Cotton rates recede with floodwaters

As the floodwaters recede in Sindh, so have prices of cotton in local trade. After a short-lived rally in cotton prices which was spurred largely by fears of massive crop losses due to the deluge; rates for the textile sectors raw material have started trending downwards once again, with the spot rate falling to Rs.6,000 per maund for the first time since monsoon rains flooded many parts of interior Sindh. Recent slippages in the local rates appear to confirm the notion that despite losses of at least 0.7 million bales in the recent flooding in Sindh, the countrys cotton crop production will still tally significantly higher than the previous years production. Moreover, data released by Pakistan Cotton Ginners Association (PCG) on Monday also showed that total arrivals of cotton (as on October 1, 2011) stood at 2.798 million bales; exhibiting an increase of 181,455 bales over last year when total arrivals had stood at 2.617 million bales by September-end. The current crop production should put textile mills and other buyers of cotton at ease, especially since about 487,550 bales of cotton from last years harvest are still awaiting buyers, along with stocks of about 606,084 bales from the current harvest. The increased output is largely attributable to additional acreage of about 150,000 acres each in Sindh and Punjab over this years cultivation season, compared to last years. While brokers draw attention to improved yields as a result of the use of BT cotton seeds, the actual increase in local yields due to the synthetically engineered seed is debatable. Besides, local prices have predominantly followed international prices of cotton, of late. And cotton rates at the benchmark international exchange of New York, were at seven-week lows following sharp declines during Mondays trade, at $0.98 per pound. Cotton rates have spiralled in recent months as China, India and other emerging economies are seen stockpiling reserves. However, global demand will likely remain relatively subdued given the fact that stocks of cotton held by the erstwhile avid buyers are considered to be enough to cater for many months of production activities. "The only possible caveat to this forecast is that if Chinese buyers become active again before the end of the year, prices could rise again, but that is very unlikely given the position of their stocks and the fact that the growth in international demand for textiles has weakened" contends cotton broker, Shakeel Khilji. Any activity from Chinese buyers, however, will not be seen at least for the next two weeks because business activity in the Oriental economic super power is expected to remain dull during celebrations of National Day. For many local buyers who have complained unendingly about being battered and bruised by the spiralling rates of raw cotton, upcoming sessions appear to be bringing some much-needed respite.