20000401

Cotton prices continue to fall

DR ZAFAR HASSAN

LAHORE: Lint prices fell this week by an aggregate of Rs. 75 to Rs. 100 per maund (32.37 kgs) in the wake of faltering values in New York cotton futures market as well as discouraging interest shown by international mechants in the purchase of cotton from the Trading Corporation of Pakistan (TCP). Subdued conditions reported in the yarn market also influnced the decline in cotton values.

Till the afternoon, hardy a business of 3,000 bales of cotton was reported in the ready market. The Karachi Cotton Association (KCA) also slashed its spot rates sizeably on Friday. Thus low trading activity was reported in weak market. Though they kept registering more cotton sales, the exporters were also not very visible in the market. Despite the fact that cotton ginners now only possess an estimated 500,000 to 600,000 bales (170 kgs) of unsold cotton left with them from the current (1999-2000) season, lint values continued to drift lower throughout this week.

The KCA slashed its spot rate for Niab-78 by Rs. 28.75 to notify it at Rs. 2,196.25 per maund including the 15 percent sales tax, it cut its spot rate for K-68 by Rs. 40.25 per maund (37.32 kgs) to declare it at Rs. 2,368.75 per maund, while it also reduced it spot rate for MNH-93 by Rs. 40.25 per maund to establish it at Rs. 2,407.50 per maund.

The cotton market continued to remain mostly quiet in the evening amidst news from some brokers that yarn prices had also suffered in the domestic market. Thus the offtake of raw cotton was reported to be comparatively low. The New York cotton market has been suffering continuously in recent weeks. One possible reason for fall in cotton prices could be that replenishing cost of lint has become higher over the past several weeks compared to the sales price of yarns. Mills had earlier gained handsomely with cheaper inventories of cotton. But now some of the yarn prices are trailing behind the replacement cost of cotton.

Thus on last Tuesday the key 2000 delivery month on the New York cotton futures market fell to finish for the day at 57.57 cents per pound (down by 38 points). The July 200 delivery also suffered to settle at 59.24 cents per pound (down by 23 points), while the October 2000 delivery also fell to close the session at 59.70 cents per pound (down by 20 points). In case of better prospects of the cotton crop in the USA the new crop values could undergo some more pruning.

Sowing in lower Sindh could be reduced or delayed due to reported shortage of water, whereas the government is restricting early sowing in Punjab for the new crop (2000-2001) to avoid any pest problems. Even then the current prices in the domestic cotton market have remained subdued recently.

Amidst easy tendency in the cotton market, it was reported that lint from Sultanabad in lower Sindh sold at Rs. 1,700 per maund (37.32 kgs) without the 15 percent sales tax. Without the sales tax, it was earlier reported that 500 bales of cotton from Sultanabad had sold at Rs. 1,750 per maund; 200 bales from Kandiaro sold at Rs. 1,900 per maund; 200 bales from the Khairpur District sold at Rs. 1,900 per maund. The price idea for cotton from Upper Sindh (K-68) was Rs. 2,000 per maund, the general price range in the Punjab extended from Rs. 1,900 to Rs. 2,000 per maund (37.32 kgs), while about 400 bales from Haroonabad and Chishtian are said to have been sold at Rs. 2,030 per maund.

The number of bidders in the seventh TCP tender for the export of cotton has gone down with only seven merchants participating. According to the traders in Karachi, 10,000 bales of Afzal of 1-1/16 inch staple sold at 44.10 cents pound on FoB Karachi-basis, while 10,000 bales of type Alaka were reportedly sold at 43.45 cents per pound. Thus the sale price of TCP cotton has fallen from 50 cents to nearly 44 cents per pound now. The international prices for shipment cotton are not so weak, only the traders are waiting for the farmers planting intention which was to be announced on March 31, by the United States Department of Agriculture (USDA).