Further free fall in New York cotton futures prices has depressed domestic lint values so that little activity is being reported in the market.
In fact, agents for international merchants in Karachi have reported that domestic spinners are booking more imported cottons ranging from early delivery till the next 12 months on both fixed and unfixed basis from several origins.
Cotton futures prices in New York are lowest since one year and are presenting a very depressed picture.
On last Wednesday, spot July 2004 settled at US cents 51.53 per pound (down by 279 points), the October 2004 delivery finished for the day at US cents 53.75 per pound (down by 126 points), while the December 2004 delivery ended the session at US cents 54.13 per pound (down by 124 points).
Some mills in Pakistan have found it feasible to fix their earlier purchases at the current levels of New York futures prices, while others are making new purchases on unfixed basis.
On Thursday, brokers said in Karachi that business in domestic cotton is sparse and lacks normal activity.
The domestic cotton market is, therefore, quiet with a weak disposition. Some of the ginners who were harbour1ng the hope that cotton prices would revive because domestic spinners have st1ll to cover sizeable quantities of cotton before the arrival of the new season (2004-05) are very disheartened following the massive slump in New York cotton futures prices.
Slump in New York cotton futures has provided the mills the opportunity to capitalise on cheaper purchases from sundry foreign origins.
The new crop (2004-05) cotton sale from Sultanabad which made its debut at Rs 2,800 per maund (37.32kg) last fortnight for delivery in August was later sold at Rs 2,600 per maund, but spinners are not interested even at this price now.
The presumptive price for this new crop lint could now be as low as Rs 2,500 per maund. Rains have been reported in some stations in the cotton belt, which could delay seed cotton (Kapas/phutti) arrivals but are otherwise good for the incoming crop.
Brokers sa1d that while it drizzled in Mirpurkhas in Sindh, it rained in Liaquatpur and Khanpur in the Punjab and some other areas.
Two truck loads of seed cotton from the new crop (2004-05) were sold in Jhudo in Sindh at prices ranging from Rs 1,125 to Rs 1,150 per 40kg, which were reportedly destined for Burewala in the Punjab.
Naseem Usman, a prominent broker reported that Bismillah Cotton Factory (BCF) in Chichawatni in Punjab had bought indigenous Punjab grown seed cotton (Kapas/phutti) from the new crop (2004-05) at Rs 1,100 per 40kg, but the quantity was small.
It is generally believed that regular arrivals of seed cotton in Sindh would commence during the end of July or early August, whereas in Punjab it would be during the first or second week of August.
Thereafter, the seed cotton arrivals will increase in pace and gain speed in the ensuing months. If the weather remains conducive, we can expect above normal output for the new season (2004-05) as the growers have shown good enthusiasm in planting cotton due to highest prices they reviewed for their seed cotton during the outgoing season (2003-04).
Though yarn and fabr1c prices may go down in line with the drastic fall in New York cotton futures and subdued domestic prices, overall impression in cotton trade and textile industry remains positive as throughout the last year both manufacturing and exports of textile goods in Pakistan expanded 12 percent to 15 percent in various categories.
Most trade bodies and industrial associations have extolled the federal budget for 2004-05 announced by Finance Minister Shaukat Aziz on last Saturday except the stock exchanges in the country which have opposed the proposed levy of 0.1 capital value tax (CVT). However, the tax is under review/reconsideration of the government.
All Pakistan Textile Mills Association (Aptma) Chairman Waqar Monnoo had said earlier this week that zero-rated sales tax on ginned cotton is a landmark decision taken by the government which would give sudden boost to exports, which would be cumulatively increased by $2 billion.
He thanked the government for accepting major demands of Aptma in formulating the federal budget.
Karachi Cotton Association (KCA) Acting Chairman Anwar Yasin also extolled the federal budget early this week and called it balanced, realistic and a step forward towards promotion of growth and investment.
He said that the abolition of 15 percent sales tax on the supply of ginned cotton would give a boost to our textile sector and enhance our competitive ability in the global markets.
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