New crop (2005-06) cotton arrivals are expected to increase over the next month (August 2005) as flood waters are mostly expected to recede. However, recent record downpour in neighbouring Mumbai (India) has put in an element of caution in case the monsoon drop excessive water in cotton belt in the coming weeks in our fields.
The weather has been wet in Pakistan over the previous several months in the northern and central regions but has spared the southern cotton areas from any intensive downpour till now.
Thus most traders feel that the incoming cotton crop (2005-06) should at least match last years (2004-05) output (around fourteen million bales of about 170 kgs each), if it does not produce more.
There is no stock of cotton from the current crop (2004-05) left with the ginners as it has been sold out, but the state agency (Trading Corporation of Pakistan) still carries more than half a million bales of unsold cotton which it must dispose.
In its last tender during the previous week, it sold a meagre 17,500 bales only because the buyers found the prices to be on the high side. Anyhow, it has called for bids for its next tender in early August for the disposal of 82,000 bales of different grades and lengths.
However, most of the leading mills are reported to be well stocked because they also covered their requirements by booking the cotton in the previous weeks when prices were low at various foreign origins.
According to agents of international merchants in Karachi, about 20,000 tonnes of imported cottons were booked by the domestic spinners in previous few weeks fearing that floods in the rivers and possibly rains in the forthcoming weeks could damage the incoming (2005-06) cotton crop. Nevertheless, there are several mills who have no stocks and are buying on a hand to mouth basis.
About 4 or 5 ginning factories each in Sindh and Punjab are presently pressing the new crop. It is expected that unless the weather intervenes, more and more factories will go into operation by the middle of next month (15 August 2005).
It is generally believed that till now the new cotton crop (2005-06) is mostly intact. Even if there was spillover of water from the rivers into the banks where some cotton is also grown, not more than 200,000 lint-equivalent bales of seedcotton has been adversely effected.
However, with the seasonal monsoon weather having shown its fury of record-breaking proportions in nearby Mumbai in India this week, some cotton traders remain worried lest any excessive rains may damage the cotton crop in Pakistan.
Tone of new crop (2005-06) cotton prices which appeared to be somewhat quiet in the morning became steadier in the evening. Actually, with cotton consumption in Pakistan still galloping ahead, most cotton at this initial stage of the new season should find buyers at home.
Seedcotton (kapas/phutti) prices were seen to be steadier and reportedly ranged from Rs 990 to Rs 1010 per 40 kilogrammes. However, the mills are not displaying the urgency in their purchases which was more manifest during the preceding couple of weeks.
Indeed the Karachi Cotton Association (KCA) reduced the ex-gin price of Grade 3 cotton by Rs 25 and fixed it at Rs 2350 per maund (37.32 kgs) a couple of days ago and which price persists today. The market showed no signs at present to either move up or down significantly, but any new feature or fundamental could sway it in any direction.
We do have to watch the weather in the domestic setting more keenly this year and also keep track of the movements of the cotton futures prices in New York which are increasingly influencing our prices in several ways.
Lint prices for the new crop (2005-06) which were said to be moving between Rs 2325 to Rs 2350 per maund in the morning were being more and more quoted at the level of Rs 2350 per maund in the evening. While there appeared to be a paucity of buyers in the morning, in the evening there were marginally better enquiries for cotton being reported in the market.
Anyway, there was no panic in the ranks of the spinners because any of their short-term needs could conceivably be covered from the stocks of the Trading Corporation of Pakistan (TCP). Therefore, as the new cotton season (2005-06) has already started, the transition from the old season (2004-05) should not be very bumpy.
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