The volatility in cotton prices can be quite vexing, especially when local prices suddenly stop tailing the price in global markets.
The price of global cotton is currently hovering near its five-month low of 74.32 cents per pound, and is expected to remain sober. Forecasts of higher import demand are being kept in check by projections of higher production in 2010-11 amid fears that overall the economic outlook would be a tad fragile.
Yet, domestic cotton is pacing upwards, in the past few weeks, local cotton prices have stopped following international prices as monsoon rains in the country has been causing a delay in cotton arrival.
Recent surges in the price of cotton, the latest being an increase in the official spot price by Rs50 to Rs6,950 per maund, have caused restlessness.
However, there are reasons to believe that prices will gradually move towards stability - moving in line with falling international cotton prices, as eventually domestic supplies will pick up once the rains recede.
Moreover, crop harvesting in the country is gaining momentum, and production at ginning factories is picking up pace as demand from spinners is gradually increasing. With cotton supplies on the road to recovery, it is expected that prices will also ease by August.
Sources in the Karachi Cotton Association reveal that demand currently exceeds supply by 30,000 bales a day. However, supplies are seen rising to at least 25,000-30,000 bales of cotton per day, against the demand of 35,000 bales per day.
Despite the promising prospects of cotton, however, the area of concern remains the conflict between millers and the value-added textile sector. While its understandable that the finished goods manufacturers are demanding a ceiling on the export quota or an export duty, it bars local producers from competing on a level playing field.
Its about time manufactures in the value-added sector adopt technological up-gradation, and come up with innovative products of a higher standard to compete on facets other than price.