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ANALYSIS: overnight gains reported on
cotton market?
LAHORE : Despite news of heavy seedcotton (kapas/phutti)
arrivals over the past several weeks and very optimistic
projections for output for the current crop (2004-2005, lint
prices showed a fair modicum of stability.
Better demand from exporters consistent buying by the
Trading Corporation of Pakistan (TCP) and regular lifting by
the mills have propped up the cotton prices by Rs 25 to Rs
50 per maund (37.32 kgs) during the last couple of days.
Current crop output projections in Pakistan continue to be
couched in very optimistic terms. Though official quarters
have raised the output estimate by about one million bales
and are now hoping to harvest 11.6 million domestic size
bales, most private sector estimates of cotton production
range much higher and even transgress 13 million bales which
would amount to a record crop.
Some talk concerning curl leaf virus (CLV) and reddening of
leaves or wilting of plants is reported now and then but
mostly these reports have not yet been construed to impart
any large damage to the standing crop.
According to a preliminary estimate, nearly 100,000 bales of
current crop (2004-2005) have been sold in export, though
most of it has not been formally registered with the
authorities. Moreover 43,739 bales from the old crop
(2003-2004) have also been registered for export.
Thus the brokers in Karachi said on Thursday that Sindh
styles were selling in the range of Rs 1875 per maund (37.32
kgs) to Rs 2000 per maund. According to the quality of lint,
where as cotton in Punjab was being transacted from Rs 1975
to Rs 2050 per maund on ex-gin basis.
In recent weeks, the Trading Corporation of Pakistan (TCP)
has reportedly bought 300,000 bales of cotton in a drive to
bring stability to the cotton market and prevent prices from
sagging below Rs 2159 per maund which is the support price
indicated by the government at which the TCP will buy to
make sure that the growers will get Rs 925 per 40 kgs for
their seedcotton.
To support the growers effectively, Prime Minister Shaukat
Aziz has instructed Federal Minister of Food and Agriculture
Sikandar Bosan to ensure that the farmers get nothing less
than Rs 925 per 40 kgs for their seedcotton.
The Prime Minister directed Sikandar Bosan when they met in
Islamabad recently to take suitable measures that the
growers get their due. The policy to safeguard the growers
is being pursued under the directives of President General
Pervez Musharraf.
Moreover, the TCP has decided to lift 2,000 bales from each
ginning factory against the earlier decision to procure
1,000 bales from each factory. If the current pace of cotton
procurement is pursued by the TCP and both the mills and the
exporters continue their regular buying, cotton rates will
remain stable.
However, some observers feel that if the pace of seedcotton
arrivals increases as may be the case in the face of a
predicted bumper crop in Pakistan this year, lint prices
could buckle under the pressure later on.
Anyhow, the government appears to be earnest in assisting
the growers as far as possible.
Under the circumstances, ginners are presently ginning
nearly 100,000 bales daily. All this output is mostly sold
out to the three eager buyers, viz the domestic mills, the
Trading Corporation of Pakistan (TCP) and the exporters.
Higher cotton production in Pakistan this year will reduce
the import requirements materially.
Thus the domestic cotton prices have become tighter with
brisk activity being reported since the last several days.
Even though the prices of yarns are said to be weak, mills
are lapping up cotton regularly to acquire better grade lint
and also to cover their requirements at attractive rates
prevailing presently in the market.
Most reports indicate that barring certain areas here and
there which are reporting some pest problems, the general
shape of cotton development continues to be good.
In the prevailing condition some ginners are selling their
cotton sparingly against improving demand being reported
from the mills.
These recent developments indicating improvement of cotton
prices bode well for the growers.
The Pakistan Cotton Ginner's Association (PCGA) has reported
arrivals of seedcotton (kapas/phutti) for the current season
2004-2005) up to the 15th October, 2004 to be 3,613,817 lint
- equivalent bales as against last year's (2003-2004)
2,353,001 bales till the same period.
This indicates a national increase in cotton output by about
54 percent. By the end of this month, seedcotton equivalent
to nearly 5 million bales will have arrived at the ginning
factories.
Seedcotton prices in Sindh reported on Thursday ranged from
Rs 800 to Rs 900 per 40 kg. According to the quality in
Punjab, the seedcotton prices reportedly ranged from Rs 850
to Rs 910 per 40 kilogrammes.
The Pakistani rupee has lost about 140 paisas during the
previous three days and is heading for Rs 61 to one United
States dollar.
This devaluation of the Pakistan rupee will makes imports
dearer, "but will help the exporters considerably. Demand
for United States dollars has risen perceptively in recent
weeks in Pakistan.
Recent gains in the New York cotton futures market have also
imparted a steadiness to the domestic cotton prices in
Pakistan.
Though on long-term basis cotton trade must contend with
ample global supplies during the years but supply shortage
for the nearby period could keep the futures prices in
steady mode in New York.
Rumour of some Chinese interest in cotton also imparted a
positive tone to the market.
On last Wednesday, December 2004 delivery on the New York
cotton futures market settled at US cents 47.99 per pound
(up by 45 points), the march 2005 delivery closed for the
day at US cents 47.05 per pound (up by 5 points), while the
May 2005 delivery ended the session at US cents 48.20 per
pound (up by 20 points).
Due to increase in the cotton prices, brokers said that
business activity had slackened.
The ginners were asking for higher prices while the mills
were pondering whether to pay more for cotton. In the
afternoon reports of sale of 600 bales of cotton from
Jehania in Punjab Rs 2,025 per maund (37.32 kgs) were
received.
Business Recorder
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Pakissan.com;
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