After a relatively sagging tendency during last week, this week the lint prices have shown a rebound and gained between Rs 100 to Rs 125 per maund (37.32 kgs) over the last four days.
Increased idea of lint consumption in Pakistan during the current season (August 2009-July 2010), upward spiral in New York Cotton futures prices, sudden and swift improvement and profitability of Pakistani textile products over a vast array of items and general improvement in the global financial and economic conditions have all lumped together to provide a bullish sentiment to cotton prices.
Above all, lint prices in Pakistan are remarkably cheaper than those prevailing in most of the leading markets around the world. Therefore, it is almost axiomatic that the local lint prices still have much more potential to more upwards. Upscaling of domestic demand and consumption figures also point to a significant rise in cotton prices.
No doubt there is a feeling that when seedcotton (kapas/phutti) arrivals accelerate over the next couple of months lasting till the end of December 2009, lint prices could simmer down. However, the domestic fundamentals and features coupled with the international increase in fibre prices promise a firm tendency to prevail in the cotton market for the foreseeable future.
Till now seedcotton equal to about 4.4 million pressed bales of domestic size from the present season (2009-2010) are estimated to have arrived into the ginning factories in both Sindh and Punjab as against last year s arrivals of 3.4 million bales till the same time viz. 15th October 2008 during the previous season (2008-2009).
Most of the ginners are completely sold out, including the seedcotton lying in their factories which they will gin and deliver to the exporters and the mills under existing contracts. Thus it is estimated that exporters have probably bought 450,000 to 500,000 bales from ginners from the current crop, whereas the domestic mills have already lifted or contracted to lift nearly four million bales from the ginners. That hardly leaves any floating stock of cotton in the market.
As mentioned earlier, though the current cotton prices are firm and there appears to be a bullish tendency in the market, the domestic textile industry feels that with increased seedcotton arrivals in November and December 2009, the rising price tendency of lint should abate over the passage of time.
However, with the depreciation of the Pakistani rupee to 83.35 units against the United States Dollar, it appears difficult that the lint prices should go down appreciably. In fact, with one year peak prices at the ICE cotton futures in New York, if any thing the Pakistani cotton prices should appear to reduce the gap and move closer to the much higher international prices.
Thus domestic mills have lifted ready cotton from both in Sindh and Punjab between Rs 3,600 to Rs 3,650 per maund (37.32 kgs). In tandem with the rising lint prices, seedcotton (kapas/phutti) prices were also higher by about Rs 50 per 40 kgs in both Sindh and Punjab. On Thursday, seedcotton prices in Sindh reportedly ranged from Rs 1,750 to Rs 1,775 per 40 kgs, while in the Punjab they were said to have ranged from Rs 1,750 to Rs 1,800 per 40 kilogrammes.
As a result of this situation, Pakistani mills are focusing all their attention to domestic growths because the prices of imported origins are considerably higher and also quite out of parity against the prices of their textile products. According to recent assessments, the current crop (2009-2010) output in Pakistan should range between 11.8 million to 12.5 million domestic size bales on an ex-gin basis. Against this production possibility, Pakistani mills may consume anywhere from 14.7 million to 15.25 million domestic size bales this season.
This scenario could lead the local mills to import anywhere from 2.75 to three million bales (170 kgs) of cotton this year. Ready sales of cotton reported till Thursday afternoon included 2,600 bales from Khairpur in Sindh at Rs 3,625 per maund (37.32 kgs), while 400 bales from Rohri were said to have been sold at Rs 3,650 per maund. In the Punjab, 400 bales from Chichawatni sold at Rs 3,625 per maund while 400 bales each from Faki rwali and Fort Abbas and 2,000 bales from Rajanpur were all said to have been sold at Rs 3,650 per maund each.
When everything appeared to be returning to normal last week, terrors again struck Pakistan over the last three or four days as suicide attacks hit the General Head Quarter (GHQ) of the Army in Rawalpindi including other strategic and public places in Kohat, Peshawar and at three places in Lahore on Thursday. These serial and continuing attacks by the terrorists and suicide bomber indicate the vulnerability of our security arrangements because the three attacks in Lahore were made on precincts and premises of the law enforcing agencies. Any how, the people of Pakistan remain undaunted and remain prepared to defeat the terrorists.
On the foreign financial and economic front, share markets and also many of the commodity markets around the world continue to record robust rise in their values. Equity prices on many bourses are at their highest since almost one year with Wall Street index having risen phenomenally to surpass 10,000 points.
Big boost was given this week to the equity markets due to positive or better reports being filed by J.P. Morgan, Citibank and also increase in the values of Goldman Sachs. Asian markets are also following suit thereby leading to a flurry of shares purchases around the world.
Notwithstanding this phenomenal progress in investor confidence, many economists and bankers still prefer to be cautious and continue to warn of more negative developments in the global economy and the banking system to come which could take many more years before the business world recovers its composure.
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