Modest business activity was seen on the cotton market on Friday as mills reluctantly making new deals of fine quality because they are very confident of fresh decline in the rates, dealers said. The Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 9,000, they said.
In Sindh and Punjab phutti price of low type was at Rs 2500 and that of superior type at Rs 3000, they said. In ready business over 3000 bales of cotton changed hands between Rs 7200-8500, they added. In fact, the ginners are in a hurry to sell the old stock as early as possible to make room for new crop and keep themselves safe from future losses, as well, they said.
Particularly they are bound to do so, because if they don't do it, they may be the loser in the near future, they said. About the bearish trend in the local cotton prices, some experts were of the view that there was no surprise as demand has slowed down due to several factors one of the major factor is continued decline in the NY cotton futures due to speculative selling.
Additionally, one of the major cotton buyers China is also on the sideline because of less purchasing interest, they said. Some cotton analysts were of the view that even at current levels prices are still quite good and very good historically. According to the market sources, demand has slowed as the markets have done their job in rationing the old crop and it looks that prices of new cotton crop may be very surprising if weather helps in achieving the target for next season.
China's cotton futures fell as much as six percent to a five-month low on Thursday, tracking losses in New York in a broader sell-off for commodities, and with demand also slowing after prices hit a record high in March. "Downstream demand has been very bad. Mills dare not receive big orders and some mills have shut down after the May Day holidays for five days or even 10 days," said Dong Shuangwei, a senior analyst with Beijing Capital Futures. Yarn stocks have also piled up, said Dong.
China's most active September cotton futures fell 5.3 percent to 24,790 yuan ($3,818) per tonne by 0322 GMT, just off a low of 24,620 yuan, its weakest since November 30. According to a report, in Australia, a leading cotton exporter, cotton growers have harvested about 40 percent of what is expected to be a record crop of around four million bales. One tonne is equivalent to 4.4 bales. Harvesting will continue through June.
On Thursday the US cotton futures finished near a three-month low on investor sales as a commodity-wide sell-off undermined a wide variety of markets and the weak tone could last into next week, analysts said.
The Reuters-Jefferies CRB index, a global benchmark for commodities, was headed for its biggest loss in two years due to widespread liquidation. The mauling suffered by commodities spilled into stocks and crude, with oil prices stumbling six percent as doubts over the health of global economies spread like a contagion. "It's an outside market beat down," said Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas. "This is the undertow of all these outside markets pushing cotton down a rat hole."
The key July cotton contract on ICE Futures US fell 4.65 cents to settle at $1.4686 per lb, trading from $1.4451 to $1.515. It was the lowest close for cotton in almost three months, Thomson Reuters data showed. The new-crop December cotton futures lost 3.51 cents to close at $1.2208 cents per lb. Volume traded stood at almost 20,000 lots, about a fifth below the 30-day norm, Thomson Reuters preliminary data showed.
The following deals were reported: 200 bales of cotton from Sultanabad sold at Rs 7200, 300 bales from Mir Pur Khas at Rs 8500, 600 bales of cotton from Khan Pur at Rs 8500, 200 bales from Shujaabad at Rs 8150, 1000 bales from Mian Channon at Rs 8050 (Credit), 517 bales from Chichawatni at Rs 7900 and 522 bales from Faqeerwali at Rs 7900.
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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 05.05.2011
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37.324 Kgs 9,000 120 9,120 9,120 NIL
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Equivalent
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40 Kgs 9,645 120 9,765 9,765 NIL
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