutti) arrivals and
rekindling of hope that Pakistan is likely to harvest a
record crop this season (2003-2004).
Traders said in Karachi that seedcotton equivalent to 9.3
million to 9.4 million bales (170 kgs) had already arrived
at the ginning factories and the figure is likely to swell
to 10 million bales by the 1st of December 2004.
In line with the current assessment and mode of thinking
traders hope that Pakistan will reap a record crop of 13
million bales (170 kgs) this season (2004-2005) on ex-gin
basis.
According to trade talk, mills have lifted an estimated 6.3
million to 6.4 million bales till now. The Trading
Corporation of Pakistan (TCP) has bought more than one
million bales by now from which they have lifted about
350,000 bales while the exporters are said to have lifted
about 300,000 bales till this period of time.
Despite aggressive buying by the Trading Corporation of
Pakistan (TCP) who have bought more than ten million bales
and have thus prevented a possible downslide of larger
proportions, cotton market remained subdued and appeared
under visible pressure on Thursday.
Even though the Trading Corporation of Pakistan (TCP) has
announced to purchase up to 7,000 bales from each ginning
factory instead of 6,000 bales announced earlier, the cotton
market continued to portray a subdued condition.
Seedcotton (kapas/phutti) prices were said to have gone down
by Rs 15 to Rs 20 per 40 kgs on Thursday. Thus the
seedcotton prices in Sindh was said to have ranged between
Rs 775 to Rs 870 per 40 kgs according to the quality, in the
Punjab the seedcotton prices extended from Rs 800 to Rs 920
per 40 kilogrammes.
On Thursday the prices of ginned cotton in Sindh reportedly
ranged from Rs 1775 to Rs 1975 per maund (37.32 kgs) while
in the Punjab they are said to have also generally prevailed
in the same range as Sindh, according to the quality.
Therefore, it appeared that the volume of business had
declined at the approaching weekend and some sort of
pressure was evident on lint prices in the market.
Moreover, New York cotton futures market will also remain
closed from Thursday through Sunday due to thanksgiving
holidays and also the weekly closures. Thus any new
initiative in the cotton market will essentially be offered
to next week
Bulk of the domestic cotton crop had hitherto been of good
to excellent quality, but now news of deteriorating grades
and mixing of cotton is being reported in the market.
Complaints of low quality have started to trickle in from
both Sindh and Punjab.
Till the afternoon on Thursday buying was reportedly
restrained in the cotton market. However reports for yarn
prices were encouraging.
Sindh quality of cotton has relatively deteriorated much
more than in Punjab. Brokers in Sindh said that a majority
of Sindh ginners are keen to sell their cotton to the TCP,
where as many of the Punjab ginners are offering their lint
to the spinners.
Private exporters and open-end spinners are also quite
interested to buy Sindh cotton for the lower counts which
they find to be remunerative. Discoloration has also been
reported from cotton being received from Sindh due to rains
which had been fallen on the plants in the previous weeks.
In the meantime, the inter-ministerial committee held a
meeting on last Tuesday under the chairmanship of Commerce
Minister Humayun Akhtar Khan which was also attended by the
Minister of Food and Agriculture Sikandar Hayat Bosan.
The meeting appreciated the aggressive cotton buying by the
Trading Corporation of Pakistan (TCP) to stabilise the
cotton prices and reportedly turned down the demand of the
All Pakistan Textile Mills Association (APTMA) to ask the
Trading Corporation of Pakistan (TCP) to stop buying in the
market and let the market forces of supply and demand
determine the cotton prices.
The President of Liverpool Cotton Association (LCA) Andrew
MacDonald, OBE (Order of the British Empire) is visiting the
Karachi Cotton Association (KCA) on Friday morning and will
address prominent members of the KCA on certain changes in
the Liverpool Cotton Association (LCA) rules which should be
beneficial to the members of the Karachi Cotton Association
(KCA).
A large portion of international cotton trade is conducted
under the rules and arbitration of the Liverpool Cotton
Association (LCA) which has evolved and encoded the bylaws
for international cotton trade over the past several decades
and which are very helpful to both the buyers and the seller
alike.
According to Gerald Estur, statistician of the International
Cotton Advisory Committee (ICAC) the worlds cotton
production for the current season (2004-2005) is being
estimated at 24.4 million tons which is 3 million tons more
than the record cotton production achieved in the year
2001-2002, Estur added that besides high cotton prices in
2003 favourable weather conditions had led to reaping of
record or near record cotton crop in the five top cotton
producing countries namely China the United States, India,
Pakistan and Brazil.
Gerald Estur added that low cotton prices had stimulated
consumption which is expected to grow by 5 percent this
season to reach a record 22.4 million tons.
Gerald Estur said that the elimination of quotas would
benefit Pakistan, India and China substantially. The
vice-chairman of the Pakistan Central Cotton Committee
(PCCC) Dr Ibad Baddar Siddiqui said on the occasion that the
cotton output in Pakistan was being assessed at 12.1 million
bales against a target of 10.7 million bales.
Higher cotton production would be due to a 7 percent
increase in cotton cultivation, favourable weather condition
and lesser pest infestation this season (2004-2005)
Courtesy: Business Recorder
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