Lint and yarn prices show signs of recovery on better China-USA/EU understanding

Despite some odds, more than 95 percent cotton sowing has been completed in the country, and a few lots of new crop lint cotton from lower Sindh stations have been sold at around Rs 2,300 per maund ex-gin (= 46.80 cents/lb). One ginner from Khipro station intends to start ginning operation in new crop cotton by the end of July.
Weather was violent last week in Lower Sindh with rains quite heavy in some places, which were followed by gusty winds. This type of weather was experienced in cotton areas of Punjab province also.
Last week, when I visited cotton areas in Hyderabad, Hala and Sanghar districts of Sindh, the plants were quite small, mostly between six and nine inches high and the impression was of two to three weeks late. Monsoons would start from next month. Met forecast is for more than normal rains--up to 25 percent.
Fears of unfriendly weather conditions in the new season may reduce expectations for a better crop. Although, the government has fixed production target of 15.0 million 170-kg bales, the general impression is for a lower crop.
Spinners are bidding very good price (around Rs 2,400 per maund ex-warehouse) for Pakistan Trading Corporation cotton stocks, perhaps under fear of late and not good crop. However, in export, TCP reportedly confirmed two sales of 5,000 bales each to international merchants at 44.0 cents/lb fob Karachi. Another tender would be floated next week. Almost, every week, TCP is floating tenders and selling some 50,000 bales in the local market. Still, it is holding unsold stock of some 1.0 million bales, mostly in Karachi. Market circles think that response from local mills would reduce in the coming weeks in view of expectations of new crop arrivals. TCP would shift its selling pressure from local mills to exports and may oblige the merchants at best bids.
If the China-US crisis on textiles is resolved, which appears quite likely, then world cotton prices may move up. China has reportedly already made some agreements with European Union countries in connection with exports of Chinese textile goods to EU countries.
The matter of restoration of cotton futures trading has been put off when the associations of spinners and ginners showed their reservation in a meeting of cotton stakeholders, held in Islamabad recently. One cotton broker firm a few months ago had sold its licence at Rs 4.5 million, but now it is being offered for sale at around Rs 1.5 million in view of reduced chances of restoration of cotton hedge market.
Yarn prices have started picking up, and so its off-take.
Slackness in cotton prices on New York Futures Market continued last week. Ruling contract July and October, marginally recovered by C/points 42 and 10 respectively from last week's closing. US managed to make reasonable export sales of 239,500 Running Bales during the week ended on June 9 instant. Of these US sales, China bought 135,700, Turkey 50,300, Mexico 13,300, Indonesia 10,100 and Pakistan 8,100 bales.
Total seasonal US Export Sales were reported at 14,414,700 bales including 770,600 bales of US Pima cotton and season's total shipments were at 10,638,200 bales including 755,000 bales of US Pima. Main buyers of US cotton were: China 3,422,600 bales, Turkey 2,163,400, Mexico 1,875,000, Indonesia 1,219,200, Thailand 819,700, Pakistan 717,700, Korea Rep 699,900, Taiwan 602,900, Japan 424,000, Canada 423,000 and Hong Kong 256,700 bales.
In view of the agreement reached between China and EU a week ago to limit the growth of exports of Chinese textile goods of different categories between 8 and 12.5 percent, the uncertainty has been removed and Chinese exporters are getting renewed export orders. Negotiations between China and US are in progress over textile export conflict and there are chances of resolving the matter of size of Chinese textile exports in USA.
The row over exports of textile goods had been going on between China and USA and between China and EU countries for a couple of months, which had adversely affected not only Chinese exports but all textile industry. As a result of this deadlock, international cotton and yarn prices depicted fall. The merchants holding long positions in cotton became panicky in sales and prices registered considerable fall. With the resolution of export disputes between China and US / EU, cotton and yarn prices would improve.