Dullness persisted on the cotton market on Friday as leading mills and spinners were still double minded before striking any deal, dealers said. Karachi Cotton Association (KCA) official spot rate was steady at Rs 12,500, they said.
In Sindh and Punjab phutti price of low type was at Rs 4000 and superior type also unchanged at Rs 5000, they said. In ready business not a single deal finalised as ginners were not ready to lower the asking prices, they added.
Market sources said that persisting fall in the NY cotton market and uncertainty over the sales tax issues locally kept the buyers on the sidelines. Some analysts said that local buyers may be active as India has moved the restrictions over the export of cotton yarn to make profit. China is not interested in the buying of yarn, this factor, which is causing uncertainties among the cotton traders. India has allowed cotton yarn exports from Friday, an arm of the commerce ministry said in a statement "The contracts for export of cotton yarn shall be registered with the Directorate General of Foreign Trade (DGFT) prior to shipment," the DGFT said.
Besides, India had earlier restricted exports of cotton yarn made from domestic cotton at 720 million kg for 2010/11 season that began on October 1 after prices in domestic market surged in line with the global rally. Additionally, India has withdrawn tax incentives for raw cotton exports with retrospective effect from April 21, 2010, a government statement said. "When the intention of the government is not to encourage exports of specific commodity, DEPB benefit would be contradictory to its intention," the statement said.
DEPB is a tax incentive of around 1.5 percent on value of the exports, according to traders. India had allowed export of 5.5 million bales of cotton from October 1, 2010. Other report said that the 14 percent surge in US cotton plantings for 2011 may not be enough to halt the two-year rally that has pushed prices up over 500 percent to their highest since the American Civil War as strong demand from Asia underpins the market.
Cotton was the top performing commodity in 2010, a feat it repeated in the first three months of 2011, attracting huge speculative interest that peaks in the third quarter of 2010 when fears of a supply squeeze started to emerge. On Thursday the US cotton futures ended the first quarter up 38.3 percent as the market, the best performing commodity of 2010, extended its historic rally fuelled by tight supplies and strong mill demand. The key May cotton contract was up the seven-cent limit on Thursday to end at $2.0023 per lb, against the end-2010 close in the market at $1.4481.
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The KCA Official Spot Rate for Local Dealings in Pak Rupees
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FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"
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MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL
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Rate Ex-Gin Upcountry Spot Rate Spot Rate Difference
For Price Ex-Karachi Ex. KHI. As Ex-Karachi
on 31.03.2011
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37.324 Kgs 12,500 120 12,620 12,620 NIL
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Equivalent
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40 Kgs 13,396 120 13,516 13,516 NIL
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