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Analysis: Slowdown in cotton market
due to extended holidays next week
DR ZAFAR HASSAN
LAHORE (January 14 2005): Sale activity slowed down in the
cotton market ahead of a long weekend next week when
Pakistan will be observing Eid-ul-Azha holidays extending
for four days from 20th to the 23rd of this month. Already
many market operators and functionaries are starting to go
to their sundry hearth and homes in different parts of
country. Availability of transport to haul cotton from the
ginning factories to the textile mills in many parts of the
country will become scarcer day by day so that regular
business is expected to start again during the third week of
this month.
With impending holidays arriving within one week's time,
lint prices conceded Rs 25 to Rs 50 per maund as sellers
became more accommodative. It may be recalled that during
the past one week or so, cotton prices had risen from Rs
1900/Rs 1950 to Rs 2100/Rs 2150 per maund (37.32 kgs) in
ready business as mills had entered the market to build up
their inventories ahead of the long holidays.
Now that we have entered the quota-free period since the
beginning of this month, Pakistan's mills are receiving very
good enquiries for yarns, fabrics, apparel and home
textiles, where as the denim sector is booming.
Many mills have booked their export sales of textiles for
both the first and second quarters of the current year and
are also negotiating for further sales thereafter Large
quantities of grey cloth is also being exported where as it
would have been better if dyed and finished goods were
exported to obtain more value in the foreign markets.
Anyhow, the overall textile sector in Pakistan is doing very
well.
Some of the smaller and unorganised units are said to be
having difficulty because henceforth the textile industry
needs to obtain economies of scale and adopt sophisticated
kind of selling in the international market to achieve the
desired goals and gains for which there is a large scope.
According to current assessments it is expected that
seedcotton (kapas/phutti) for about 14 million
lint-equivalent bales will have arrived at the ginning
factories for the current season (July 2004-August 2005) by
the middle of this month.
From this quantity, the domestic mills will have lifted
close to 10 million bales of local size, where as the
Trading Corporation of Pakistan (TCP) will have lifted about
1.5 million bales from an estimated 2.6 million bales which
they have bought.
The exporters have lifted nearly 500,000 bales from reported
sales of about 700,000 bales they have made, where as the
ginners still carry about 2 million bales including about
1.1 million bales which they are holding on behalf of the
Trading Corporation of Pakistan (TCP).
Except for the big landlords who are still carrying
seedcotton (kapas/phutti) on their own account, most of the
seedcotton has reportedly bee disposed by the small farmers
leading to rumours in the market that henceforth the Trading
Corporation of Pakistan (TCP) may reduce or limit its
activity, or even withdraw from the market because the
government has already fulfilled its obligation to the small
growers.
Moreover, the government also has taken cognisance of the
fact that under the present conditions the Trading
Corporation of Pakistan (TCP) will be suffering massive
losses for their support to the small-time growers of
cotton.
Thus it has been reported in the market that the Trading
Corporation of Pakistan (TCP) is reluctant to enter into new
contracts to purchase more cotton from the ginners at
present.
In fact some ginners are complaining that the TCP is very
slow in lifting the cotton it has already bought. According
to trade talks, the very large funds required to continue
cotton purchases is deterring the TCP from further buying in
the market.
Seedcotton (kapas/phutti) prices in Sindh which were
previously ranging from Rs 800 to Rs 975 per 40 kgs have
fallen to range from Rs 800 to Rs 950 per 40 kgs. In the
Punjab, seedcotton prices which were earlier ranging from Rs
800 to Rs 1100 per 40 kgs have now fallen to range from Rs
800 to Rs 1050 per 40 kgs according to the quality.
The present idea of cotton crop output in Pakistan for the
current season (2004-2005) is now being estimated to range
from 14.5 million to 15 million bales on an ex-gin basis.
However, some optimists are even hoping for a still larger
crop.
In ready sales reported till Thursday afternoon, 1000 bales
from upper Sindh (K-68) were sold at Rs 2100 per maund (37
32 kgs), while 400 bales from Kahror Pucca in Punjab sold at
Rs 2050 per maund and 200 bales from Rahimyar Knan sold at
Rs 2075 per maund.
Larger consumption and thus increasing prospects of import
of cotton by China and some other countries and fears that
sowing will be deceased during the next season (2005-2006)
in some parts of the world have been responsible for a
stabler price pattern on the New York futures market in
recent weeks. If there is any setback in next year's crop in
any of the major cotton producing areas, then lint values
could move up to higher levels.
On last Wednesday, the frontal months on the New York
futures market made marginal gains. The March 2005 delivery
settled at US cents 46 59 per pound (up by 39 points), the
May 2005 delivery ended the session at US cents 47.46 per
pound (up by 22 points), while the July 2005 delivery closed
for the day at US cents 48.60 per pound (up by 10 points).
The market appeared to be in mood of consolidations.
Courtesy: Business Recorder
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Pakissan.com;
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