According to traders in Karachi, a high level delegation of Karachi Cotton Association (KCA) led by its Chairman Haji Abdul Shakoor Dada met Commerce Minister Humayun Akhtar Khan last Wednesday in Karachi who reportedly told them that because the federal cabinet has decided the issue. It should be understood that hedge trading in cotton will be allowed. Therefore, members of the Karachi Cotton Association (KCA) are very hopeful that cotton futures trading can restart in the foreseeable future. In this connection, the Vice Chairman of the Karachi Cotton Association (KCA) Sohail Naseem clarified that hedge trading in cotton functioned successfully until 1975 when it was abruptly discontinued for no valid reason.
Sohail Naseem added that the Karachi Cotton Association (KCA) was fully prepared to resume a cotton futures market under a computerised system for the forthcoming season. He extended his co-operation to the ginners or spinners for further talks for any clarification they might require in this regard. It may be recalled that the Pakistan Cotton Ginners Association (PCGA) and the All Pakistan Textile
Mills Association (APTMA) had already consented to resume hedge trading in cotton back in April 2002.
Recently some ginners, mill owners and a farmers group have been opposing the government's decision to open the futures market for cotton. According to the experts, futures markets are functioning all over the world which are the mainstay of orderly marketing of different goods and commodities in an orderly and scientific way. The proponents of resuming a cotton futures
market claim that it would reduce volatility and speculation, encourage performance of contracts and also help the cotton and textile trade and industry to plan the sales of their products for the future months in a competing world.
According to reports available from the cotton traders, besides the United States of America (USA), China is already running a futures market in cotton and is planning to open another one. Furthermore, India, Brazil and Turkey are also running or planning to start hedge marketing for cotton.
In ready business, there has been sparse news from the free market as cotton with the ginners from current crop (2004-05) has dwindled to 100,000 or less bales now. Therefore, all spot light is now on the Trading Corporation of Pakistan (TCP) which is regularly floating tenders for the sales of cotton which it is disposing of to the spinners, exporters or the international merchants steadily.
Sales of cotton by the ginners in the local market are very low in volume and quite sporadic. The general price idea for floating stocks from Sindh or Punjab ranges from Rs 1,950 to Rs 2,200 per maund (37.32 kgs) according to the quality. Cotton prices fetched by the ginners are lower because of diminished quality and dispersed stocks lying at different locations.
The Trading Corporation of Pakistan (TCP) is fetching relatively higher rates as available quantities needed by the mills or the exporters is of prime micronaire values and even the grades are comparatively better.
From the 1,620,000 bales (170 kgs) acquired by the Trading Corporation of Pakistan (TCP) this season (2004-05), about 40,000 bales have been lost to fire. From the balance 1,580,000 bales, 138,000 bales have been sold out from which the mills have lifted about 88,000 bales and nearly 50,000 bales are
said to have been acquired by the exporters.
Now the Trading Corporation of Pakistan (TCP) has floated another tender for sale of 78,000 bales which will be opened on next Saturday viz. 14th of May 2005. Cotton under offer comprise 25,000 bales from Karachi, 15,000 bales from Multan, 10,000 bales from Bahawalpur, 10,000 bales from Rohri, 9,500 bales from Sanghar and 8,500 bales from Shikarpur. Traders are expecting fair participation in these offers of the Trading Corporation of Pakistan (TCP) as New York cotton futures prices have also improved this fortnight.
According to a recent report, the cotton commissioner from the Federal Ministry of Agriculture, Qadir Bux Baloch is very upbeat about the forthcoming crop (2005-06) which he has projected to exceed 15 million bales which would be a record output. He cites improved availability of water, certified seeds, more availability of fertiliser and pesticides which should help increase the cotton production. However, due to recent rains and some problems regarding availability of seeds and its quality, some traders in the private sector are not so optimistic.
According to announcement of the United States Department of Agriculture (USDA) made on Thursday, Chinese output for the new crop (2005-06) has been projected at 25.5 million bales (480 lbs) whereas the consumption has been placed at 41 million bales so that China would need to import about 15 million bales. This data is being construed by the trade to be bullish. However, after cancellation of earlier sales, export sales from the United States carries a negative figure of 80,000 bales this week which is a bearish indication. The market must now sort out the net effect of these recent developments.
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