Cotton prices continue consolidation

Lint prices continued to consolidate this week following widespread rains throughout the cotton belt on last Sunday and Monday. as a result of sizeable rains received in both Sindh and Punjab, besides most other parts of the country, cotton ginning was interrupted for two or three days but has resumed now.
According to preliminary reports, the output may remain same as estimated before the rainfall, but it is feared that qualitative damage has occurred in several cotton areas.
Therefore, according to current reckoning, this year's crop (2006-07) may still achieve the revised production target set by the government which was fixed at 12.4 million domestic size bales. It may be recalled that government had previously given a production target of 13.8 million bales for this year earlier in the season.
This perceived qualitative deficiency in the current crop has hardened the cotton prices so that they continue to remain at Rs 2,600 per maund (37.32 kgs) in both Sindh and Punjab for the premium grades. Domestic mills are now worried that the quantity of the higher class of cotton in the current crop has decreased considerably.
Thus the prices of both seedcotton (kapas/phutti) as well as ginned cotton continue to remain firm and are perched at fairly high levels. On Thursday the seedcotton (kapas/phutti) prices in Sindh resportedly ranged from Rs 1,150 to Rs 1,350 per 40 kgs, while in the Punjab they are said to have prevailed from Rs 1,200 to Rs 1,350 per 40 kgs according to the quality.
Cotton prices were tightly held in both Sindh and Punjab. In Sindh they prevailed from Rs 2,375 to Rs 2,500 per maund (37.32 kgs), but higher quality cotton from Sukkhur was being offered at Rs 2,600 per maund. In the Punjab, lint prices reportedly ranged from Rs 2,500 to Rs 2,600 per maund according to the quality.
Though sale of cotton had been suspended for a couple of days following the rains, business has now resumed. However, there appeared no easy selling on the part of the ginners. Nevertheless, traders estimated that about 50,000 to 60,000 bales of cotton were sold every day on last Tuesday and Wednesday. Even though most of the mills continue to be unhappy over their business performance, cotton prices continue to remain tight in the market.
According to trade talk, mills in Pakistan may import around 2.5 million domestic size bales of cotton this season (2006-07) to fill the growing gap between their consumption presumably exceeding 15 million domestic size bales against a domestic output currently estimated to be below 12.5 million bales.
About one million local equivalent bales have already been booked for import including an estimated 200,000 to 300,000 bales from neighbouring India. Other origins from which cotton has been booked for import by the domestic mills are said to include Brazil, USA and West Africa.
Recently, prices of imported cottons are said to have firmed up in the international markets. For instance, the price for shankar-6 from India which was being quoted at US cents 56 per pound c and f Karachi has increased to US cents 57 per pound for December 2006 delivery.
According to the agents for international merchants in Karachi, there is still pending inquiry for Indian cotton by the domestic mills as it is a cheaper source of supply at present compared to other sources.
Brokers said in Karachi that those bales of cotton which were pressed before the recent rains were selling at a premium because of better quality which was available earlier.
According to one broker, if the fears of lower quality of lint are true due to the rains, then a price increase of up to Rs 100 per maund (37.3 kgs) later on could not be ruled out. Therefore, generally speaking the appearance of the cotton market may be described to be that of a firming price situation which could tighten subsequently.
The Pakistan Cotton Ginners Association (PCGA) issued its fortnightly seedcotton (kapas/phutti) arrivals report last week for the fortnight ending on the 1st of December 2006 for the current crop (2006-07). The shortage of 6.51 percent in Sindh for the seedcotton arrivals till the 1st of this month is offset by increase of 4.83 percent in Punjab which produces nearly 80 percent of Pakistan's cotton.
Thus the total arrivals of seedcotton from the current season throughout Pakistan till the 1st of December have been recorded at 8,978,686 domestic size bales against last year's 8,781,130 lint-equivalent bales, showing a national increase in output of 2.25 percent compared to the previous season (2005-06).
Supply of seedcotton in lower Sindh is said to be diminishing and also some ginning factories in Khairpur district and upper Sindh (K-68) are also closing down where seedcotton from Punjab was also said to have been received over the past several weeks.
According to the brokers in Karachi, reported cotton business in the ready market till Thursday afternoon included 1000 bales of cotton of different qualities from Sanghar in Sindh at prices varying from Rs 2,400 to Rs 2,500 per maund "(37.32 kgs).
In Punjab, 300 bales of cotton from Gojra reportedly sold at Rs 2,550 per maund, while 400 bales from Shujabad and 600 bales each from Lodhran and Mohammadpur Dewan were said to have been sold at Rs 2,600 per maund. As usual, much more business was likely to be transacted later at night.
Indian sources in Mumbai said that all-round buying in their market by both mills and exporters are keeping the cotton prices in a stable condition despite a record crop. There is an anticipation that Indian cotton prices could improve with advent of Chinese purchases when import quotas are issued in China some time after the middle of this month.
It was reported in the media that the chairman of the national strategy committee on textiles and leading industrialist Tariq Saeed Saigol was expected to make a comprehensive presentation to Prime Minister Shaukat Aziz on the problems being faced by the textile industry in Pakistan due to unfair competition from such exporters like China, India and Bangladesh.
Almost all the upstream textile associations have been consulted regarding their problems and their proposed solutions. Tariq Saeed Saigol was expected to plead with the prime minister to enable the industry to cut down cost of production of textile products in Pakistan to be able to compete equitably with the other global competitors.
In recent months, the government had conceded as much that domestic textile millers had been facing unfair competition from some of the global players which require adequate ways and means to put the Pakistan textile industry on a proper footing.