Activity improves despite higher prices on cotton market

Trading activity improved on the cotton market on Tuesday as some mills preferred to make deals despite the higher rates, dealers said. The Karachi Cotton Association (KCA) official spot rate retained the overnight level at Rs 8,500, they said. In Sindh and Punjab phutty price of low type was at Rs 2500 and that of superior type at Rs 3000, they said.
In ready business nearly 2,600 bales of cotton changed hands between Rs 8000-9000, they added. According to the market sources, needy mills preferred to cover the short position in anticipation of further rise in the rates and partly because highly volatile NY cotton futures, they said.
As a whole, both mills and ginners making cautious deals ahead of the gazette notifications about the textile related measures, some experts said. Main participants were interested in observing the impacts of budget announcements before finalising any deal to save themselves from future losses, they said.
The buyers adopted wait-and-see attitude as new cotton productions from Sindh would start arriving very soon, they said. They also said that activity could go up but ginners were not looking ready to oblige them. Some negative developments after drought and less rains in the US and China kept the ginners away from buyers.
Other brokers said that it is very surprising to know that there was no relief or concessions for the textile sector in the budget. Some analysts were of the view that it is need of the hour to lessen the burden of the textile industry to make exports competitive in the international market. High cost of inputs and tax make the exporters unable to face competition in the global market.
On Monday the US cotton futures settled sharply lower on switch trade and liquidation as players moved out of the spot contract but the worst drought in a century in the key growing state of Texas kept losses in new-crop contracts to a minimum, analysts said. The benchmark December cotton futures on ICE Futures US fell 1.77 cents to end at $1.3693 per lb, moving from $1.3472 to $1.3964.
On Thursday the contract finished at $1.3923 per lb, the highest settlement for the third position cotton contract since May 3. Spot July cotton dropped the six cents daily limit to end at $1.5563 per lb. The new-crop December cotton contract, on the other hand, is very well supported by the severe drought in Texas, the biggest cotton growing state in the United States.
The National Drought Monitor said in a report last Thursday that more than half of Texas is experiencing "exceptional" drought. Open interest in the cotton market was at 161,193 lots as of June 3, its loftiest level since April 20, the exchange data showed, and a seeming indication of renewed investor interest in the cotton market.
Total volume traded Monday reached almost 25,000 lots, over 50 percent above the 30-day norm, Thomson Reuters preliminary data showed. The following deals were reported: 200 bales of cotton from Khanewal sold at Rs 9000, 200 bales from Qutub Pur at Rs 8700, 198 bales from Jalal Pur at Rs 8500, 300 bales from Muridwala at Rs 8000, 293 bales from Burewala at Rs 8500, 200 bales from Rajan Purat Rs 9000, 600 bales from Khan Pur at Rs 8700-9000, 200 bales from Dunia Pur at Rs 8700 and 400 bales from Mohammad Pur Dewan at Rs 8500.

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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 06.06.2011

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37.324 Kgs       8,500       120       8,620        8,620               NIL

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Equivalent

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40 Kgs           9,109       120       9,229        9,229               NIL

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