Cotton prices gain again

LAHORE (January 22 2010): After some pause and easiness exemplified by the market last week when cotton prices had recoiled, they have risen again this week close to record levels. Thus lint prices have sprung back to range between Rs 4,550 to Rs 4,750 per maund (37.32 kgs) for the higher grades in both Sindh and Punjab, registering an increase of about Rs 100 per maund since the inception of this week.

Correspondingly, seedcotton (kapas/phutti) prices also recorded a gain of nearly Rs 50 per 40 kgs in both Sindh and Punjab ranging from Rs 2,050 to Rs 2,350 per 40 kgs according to the quality. Falling rupee value against the United States dollar, closing in of the domestic cotton season in Pakistan over the next few weeks, net deficit of cotton supply from the domestic crop for the mills in the prevailing season (August 2009-July 2010) and good improvement in the textile sector promise lint prices to remain perched at high levels or even move still higher.

The Pakistani rupee is lolling around its weakest level and was officially quoted at Rs 84.70 for selling while unofficially it prevailed at Rs 86.50 for selling in the open market on last Wednesday. If the running bales figure is taken to be 12.5 million to 12.75 million domestic size bales for the entire season (August 2009-July 2010) as now being indicated by the trade, it would be about 11.5 million 170 kgs bales as this season ginning factories in Pakistan are churning out pressed bales of 130 kgs to 150 kgs per bale.

Therefore, cotton imports for the entire current season (2009-2010) could range from 2.5 million to 3 million bales (170 kgs) as exporters could also ship out nearly one million bales. A notable positive factor in the cotton economy of Pakistan in recent months has been the remarkable improvement in the textile industry despite many shortcomings and drawbacks including seasonal short supply of gas and power supply being faced by the industry currently.

It is being reported by the textile circles that excepting knitwear, almost all other items of the domestic textile industry like yarns, fabrics and home textiles including bed sheets and towels are performing profitably now. Millers from Pakistan who recently attended the Heimtextil Fair at Frankfurt report good sales of their products which augurs well for their respective textile sectors.

There are also reports in the market that more enquiries for yarn s are now being received from China. This recital shows that despite many impediments, the textile sector is showing a decent revival and a worthy rehabilitation of the industry during the ongoing year. The next significant phase will invite the attention of the spinners towards imports of cotton to fill the deficit.

A report issued by the Pakistan Cotton Ginner s Association (PCGA) issued last week shows total seedcotton (kapas/phutti) arrivals upto the 15th of January 2010 from the current crop (2009-2010) to be 12,239,959 lint equivalent running bales from which the mills have bought 10,353,042 bales. The exporters are reported to have lifted 765,889 bales, leaving an unsold quantity of 1,121,018 bales with the ginners.

Sindh province is showing a remarkable record crop this year at 4,123,717 bales till this time. This year has been comparatively profitable for almost all the stakeholders in the cotton economy of Pakistan from growers and ginners to the spinners, weavers and the value-added sector generally.

In ready sales reported till Thursday evening, 200 bales each from Mirpurkhas and Sanghar in Sindh and 400 bales each from Shahdadpur and Tando Adam, all sold at Rs 4,600 per maund (37.32 kgs) in a steady market. On the global financial and economic front, the historic feature reported this week has been the rise of China as the second largest economy in the world surpassing Japan.

Otherwise, skepticism gained ground that tighter lending policy in China to rein in the overheating economy and control the burgeoning real estate prices could trigger economic downturn in China and in turn dissipate any remaining hope of a global economic revival.

Thus this week saw a notable fall in several commodity and base metal prices barring refined sugar and also easing of equity prices in many bourses around the world. Besides the China factor, the impending collapse of the Greek economy does not bode well for the Euro monetary system which could fall into jeopardy.

Now most economists, banking institutions and global leaders are increasingly of the opinion that early recoveries around the world have become doubtful and different signs and signals around the world are portending a double dip recession. Some observers go as far as to say that it will be many, many years before any true and sustainable recovery is available.

In fact, many reports of economic recovery here and there state that it is bound to be patchy, short-lived and fragile. The trump card of infusing stimulus packages by governments in many leading countries has already been played out and is breeding opposition and criticism by the people in several countries. Indeed several countries are practically bankrupt and do not have more leeway to throw around more stimulus packages.

Thus this week it was reported that property prices may tumble in China while many more economic bubbles await bursting in Asia. The Euro slumped against the United States Dollar amidst fears that the European economy is vulnerable in light of weak performance in Germany and unsurmountable financial worries in Greece.

This Wednesday, the Wall Street saw its worst performance of this year (2010), the Canadian economic recovery remains weak, the United States housing starts have fallen again, the Japan Air Line (JAL) has gone bankrupt, the fourth quarter profit or Morgan Stanley has fallen, Tokyo stocks are slipping and the Indian shares went down. In fact, at mid week all global shares prices retreated.

Even the New York cotton futures fell further on last Wednesday in line with most entities of the commodities complex. However, some fibre users availed the opportunity to cover their short position during the notable dips seen almost continuously over the past several days.