After holding on to higher level of prices over the past several weeks, cotton prices declined definitely this week and lost anywhere from Rs 75 to Rs 100 per maund (37.32 kgs). Lacklustre condition in the yarn market, reported decline in fabric prices, prospects of more seedcotton (kapas/phutti) arrivals and anticipations for good forthcoming crop (2006-07) have bundled together to put pressure on lint prices.
In lower Sindh, seedcotton in small to moderate quantities has already arrived in such stations as Digri, Pangrio, Tando Jan Mohammad, Kunri, Samaro Road, Omarkot, Jhudo and Nawakot. Similarly, reports reaching from sundry Punjab stations indicate that the process of seedcotton arrivals has commenced in Burewalla, Bahawalnagar, Chichawatni, Arifwalla, Sahiwal, Chistian and Pakpattan.
According to Nasim Usman, a prominent cotton broker in Karachi, the four or five rain showers received in southern Punjab have been beneficial to the new cotton crop (2006-07). Any excess rainfall could be harmful, but as of now the forthcoming crop carries the potential of achieving the official target, viz 13.8 million bales (170 kgs) output which is usually meant to be on an ex-farm basis.
Despite earlier fears of delay in the new crop (2006-07) arrivals, it now appears that appreciable quantities of lint from the next season will start trickling soon. As such, modest to fair quantities of seedcotton from lower Sindh are expected to start arriving at the end of July, 2006 or in early August. Similarly, we may expect Punjab seedcotton arrivals to start as early as July 2006 when two or three factories may commence ginning, but increased quantities are anticipated to arrive in Punjab in August this year.
In the previous few weeks, mills were relatively eager to buy cotton but now they appear to have moved to the sidelines. Now the ginners appear to be willing sellers but the mills are said to be in no immediate mood to buy cotton in any appreciable quantities. The report of the sale of 200 bales of new crop (2006-07) from Mirpurkhas in lower Sindh at Rs 2550 per maund (37.32 kgs) a couple of days ago has dented the buoyant sentiment which had been prevailing earlier in the cotton market.
Last week the current crop (2005-06) price which was prevailing in the market in the range of Rs 2000 to Rs 2650 per maund (37.32 kgs) has gone down noticeably at the higher end of the scale because on Thursday traders said that cotton was now being quoted from Rs 2000 to Rs 2575 per maund, according to the quality. Seedcotton (kapas/phutti) prices for the new crop (2006-07) were said to have been quoted around Rs 1125 in Sindh and Rs 1150 per 40 kgs in the Punjab.
Restlessness in textile circles due to lack of any announcement from the government till now regarding compensatory measures to put the Pakistan millers on an equal footing with their competitors like China, India and Bangladesh whose governments are reportedly subsidising or assissting their textile units has also dampened any fervour which was prevailing in the industry till recently. Media reports indicate that government has asked the millowners to provide precise information regarding any subsidy or compensation being given to the textile mills in China, India, Bangladesh or elsewhere before any measures may be considered.
Ginners are now said to possess 150,000 bales of unsold cotton from the current crop (2005-06), where as the Trading Corporation of Pakistan (TCP) propose to sell out 42,000 bales from their reported unsold stocks of 84,000 bales from the previous crop (2004-05) on the 10th of July or a little later. that would then leave the unsold holdings of about 42,000 bales with the Trading Corporation of Pakistan.
Spinners claim that under the present circumstances any purchases of cotton over and above Rs 2600 per maund (37.32 kgs) is unremunerative. Therefore, if new crop (2006-07) cotton is available from the 15th of July or one or two weeks thereafter at Rs 2550 per maund, they see no reason to buy the current crop (2005-06) at higher prices.
At the current rate of cotton imports into Pakistan, total imports of lint for the entire season (July 2005/August 2006) would be around 1,880,000 bales (170 kgs), which would be close to two million bales. In the evening, market sentiment remained weak. Seasonal slackness could extend in the market if the new crop arrives within the normal time in the market. Moreover, holidays in most parts of Europe in August could also depress sales and prices further.