Higher yield perception causes sharp fall in spot rate on cotton market
The official spot rate was slashed sharply on the cotton market on Friday on rising anticipations of higher cotton production in the coming season, dealers said. The Karachi Cotton Association (KCA) official spot rate was cut drastically by Rs 250 to Rs 8,400, they said.
Seedcotton rates drifted lower for second day in a row in Sindh, shedding another Rs 200 to Rs 3100-3200, in sympathy, in Punjab prices also came down by Rs 300-200 to Rs 2800-3100, they said. In ready business nearly 400 bales of cotton changed hands at Rs 8450-8500, they said. Some experts said that by and large, the scenario on the cotton has not changed after the monsoon rain in some parts of the Punjab, because prices of cotton lost Rs 500 and seedcotton rates also fell by Rs 600-700 due to decline in mills' purchasing.
They attributed the fall in prices to sharp rise in the production for the next season and the other factor is shifting of growers from rice to harvesting of cotton but the demand is not coming up to match with the supply, they said. Some brokers said that with the beginning of new fiscal year 2011-12, the buying interest may emerge from the mills and spinners. Now the ginners are worried about the prevailing situation as they held back the stuff in anticipations of rise in prices but the situation is reversed, they added.
Naseem Usman said that the after the fresh rains, which is causing quality problem may propel the ginners to lower the asking prices, which is likely to attract the buyers. Many in the market are of the view that prices are still on the upside because the traders are facing problems due to higher-than-expected total cost of production, other analysts said.
On Thursday the US cotton futures closed lower, hitting their five-cent downside limit at one point, after a government plantings estimate suggested the biggest US cotton crop in five years. The losses dragged fibre values down to close out the second quarter of 2011 with a more-than 40 percent loss. It was the first quarterly loss since the second quarter 2010, brought upon by end user demand destruction after prices mounted a historic rally above $2 per lb in the first quarter.
Benchmark December cotton futures on ICE Futures US shed 2.81 cents or 2.3 percent to settle at $1.1859 per lb, after dealing between $1.1640 and $1.23. The losses were triggered by an annual planted acreage report by the US Agriculture Department that pegged US 2011 cotton sowings at 13.725 million acres, the highest since 2006, when 15.274 million acres were sown to cotton.
The USDA plantings number came in at the higher end of Reuters poll, with the average analyst estimate at 13.26 million acres. Total market volumes picked up a bit from the sluggish pace at the beginning of the week, but still remained on the low side. More than 16,250 lots traded late in New York, about 20 percent below the 30-day norm, Thomson Reuters preliminary data showed. The following deals were reported: 200 bales of cotton from Shahdadpur sold at Rs 8450, 100 bales from Burewala at Rs 8500 and same figure from same station at Rs 8450, they said.
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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 30.06.2011
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37.324 Kgs 8,400 120 8,520 8,770 -250
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Equivalent
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40 Kgs 9,002 120 9,122 9,390 -268
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