This week saw some revival in cotton prices from the earlier depression as lint values gained from Rs 25 to 50 per maund (37.32 kgs).
Gain in New York cotton futures on last Wednesday had a salutary effect on domestic cotton prices as ginners hiked their asking rates further.
The reported increase in prices indicated the enhanced interest of the spinners and also a few exporters to procure more cotton.
A section of the domestic press reported that Punjab irrigation minister Chaudhry Amer Sultan Cheema told a group of growers this week that delay in the release of water in the canal system would delay sowing in Punjab up to one month.
Generally speaking, however, no shortage of water is feared as with arrival of the summer season soon the snows in the northern mountains are expected to melt and thus provide ample water to cotton fields for the forthcoming season (2004-2005).
In view of the improvement in cotton prices this week, the Karachi Cotton Association (KCA) increased the ex-gin price of grade-3 cotton by Rs 50 per maund (37.32 kgs) and fixed it to Rs 2850 per maund which computes to a spot rate of Rs 3327.25 per when the upcountry expenses and 15 percent sales tax are added.
Despite problem with some of the spinners who picked up cotton at higher rates earlier in the season, it is still estimated in the textile circles that most of the installed spindles in Pakistan will remain operative so it is expected that this year the textile industry will consume a record 12.5 million domestic size bales.
Thus the ginners continue to harbour the hope that the cotton prices should improve in the near future.
In the mean time, the chairman of the Pakistan Cotton Ginners Association (PCGA), Seth Jeth Anand presided over a meeting last Sunday accusing the mill owners of forming a cartel to suppress the cotton prices.
He reportedly called upon the government to induct the Trading Corporation of Pakistan (TCP) to lift more than one million bales of cotton still lying unsold with the ginners from the current season (2003-2004).
In this context, traders in Karachi said that the State Bank of Pakistan Governor, Dr Ishrat Hussain has told the members of the Karachi Cotton Association (KCA) early this month that trading in cotton had been made entirely free and the prices would follow the dictates of supply and demand in the market.
Dr Ishrat Hussain informed the traders that the Trading Corporation of Pakistan (TCP) or the Cotton Export Corporation (CEC) will no more be available in the cotton market as they do not have any role to play in this regard.
In other news, one ginner in Mirpurkhas in southern Sindh promises to make new crop (2004-2005) cotton available in the market by June, 2004 because sowing in southern Sindh has been phenomenal and plants have attained good height.
He added that water supply is also quite satisfactory in his area.
According to trade talk, imported cotton booked over the past few months is arriving in the various mills in large quantities which is one of the reason that was delaying any increase in lint prices over the past several weeks.
Karachi traders add that though the New York cotton futures prices have dived down in previous weeks and are now recovering, the prices for shipment cottons at various origins had remained relatively steady and had not suffered much in line with the futures prices.
According to the seed cotton (kapas/phutti) arrivals report for the current season (2003-2004) issued by the Pakistan Cotton Ginners Association (PCGA) up to the 15th of April, 2004, 9,770,827 lint - equivalent bales had entered the ginning factories throughout Pakistan.
Traders opined that the PCGA would issue its final report for the period ending 1st of May 2004, which is not expected to exceed 9.8 million bales on an ex-gin basis.
Out of the above cotton output this season the exporters have produced about 200,000 bales, thus leaving a net of about 9.6 million bales for home consumption from the domestic crop.
From this scenario, it appears that Pakistani mills still have to shop for more cotton from abroad before the advent of the next season (July 2004/August 2005).
In the evening, the ginners were reported to have notched up their asking prices and were even demanding Rs 3,000 to 3100 for their higher class of cottons.
On Thursday, an exporter purchased 800 bales from Meharpur in Sindh at Rs 2600 per mound (37.32 kgs) without the 15 percent sales tax; 600 bales from Salehpat were sold at Rs 2650 per mound, 200 bales from Nawabshah were sold at Rs 2700 mound while 1200 bales from Daharki were sold at Rs 2900 per mound.
In the Punjab, 1600 bales from Khanewal were sold at Rs 3000 per mound.
Brokers added that the exporters had bought some low grade cottons from Sanghar in Sindh at prices ranging from Rs 2300 to Rs 2400 per mound.
In fact some very low quality cotton from Punjab equivalent to grade 4 or 5 was also sold earlier at Rs 1900 to Rs 1950 per mound.
Most of lower grades of cotton are being purchased for shipment to Bangladesh.
Cotton prices have been jumping up and down in recent sessions at the New York Futures market creating lot of volatility and uncertainty for the traders.
Anyhow, last Wednesday the cotton futures prices rose up despite reported increase in short positions created by the speculators.
Traders and mills fixation lent support to the market. The switch operations from May 2004 to July 2004 continued, while the overall firmness was reported in both the current and forthcoming crops.
Outgoing May 2004 delivery settled higher at cents 63.45 per pound, July 2004 closed for the day at cents 62.61 per pound, while the October 2004 delivery ended the session at cents 63.90 per pound.
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