Prices in the cotton market have declined by Rs 100 to Rs 150 per mound (37.32 kgs) over the last two weeks and are portending further weakness during the next few days.
This situation in the domestic market is akin to the drastic fall registered on the New York Cotton Futures Market where prices fell around 10 cents a pound in the frontal months in recent deliberations.
The dull and depressed condition in the domestic cotton market has also been recorded by the Karachi Cotton Association (KCA) which has slashed the ex-gin price of grade 3 cotton by Rs 75 per mound (37.32 kgs) in recent sessions.
The hypotensive condition of the cotton market promises to prolong further in the near future.
Consequently, on Thursday the Karachi Cotton Association (KCA) determined the ex-gin price of grade 3 cotton to be Rs 3,175 per mound (37.32 kgs) which equates to a spot rate or Rs 3,701.25 per mound when the Rs 50 up country expenses and 15 percent Sales Tax are added to it.
The lone sale of cotton on last Wednesday was that of 400 bales of cotton from Sanghar in Sindh at Rs 2700 per mound (37.32 kgs) without the 15 percent sales tax. No report of cotton sales could be obtained on Thursday till late in the afternoon.
However, brokers in Karachi said that cotton prices continued to portray a subdued posture.
The price idea for cotton from Mirpurkhas in Sindh was said to obtain around Rs 2650 per mound (37.32 kgs) without the 15 percent Sales Tax; in Sanghar, Shahdadpur or Tando Adam, lint prices were being quoted from Rs 2700 to Rs 2800 per mound; the price idea of cotton from Nawabshah district floated around Rs 2900 per mound.
Cotton in the Khairpur district was being quoted in the range of Rs 2950 to Rs 3000 per mound; lint price in Upper Sindh (K-68) extended anywhere from Rs 3150 to Rs 3200 per mound, while in the Punjab the cotton prices stretched between Rs 2700 and Rs 3250 per mound depending upon the quality.
Likewise, seed-cotton (kapas/phutti) prices were also being reported to have declined correspondingly.
Thus on Thursday the seed-cotton prices in Sindh reportedly ranged from Rs 1000/Rs 1050 to Rs 1350 per 40 kgs, while in the Punjab the seed-cotton prices were said to have ranged from Rs 1050/Rs 1100 to Rs 1400 per 40 kgs according to the quality.
Brokers in Karachi added that still considerable quantities of seed-cotton were being received from lower and Central Sindh including such stations as Umarkot, Sanghar, Shahdadpur and Hala which was mostly being transported to the Punjab.
Furthermore, large quantities of seed-cotton have been reported to be accumulating in Harunabad in Punjab while significant quantities of seed-cotton are also arriving in Chishtian, Hasilpur and several other stations.
Thus it appears that the current cotton season (August 2003/July 2004) would extend to the next several weeks.
Thus it is evident that after the close of the extended holiday period last week the bearish tendency of cotton prices remains intact, while the turnover in reported cotton business is either small or mostly stagnant.
Therefore, the cotton prices remain in a soft and easy mode amidst reports that yarn prices have also somewhat weakened over the past few days.
It may be recalled, however, that the All Pakistan Cloth Exporters Association (Apcea) has been agitating against what they claim to have been a rapid rise in cotton and polyester fibre prices which has negated their efforts to ship large quantities of textile goods which they sold at the Heimtextil fair held recently at Frankfurt.
The chairman of Apcea, Ahmed Kamal said recently in Faisalabad that their efforts to ship sizeable quantities of textile goods orders to Germany would be jeopardised if fibres and yarn prices do not go down.
In fact, according to Ahmed Kamal the high prices of cotton and manmade fibres produced in Pakistan would not only wipe out their profits but also make it difficult for Apcea to fulfil their export commitments.
It this context, the various stakeholders including the ginners, spinners, and the exporters are now reportedly building up a consensus to urge upon the government to provide permission to Karachi Cotton Association (KCA) to restart cotton hedging.
In order to avoid volatility in cotton prices and also to stabilise the cotton market, the proponents of reopening a cotton futures contract under the aegis of the Karachi Cotton Association (KCA) believe that all players in the cotton market would be able to plan their forward activities much more stable and properly if the cotton hedge activity in Pakistan is reactivated.
The chairman of the Karachi Cotton Association (KCA), Iqbal Umer, the chairman of the Pakistan Cotton Ginners Association (PCGA) Jetha Nand Kohistani and Nasim Usman, the general secretary of the Karachi Cotton Association brokers advisory committee are having hectic meetings with trade leaders to seek a way to restart cotton hedging as early as possible.
Speculators on the New York cotton futures market have substantially reduced their long positions and can conceivably switch to holding short positions and thus clobber the market to still lower levels.
However, at this stage some trade buying and mill fixations are lending support to the market.
It remains to be seen if the speculators would continue to pound the market or whether the bottom has been reached.
On last Wednesday, the New York cotton futures market moved still lower following the plummeting it witnessed on last Tuesday when all the frontal months suffered limit down aggression.
Thus on Wednesday the March 2004 delivery settled lower at US cents 64.94 per pound (down by 2 points), the May 2004 delivery ended lower for the day at US cents 66.94 per pound (down by 33 po1nts), while the July 2004 delivery month closed for the session at US cents 68 per pound (down by 30 points).
Despite some favourable factors like Chinese need for more cotton and the still falling United States dollar against all other major currencies, the bulls and the bears on the New York cotton futures market remain engaged ferociously. Some sector must needs to snap.
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