Latest cotton arrival figures indicate final cotton output around 14.5 million running bales and balance unsold with the ginners have been reduced to 350,000 bales. Last week, the government of Pakistan announced production targets of 15.0 million 170-Kg bales ex-farm for next season against 12.0 million bales fixed earlier. Better availability of irrigation water, farm in-puts including seed, fertiliser and pesticides, record high yield this season and expectation of a conducive weather are encouraging farmers for increase in cotton area next season. As such, no wonder, if another bumper cotton crop is harvested next season.
The Trading Corporation of Pakistan (TCP) has finally decided to offer its cotton for sale and for this purpose it has floated a tender for inviting bids for export and local sale of 60,000 bales of Grade III staple 1-1/16 Prime Mic from its three different warehouses.
Presently, TCP is holding some 1.585 bales of raw cotton. The trade circles are showing interest in purchase of TCP stocks. TCP purchased cotton at fixed rate of Rs 21,59 per 37.324 Kg ex-gin from ginners.
For export purpose, TCP's FOB Karachi price works out to around US Cents 51.0 /lb (Initial price Rs 2,159 + 200 FOB expenses + 150 being 5 months carrying charges including weight shortage = Total cost Rs 2,509 = US Cents 51.20 /lb) for local sale, price works out to Rs 2,159 + 35 being expenses from upcountry station to Karachi warehouse + 150 being 5 months carrying charges including weight shortage = Total cost Rs 2,344 per maund of 37.324 Kg ex-Karachi warehouse and for any upcountry warehouse Rs 2,320 per maund).
What best price the local spinners would bid is not difficult to answer considering the ground realities which are as under:
1. The local spinners have already purchased some 11.9 million bales from the ginners.
2. They would purchase balance of 400,000 bales to make total purchases around 12.3 million bales.
3. The spinners have booked import of cotton equivalent to 1.3 million local bales.
4. According to an international survey, Pakistani spinners have covered 90 percent of their requirements for the second quarter April - June, 05, while 50 percent of the third quarter July - September 05 and 10 percent of the fourth quarter October - December 05.
5. Presently, yarn prices in the international market are not supporting increase in lint cotton prices.
6. High cotton planting intentions for new season are indicating towards another bumper cotton crop next season.
The Karachi Cotton Association has fixed Rs 2200 as Spot Rate in the last day of the week and the same level of price with a quality premium of Rs 50 may be taken as ex-warehouse price for grade III staple 1-1/16. Reportedly, minimum quantity has been reduced from 5000 bales to 500 bales which would attract more and more participation and comparatively at better price.
Regarding the best-expected export price, the international merchants are already holding long position and may not like to add to long position. These merchants are holding up their stocks more specially for China who has opted to buy yarn instead of raw cotton.
Cotton surplus countries are holding enough stocks for selling. The beginning stocks would be around 47 million 480-lb bales next season while it was 35 million bales this season. Presently, prices are fighting hard for increase but the bears appear equally strong for fight. As such, the best export prices may not be above the level of US Cents 48 FOB Karachi.
Unfortunately, a fire broke out on the evening of Friday, the 15th April 05 in TCP's warehouse in Akramabad near Rahimyarkhan where some 42,000 bales were lying stored. The chairman TCP with concerned officers has rushed to the spot to get first hand information of the damage. Some initial reports indicate that about 50 percent of the stocks have been damaged.
However, cause of the fire and extent of the loss / damage would only be made available when inspection, survey and investigations are completed by the concerned quarters specially the insurance company. This fire incident would certainly question whether TCP have already taken necessary measures for the safety and security of its cotton stocks in different warehouses or not. TCP's warehouse in Pipri at Karachi has largest stocks of over one million bales. Here, there appear many laps in observing insurance warranties.
The most important requirement is the abundant availability of water quite close to the warehouse which reportedly is not there.
Reportedly, one fire tender has been posted in Pipri which cannot do anything without water stocks. In TCP's upcountry warehouse, arrangements for safety and security of cotton stocks should be reviewed and make the arrangement more effective for any emergency. After all these are public property so stringent safety and security measure should necessarily be taken by the TCP.
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