Spot rate reduced to Rs 9,000; buyers expect further decline in cotton prices

Spot rate was down on the cotton market on Tuesday due to sharp fall in the world cotton prices and more decline is expected because of lack of buying interest among the main participants, dealers said. The Karachi Cotton Association (KCA) official spot rate after some time gap fell by Rs 500 Rs 9,000, they said.
In Sindh and Punjab phutti price of low type was at Rs 2500 and that of superior type at Rs 3000, they said. In ready business over 700 bales of cotton changed hands between Rs 8000-8500, they added. Market sources said that fall in cotton yarn is causing major problem among the traders because contamination in cotton yarn may hurt the exports.
The ginners lower asking prices but it appears that the mills were not ready to oblige them so trading activity is not picking up for several sessions, they said. The Pakistan Cotton Ginners Association (PCGA) fortnightly report till April was not announced and expected in the first week of May, now it was again delayed for unknown reason, some brokers said. Phutti arrival report was expected today but according to a report, domestic cotton arrivals in Indian spot markets till May 1 in the 2010/11 season rose by 2.5 percent on year, state-run Cotton Corp of India said on Monday.
The arrivals stood at 28.6 million bales of 170 kg each, compared with 27.9 million bales a year ago, the government body said on its website. The Indian cotton year runs from October to September. Other reports, showing that the world cotton prices fell in April after rising for seven consecutive months, an international farm group said.
The International Cotton Advisory Committee secretariat said prices fell to $1.73 per pound at the end of April after reaching a record high on March 8 of $2.44. The group said prices fell as credit access problems and competition from chemical fibres curtailed demand for cotton.
Prices, which are still high by historical standards, and increased demand for chemical fibres are expected to limit growth in global cotton use to three percent in 2011/12, while world cotton output is seen increasing by 11 percent, the group said. World cotton ending stocks are expected to reach 10.1 million tonnes and the stocks-to-use ratio is expected to recover from a projected all-time low this season to reach 39 percent in 2011/12, ICAC said. The season average projection for the 2011/12 Cotlook A Index was forecast to fall from the expected 2010/11 average of $1.65 per pound but is still seen above the 10-year average of 60 cents per pound.
On Monday the benchmark US cotton futures tumbled amid professional sales, scuppering a brief recovery late last week and opening the door to further declines this week, analysts said. Dealers said selling by investors and producers was behind the drop in the benchmark July cotton contract on ICE Futures US, which ended down 3.57 cents, or 2.3 percent, at $1.5445 per lb. New-crop December cotton fell 3.87 cents, nearly three percent to $1.2706 cents per lb.
Volume traded was almost 11,000 lots, over 50 percent below the norm, Thomson Reuters preliminary data showed. The level of investor interest in the cotton market is at its lowest level since July 2010 before futures embarked rallied to record highs in early March. Open interest on Friday fell to a 9-1/2 month low at 153,644 lots. The following deals were reported: 300 bales of cotton from Harronabad sold at Rs 8500, 200 bales of cotton from Rajan Pur at Rs 8000 and 200 bales of cotton from Vehari at Rs 8200, they added.

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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 02.05.2011

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37.324 Kgs       9,000       120       9,120        9,620              -500

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Equivalent

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40 Kgs           9,645       120       9,765       10,301              -536

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