Untimely rains accompanied by hailstorms in several parts of Punjab earlier this week caused cotton prices to increase over the past couple of days. Punjab prices of cotton reportedly gained anywhere from Rs 50 to Rs 75 over the past couple of days as spinners feared that the quality of the incoming (2006-2007) crop will be damaged at this crucial time.
Buyers appeared less worried about the size of the current crop but became wary of damage to its grade, colour and other fibre characteristics following the moisture intake as a result of the recent rains.
Rains reportedly fell along with some deposit of hail in such areas in Punjab like Multan, Sahiwal, Bahawalpur and Faisalabad divisions and also as far as Layyah and Bhakkar so that this unusual downpour instilled fears in the buyers regarding quality who therefore turned eager buyers of cotton while some of the ginners were said to have become reluctant sellers.
Last week the Pakistan Cotton Ginners Association (PCGA) issued the seed cotton (kapas/phutti) arrivals report till the 15th of November 2006 showing a national output figure of 6,807,885 lint - equivalent bales of domestic size compared to last years (2005-2006) number of 6,801,872 bales at the same time, or a nominal increase this year which is just short of one percent. Last year's lint output in Pakistan was about 12,400,000 bales on an ex-gin basis.
After many ups and downs in cotton estimates in this year's (2006-2007) output following torrential rains and some floods earlier in the season, particularly in Sindh, lately the trade had started harbouring the hope that a good crop would be obtained because the yield per hectare and also the ginning out-turn (got) were both showing positive performance.
In fact, when the Cotton Crop Assessment Committee (CCAC) met last Monday under the Federal Minister of Food and Agriculture Sikandar Hayat Khan Bosan in Islamabad it revised the target to 12.41 million (12,410,000) bales in view of the improving situation of the crop.
Earlier, some mills had said that if good quality of cotton was made available to them at Rs 2400 per maund (37.32 kgs), they could work profitably with their spinning operations. On Thursday afternoon, lint prices reportedly ranged from Rs 2325 to Rs 2475 per maund (37.32 kgs) in Sindh, while in the Punjab they were said to have extended from Rs 2450 to Rs 2500 per maund.
Punjab cotton prices were said to have tightened later in the evening and some transactions were said to have materialised at Rs 2525 per maund (37.32 kgs). Reportedly, the price of oil cakes (khali) and cottonseed (binola /kakra) also went up.
Seed cotton (kapas/phutti) prices also moved up on Thursday. According to the brokers in Karachi, the prices of seed cotton in Sindh ranged from Rs 1150 to Rs 1250 per 40 kgs, while in the Punjab they are said to have ranged from Rs 1175 to Rs 1275 per 40 kilograms. The vertical direction of cotton prices indicate that most of the mills are looking for good quality of cotton to produce higher quality of yarns but are now fearful that it may become scarcer following the recent adverse weather.
Thus the operators in the market adopted a bullish frame of mind with the speculation that the spinners may have to import anywhere from two (2,000,000) to 2.5 million (2,500,000) domestic size bales this season if they are to consume more than 15 (fifteen) million bales this year (2006-2007).
In this quality conscious market, traders said that higher grade cotton in Sindh is available in Shahdadpur, Dadu and Sukkur division, while the better to good grade stations including higher quality lint in Punjab was available from Rajanpur, Fazilpur, Rahimyar Khan, Uch Sharif and Alipur.
These developments have resulted in regular buying by the mills, which has logically led to the recent increase in cotton prices. Every working day large volumes of cotton are transacted in the ready market where quality considerations have given rise to positive premia differentials for choice lots of cotton. Therefore, currently the sellers are certainly riding a bullish bandwagon.
New York cotton futures prices improved in the last couple of sessions when dealings in the outgoing December 2006 delivery petered out. New York futures market will remain closed on Thursday and Friday for the Thanksgiving holidays so that it will again resume trading on next Monday.
On last Wednesday, the March 2007 delivery settled at US cents 52.12 per pound (up by 49 points), the May 2007 delivery ended the session at US cents 53.53 per pound (up by 48 points), while the July 2007 delivery closed for the day at US cents 54.63 per pound (up by 34 points). Some spinners in Pakistan said that they find asking prices from certain foreign origins to be well maintained and steadily held.
In the election to the Brokers Advisory Committee (BAC) of the Karachi Cotton Association (KCA) held on Wednesday, five out of six members of the Nasim Usman panel got elected. Those who got elected are Nasim Usman, Abdul Aziz Abdullah, Abdul Jalil Khan, Girdhari Lal, Mehboob Shabbar Siddique and Mohammed Taufique.
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