Cotton prices on the rise

Cotton prices in the world market has suddenly jumped by 2 to 3 cents per pound which heated the prices in the local market adding at least Rs 200 per maund in a week. The traders say that the American cotton suddenly started moving upwards, as the demand for the commodity has risen suspecting China entered into the market. However, market observed that continues fall in dollar's value was the main factor for higher demand of the American cotton, which turned cheaper for the whole Euro zone.
"China has already announced that it needs over 8 million bales cotton for the current season and its entry has pushed the market for a long jump," said a Sattar Karim, a cotton trader and exporter.
Last month a Chinese delegation visited Karachi Cotton Association to explore the possibility of import of cotton from Pakistan. The delegation also met TCP officials for the same purpose but no deal was struck. However, the delegation announced that China would import around 8.5 million bales. After WTO, China has declared to double its exports.
The trader said that the American cotton which was trading at 51 cents per pound just a week before, reached 54 cents per pound by the end of this week.
"This increase in the world market has already pushed the prices and the lower grade Pakistan cotton is being sold at Rs 2300 per maund," Karim added.
The exporters opined that the substantial decline of the greenback against the Euro and Pound has made the commodity cheaper for the European countries. The European Union has 25 members and a number of them were buying cotton. The United States has been maintaining a weak dollar to get some control over the rising trade deficit but the weak dollar has also provided opportunity for buyers to make money.
The US dollar ended 9-year low against the major currencies last year and the new year began with the depreciation of the USD. However, Pak-rupee still weaker against the dollar and import of American cotton would be a costly affair for Pakistani importers.
"The 54 cents per pound of American cotton means Rs 2700 per maund as the landed cost for Karachi," said Abdul Sattar, a ginner and cotton trader.
The traders see no chance of import as Trading Corporation of Pakistan has a stock of over 1.6 million bales and ready to off-load it. The TCP has very fine quality of cotton which could attract higher prices from the local textile millers who have expanded their capacity. Despite record over 14 million bales cotton production, the textile millers were willing to buy more from the market.