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ANALYSIS: steady condition in cotton market
DR ZAFAR HASSAN
Cotton prices remained fairly
steady on Thursday as seedcotton (kapas/phutti) arrivals are
increasing progressively indicating a very good cotton
season this year (2004-2005) under the prevailing
circumstances.
Most quarters in cotton trade are looking forward to
Pakistan harvesting a fairly large cotton crop with output
estimates ranging widely from 11 to 12 million bales (160
kgs 170 kgs) with some optimists even forecasting an ex-gin
production close to 13 million bales. Arrivals or seedcotton
are gaining rapidly and the quality of cotton in both Sindh
and Punjab is being described as very good. While the price
of cotton in lower Sindh (Mirpurkhas) was said to be Rs
2225/Rs2250 per maund ex-gin. The better quality of cotton
from both Sindh and Punjab provinces ranged from Rs 2275 to
Rs 2300 per maund.
About 400,000 bales from the current crop (2004-2005) had
arrived till the 1st of this month. By the end of this month
(September 2004), seedcotton equivalent to another 1,500,000
to 1,600,000 bales are likely to reach the ginning factories
raising the total output to about 2 million domestic size
bales.
Daily arrivals of seedcotton (kapas/phutti) have now
increased to nearly 50,000 bales and they are expected to
increase further. The current seedcotton and lint prices
seem to be satisfactory to all the sectors of the trade,
namely the growers, the ginners and the spinners. The
transition from the previous season (2003-2004) to the
current season (2004-2005) seems to have materialised
smoothly.
Prime Minister Shaukat Aziz reviewed the cotton situation
last week and directed the Trading Corporation of Pakistan
(TCP) to remain active and vigilant to procure all cotton to
ensure that the growers get the support price for seedcotton
fixed at Rs 925 per 40 kilogrammes in case the prices start
going down in the free market. On its part, the TCP is
taking all necessary steps to enter the market in case the
cotton prices start to fall.
Textile circles mostly said on Thursday that the present
yarn prices were workable with the current level of lint
prices prevailing in the country. Furthermore, some spinners
are reported to have received enquiries for yarns from
foreign markets. Some observers in the Pakistan textile
industry are reporting that more and more investment is
continuing to increase capacity and also to modernise and
balance the units. In fact, the spinning capacity in
Pakistan is still said to be increasing, which should
further increase the cotton consumption in Pakistan to
record levels according to the current reckoning.
Mills in Pakistan are currently consuming nearly 1 million
bales (170 kgs) of cotton every month. With the increase in
capacity the consumption is likely to go up sizeably. Last
year the mills in Pakistan imported 2,173,048 bales (170 kgs)
from August 2003 to June 2004. Current year's (2004-2005)
cotton imports into Pakistan will depend on the size of the
domestic crop and the increase in the spindleage, both of
these variables being presently conjectural.
On Thursday the seedcotton (kapas/phutti) prices in Sindh
were reported to have ranged from Rs 960 to Rs 980 per 40
kgs according to the quality, while in the Punjab the
seedcotton prices were said to have ranged from Rs 1000 to
Rs 1025 per 40 kilogrammes.
Brokers said in Karachi that nearly all the 50,000 bales
from the current crop which are being ginned every day are
sold out readily. In fact, some ginners are said to be
carrying an oversold position.
In Sindh, 1000 bales from Mirpurkhas were reportedly sold at
Rs 2225 per maund (37.32 kgs); 1000 bales from Tando Adam
were sold at Rs 2250 per maund; 1000 bales from Sanghar were
sold at Rs 2250/2275 per maund, while 1000 bales from
Nawabshah and 2000 bales from Shahdadpur were sold at Rs2300
per maund each.
In the Punjab, 400 bales from Rahimyar Khan and 1000 bales
from Bahawalnagar were sold at Rs 2275 per maund each.
Last week the chairman of the Karachi Cotton Association (KCA)
Iqbal Umer expressed his concern over news reports that
water supply to cotton fields may be reduced to conserve
water for the forthcoming Rabi crops. Iqbal Umer advised the
government not to interrupt water supply to the standing
cotton crop which not only promises to provide a bumper
output but is also the mainstay of the country's economy.
Last Wednesday the Sindh Minister for Food and Agriculture
Arif Mustafa Jatoi visited the Karachi Cotton Association (KCA)
and met the board of directors and prominent members of the
association and discussed matters relating to the cotton
trade with them. Anwar Yasin the vice chairman of KCA
welcomed the minister and stressed the need to increase
cotton production in Pakistan to 15 million bales to cater
to the fast growing need of the domestic textile industry.
He also urged the minister to ensure continuous supply of
irrigation water to the cotton crop to avoid ultimate losses
in textile production and exports which earn valuable
foreign exchange. He also stressed the need to construct
more dams and reservoirs in the country to overcome the
problems of water shortage.
Anwar Yasin also urged upon Sindh Agriculture Minister Arif
Mustafa Jatoi to use his good offices and accord permission
to the KCA to resume hedge trading as the KCA has the
necessary means and infrastructure for this purpose. Anwar
Yasin elaborated on the utility and usefulness of resuming
hedge trading in cotton which will bring stability to cotton
prices and benefit all the sectors of the trade.
Sindh Agriculture Minister Arif Mustafa Jatoi assured the
KCA that the government is taking all measures to increase
cotton production in the country. He, however, emphasised
the need to protect the interest of the growers by providing
them fair return and to encourage them to grow more cotton.
Arif Jatoi conceded that water shortage is a serious problem
but the government is taking all measures to tackle the
situation so that cotton crop may not suffer.
Curtesy: Business Recorder
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