KARACHI: The local market remained bullish on Friday. Market Sources told that trading volume remained thin.
Market Sources told that 600 bales of new crop of cotton from Sanghar were sold at Rs 1300 per maund. Sources also told that rate of Phutti reached at the highest level in the history of Pakistan. The rate of new crop of Phutti was in between Rs 5800 to Rs 600 per 40 kg. The rate of Banola is in between Rs 2300 to Rs 2500 per maund.
Cotton Analyst Naseem Usman told Business Recorder that it is in the first time of history that new cotton season starts in the month of May.
Meanwhile, initial surveys of the cotton sowing area by the provincial departments concerned suggest that area under sowing of cotton during current season remained slightly over 3.3 million acres of land which is almost 700,000 acres short of the target of 4 million acres assigned to the province.
The area under cotton cultivation last year was 3.821 million acres and it is decreasing continuously for the last three years. This year, it is estimated that area under cotton sowing will remain 3.31 million acres, showing a decline of 13.4 percent as compared to last years. However, the shortfall is more if it is calculated against the assigned target.
Sources in the Crop Reporting Services, Punjab, told the Business Recorder that by May 31, 2021, (cotton sowing season end date), area under cultivation was recorded at 3.115 million acres, which comes to 94.1 percent of the expected cultivated area.
Cotton Analyst Naseem Usman told Business Recorder that if the cotton sowing area is decreased in Punjab then it is difficult that cotton production target of one crore bales set by Federal Agriculture Committee will be achieved. The new season of cotton 2021-22 has started and up till now 800 bales were prepared.
He also told that new season of cotton has started in the country from June 1. 400 bales of cotton has been delivered from the ginning factory of Tandoo Adam and 100 bales of cotton were prepared in the ginning factory of Sanghar. A ginning factory of Burewala has delivered 200 bales of cotton from the Phutti of Sindh. Up till now 800 bales of cotton were prepared from the Phutti of new season of 2021-22.
According to NAEC, many exporters are falling back on PPE manufacturing as a stop-gap activity, while some are just left with no orders to service.
Businesses worldwide have been hurt by the COVID-induced economic crisis. Indian textile and apparel manufacturers are suffering severely and some regions of the country facing a huge struggle. The garment exporters in Noida and Greater Noida are the worst of times as they claim to be fast losing business to Bangladesh, Sri Lanka and Vietnam. They are claiming- “over 20% orders have already been diverted to these countries.”
“This is not a substitute for the core business of garments. We are now finding ways to reassure workers to return to work. As an apparel cluster, we have organized our oxygen bank. We have distributed oxygen concentrators,” he said.
“For our workers, there are isolation wards and oxygen beds at factories. We have also created a facility for COVID-affected workers to borrow concentrators and return them after use. We urge the government to make vaccines available for workers, which would give them the confidence to rejoin,” he added. Thukral claimed that losing business at this time could result in long-term damage.
Meanwhile, market participants awaited a weekly export sales report from the US Department of Agriculture (USDA) due on Friday.
“The assumption (in the cotton market) is that demand is going to be there and the crop is probably not going to be big enough this year, maybe even next year, to meet demand, so we’ll see prices supported,” said Jordan Lea, senior trader at DECA Global. Traders were also keeping an eye on weather in the top cotton producing West Texas region.
While recent rains in West Texas could create some temporary challenges to production, in the long term it should be beneficial as the water disperses into the soil, Lea said, adding that higher grain prices could create a “multi-year challenge” for US cotton acreage.
In its weekly crop progress report released on Tuesday, the USDA rated 30% of the cotton crop in Texas in poor-to-very poor condition.
Total futures market volume fell by 11,071 to 22,022 lots. Data showed total open interest gained 75 to 230,386 contracts in the previous session.
Moreover, NY futures continued to move higher during this holiday-shortened week, as July added 160 points to close at 84.21 cents, while December gained 119 points to close at 85.04 cents.
Relatively tight inventories among major suppliers, combined with strong demand from the downstream sector, have continued to shore up NY futures this week. Even though the market has that beaten down feeling since July is still over 1000 points below its February 24 settlement high of 94.33 cents, the situation looks a lot more constructive for December, which closed today just 258 points below its contract high of 87.66 cents.
Although the export sales report is delayed until tomorrow, we have heard of good off take over the last couple of weeks thanks to the US being among the cheapest origins available at the moment. Competitors like Brazil and India, which are the largest exporters after the US with a combined 16.2 million bales, have seen their local prices shoot up recently.
In Brazil spot prices reached over 97 cents, delivered mill South Brazil, which is considerably above export levels, while in India prices quoted in rupees are at their highest level since mid-2016 and have rendered Indian exports uncompetitive for now. Mills in the South of India are actually interested in importing WAF and Australian styles.
As we leave the current season with relatively tight inventories in many of the relevant origins, it puts greater emphasis on new crop production. Fortunately the outlook has improved somewhat after West Texas has received copious amounts of rain, while the Indian monsoon seems to be off to a good start and even Brazil has received some last minute rainfall that might improve yields.
The big story has been West Texas, where Lubbock has seen over 6 inches of rain in May, which is the 8th largest amount on record. However, these downpours, which were accompanied by strong winds and in some cases hail, seem to be a mixed blessing. Too much of a good thing has turned into a challenge for growers, who are now trying to beat crop insurance deadlines, especially south of Lubbock, where a June 5 deadline looms.
While some acres may be claimed by insurance and/or competing crops, like milo, we believe that on balance we are looking at an above average potential for the region. The weather looks a bit warmer and drier over the coming days and if summer were to finally arrive in West Texas, cotton should be doing well with all that moisture.
The Texas coastal bend, which normally accounts for over a million bales of production, has seen its wettest May on record and more heavy rain is forecast for the coming days. Many fields remain waterlogged, which makes crop management difficult and yield prospects are therefore being scaled lower. There is still time for things to improve, but the fear is that this crazy pattern is going to persist and the market will therefore keep ‘a weather eye on things’.
The Spot Rate remained unchanged at Rs 12300 per maund. The Polyester Fiber was available at Rs 200 per kg.
Copyright Business Recorder, 2021