With dwindling stocks of unsold cotton from the current crop (2007-08) remaining in the hands of the ginners now getting lower, cotton prices, particularly for the better quality of lint, crawled upward this week.
Traders said in Karachi on Thursday that prices for ginned cotton in the ready market moved up by Rs 50 to Rs 60 per maund (37.32 kgs) since the beginning of this week.
In recognition of the steady and stable behaviour of the cotton prices accompanied by the rising price tendency, the Karachi Cotton Association (KCA) increased the ex-gin price of Grade 3 cotton by Rs 25 per maund (37.32 kgs) and fixed it at Rs 3325 per maund.
Though mills are buying with care and caution due to essential uninspiring performance of their industry, still considerable quantities of cotton are being disposed by the ginners.
It is now surmised that about 200,000 bales of cotton have shifted from the stocks of the ginners to mills custody since the beginning of this month. Now it is being conjectured that the domestic ginners are holding slightly less than 700,000 bales of unsold cotton with them from the current crop which may be easily disbursed over the next few weeks.
With political strife and recent acts of violence coupled with unruly behaviour against former chief minister of Sindh Dr Arbab Ghulam Raheem and the roughing up of former federal minister Dr Sher Afgan Niazi in Karachi and Lahore respectively this week, uncertainty has entered again into the socio-political horizon of the country.
Moreover, revelations that the previous government had hidden data about large losses and also bad performance of the economy have put noticeable fear on financial and business circles. The new Federal Finance Minister Ishaq Dar has warned the people of Pakistan that a lot of economic hardship will have to be borne by the populace during the time ahead of us.
In this month, Prime Minister Syed Yousaf Raza Gilani presided over a cabinet meeting on last Tuesday for the approval of a rescue plan to extricate Pakistan from a financial crisis which is being primarily deemed as an outcome of former prime minister Shaukat Aziz government's fudged budgetary figures.
Whatever the results and ramifications of these developments on the overall economy of Pakistan, the domestic textile industry is now uncertain whether a constrained financial condition of the country would leave the government in any meaningful position to help the industry in a considerable way.
With the new government mired in political uncertainty and financial difficulties claimed to be the outcome of the financial shenanigans of the previous administration, any large support to the textile industry can be ruled out.
In fact, rising costs of fuel, labour, cotton and other inputs could further depress a section of the textile industry in Pakistan. The new government is said to believe that the previous government doled out sizeable largesse to the textile industry including funds for research and development some of which were misused.
According to market sources, about 10,000 bales of imported cottons, mostly Shankar-6 from India, changed hands when some domestic mills sold to other spinners at the reduced prices ranging from Rs 4200 to Rs 3950 per maund (37.32 kgs).
Local lint prices in Sindh reportedly ranged from Rs 3200 to Rs 3425 per maund (37.32 kgs) where as in the Punjab they are said to have ranged from Rs 3250 to Rs 3550 per maund depending on the quality of the fibre.
Reports received till Thursday afternoon stated that 500 bales of quite low grade cotton from Nawabshah in Sindh were sold at Rs 3150 per maund (37.32 kgs) to an exporter; furthermore, 400 bales of below average grade lint from Kazi Ahmad were sold at Rs 3250 per maund also to an exporter and another exporter is said to have procured 400 bales of sub-average lint at Rs 3300 per maund from Kandiaro.
Unconfirmed reports circulating the market spoke of a deal under discussion for 1300 bales of cotton from Gillewali in Punjab at Rs 3600 per maund. What most of the trade believes to be the final seedcotton (kapas/phutti) arrivals report issued by the Pakistan Cotton Ginners Association (PCGA) for the current season (2007-08) indicating figures upto the 1st of April 2008 shows the output for the current crop at 11,331,124 domestic size bales against last years production of 12,384.405 bales, or a shortfall of 8.50 percent compared to the previous year (2006-07).
This output on an ex-gin basis is short by about 2,668,876 bales compared to the original target set by the government at 14 million bales for this season. Government targets are based on ex-farm basis.
From the above quantity, textile mills had lifted 10,337,976 bales and the exporters 111,226 bales of cotton. The KCA figures of cotton procurement by the exporters are much higher. Preparations and plantings are in advanced stage in many cotton growing areas in both Sindh and Punjab. However, crop has been delayed in Sindh due to paucity of irrigation water.
On the other hand, sowings were early in such Punjab stations like Sahiwal, Pakpatan, Vihari, Arifwalla and Faisalabad where some of the cotton plants are already more than a foot high. Seedcotton and possibly ginned cotton from these areas could arrive as early as next July.
In the evening of Thursday, trade talk indicated a firm tone of cotton prices in the market. Cost of imported cottons will also go up as Pakistani rupee has reportedly slipped down further to Rs 63.50 per US dollar in the open market.
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