Lint prices have gone down by nearly Rs 200 per mound (37.32 kgs) this month and seem likely to move down further.
After reassessment by the traders that net output this year (August 2003/July 2004) would be close to 10 million or more domestic size bales on an ex-gin basis, the spinners have presently reduced their purchases considerably.
Moreover, decrease in the New York cotton futures prices over the past several weeks and lower rates being quoted for yarns have added to the spinners predilection to restrict their purchases in recent weeks.
Having booked an estimated 1 to 1.2 million bales (480 lbs) for import since September 2003 from several sources, textile mills in Pakistan have ample cushion to wait and see before they enter the cotton market in any big way.
Mills in Pakistan are said to have bought more than 200,000 bales of cotton from India up to now.
This situation has put the ginners, still holding sizeable stocks reported to be about 1.5 million bales of unsold cotton with them, in an apparent difficulty.
The current report in the cotton market is that lint prices of lower grades have already slipped to Rs 2500 per mound (37.32 kgs) without 15 percent Sales Tax, while the good grade lint may soon fall below the psychological barrier of Rs 3000 per mound.
A sort of critical condition has surrounded the cotton market where several ginners are said to be having sleepless nights due to their unsold inventories of cotton.
The ginners can only fully pay back to the growers, for the seed-cotton (kapas/phutti) obtained from them earlier, when their liquidity position improves.
However, there remains a plus point for the ginners because the spinners still need to obtain more than 2 million bales (170 kgs), either from local stocks or by importing from foreign sources, before the end of the current season.
It is somewhat strange that while the domestic mills still need a lot of cotton, the normal demand has suddenly decreased if not almost vanished for the past several weeks.
Of course the increased use of Polyester Staple Fibres (PSF) and spinning of much higher counts of yarns by several mills has also dampened some appetite of the spinners to accumulate larger stocks of cotton.
In other developments, some mills are reported to be accumulating yarns due to lack of sales.
On the other hand, now the arrivals of current crop (2003-2004) seed-cotton (kapas/phutti) in many parts of the cotton belt are reported to be waning.
This situation has led to a reduction in enquiry for cotton following the reportedly depressed cotton market.
Thus the turnover in the cotton market has been low during past several sessions.
However, traders in the textile market add that the well-placed, larger and efficient textile mills are still very happy over their performance.
Brokers said in Karachi on Thursday that the price idea for cotton prom Mirpurkhas in Sindh had gone down to range from Rs 2500 to Rs 2550 per mound (37.32 kgs) without the 15 percent Sales Tax; cotton from Tando Adam, Shahdadpur or Sanghar was being quoted from Rs 2600 to Rs 2700 per mound.
In Nawabshah district the cotton was being reportedly offered from Rs 2800 to Rs 2850 per mound; lint price from the Khairpur district was said to have ranged from Rs 2850 Rs 2900 per mound.
While the price idea for cotton from Upper Sindh (K-68) ranged from Rs 3100 to Rs 3150 per mound.
Without the Sales Tax, the price of ginned cotton in Punjab reportedly ranged from Rs 2600 to Rs 3150 per mound.
Holiday mood has pervaded the cotton market as next Monday and Tuesday have been declared Muharram holidays in Pakistan so that real activity in the cotton market will resume after the middle of next week.
In actual business transacted on Thursday, an exporter bought 1000 bales of cotton from Shahdadpur in Sindh at Rs 2700 per mound (37.32 kgs) without the Sales Tax, 2000 bales were sold in the Khairpur district in the range of Rs 2890 to Rs 2900 per mound, while 3000 bales were said to have been sold from an assortment of stations in Upper Sindh (K-68) including Daharki, Ghotki and Mirpur Mathelo at Rs 3100 per mound. No sales from Punjab were reported till the evening.
The prices of seed-cotton (kapas/phutti) also fell in sympathy w1th the declining cotton prices.
Thus on Thursday, seed-cotton in Sindh was quoted from Rs 900 to Rs 1200 per 40 kgs, while in the Punjab the seed-cotton prices ranged from Rs 900 to Rs 1250 per 40 kgs according to the quality.
Earlier this week, the chairman of the Karachi Cotton Association (KCA), Iqbal Umer, invited the Federal Minister for Agriculture Sardar Yar Mohammad Rind to meet the board of directors and several prominent members of the trade.
In his welcome address, Iqbal Umer highlighted the role being played by the Karachi Cotton Association (KCA) in regulating the marketing of raw cotton.
Iqbal Umer emphasised the urgent need to increase the cotton production in Pakistan to 15 million bales as soon as Possible, by increasing the area under cultivation and also improving the yield per acre to meet growing requirements of the domestic textile industry and also to ensure availability of surplus cotton for export.
The Chairman of Karachi Cotton Association (KCA) also pleaded with the minister to allow immediate resumption of hedge trading in cotton which was suspended in 1976, following the nationalisation of export or raw cotton.
Iqbal Umer explained to the Federal Minister Sardar Yar Mohammad Rind that futures trading in cotton is a sophisticated marketing mechanism, beneficial to all the sectors and stakeholders in the cotton trade, which enables smooth deliveries against forward sales.
The cotton delivery is stipulated in the contract. The Karachi Cotton Association (KCA) has complete experience, know-how and the infrastructure to conduct cotton futures trading properly.
In his reply, Sardar Yar Mohammad Rind assured consideration of the government to reopen cotton hedge as all the stakeholders had already recommended the resumption of cotton hedge operation, as it had been successfully conducted by the Karachi Cotton Association (KCA) in the past.
It is also noteworthy that according to a report from Islamabad, last Thursday that the law division of the government has stated that hedge trading is not against the Islamic mode of trading and thus cotton hedge trading could be allowed by the government.
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