Textile alert! Book your cotton now

Pakistan normally follows international trends. But its only the price trend that we generally follow keeping the supply-demand dynamics aside. So, tracking the trend in international cotton prices, the prices of home grown cotton have also soared to an all time record high level of Rs4,400/maund.
The general public bears the hike in international prices of products say oil, which we largely import and therefore can set a price on our own. But cottons case is rather curious as the prices have rocketed at a time when the cotton arrivals have increased by a good 25 percent - which in theory should have cooled the prices.
But there is a slightly brighter side to the broader picture as well, as it is a well known fact round the globe that Pakistans quality of cotton is much superior when compared to the regional cotton producers. This very reality coupled with the fact that Pakistan has had a bumper crop this season makes its exports quite attractive.
The ever depreciating rupee against dollar (down 14 percent year-on-year) serves as the perfect topping on the cake making cotton the most attractive exportable commodity. Raw cotton exports in the fiscal year to date have almost tripled compared to the same period a year ago. The flip side is that we are losing on value added exports.
The trend is expected to gain pace in December as well as the crop approaches maturity and government target of 12.5 million bales has almost been achieved. Exporters of the commodity owe a letter of thanks to the growers who used BT cotton seeds in large quantity resulting in higher production - and also the weather that remained merciful on the crop.
Now, the market dynamics all point to lower cotton prices in the future, as the inventory of 0.8 million bales coupled with strong expected arrivals in the coming months suggest an oversupply situation. But, by the look of it, things do not seem to be moving much in favour of the local textile industry as prices have refused to follow the theory and are instead happily following the international market.
What has triggered the local prices jump by 21 percent in just five months is the high discount to the international cotton prices that currently stands at 10 percent - still attractive enough to keep luring foreign buyers in the local market.
It is high time that the textile manufacturers come out of their nap and book the product for the next season before the fast reducing discount with the international prices blows away completely and their margins along with.

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Cotton Arrival

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(000) 40 Kg bales   Dec-09   Dec-08   %()

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Total               10,428    8,336      25%

Export                 627      215     192%

Sales to mills       8,912    6,487      37%

Unsold bales           837    1,128     -26%

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