20000403

Easy tone sustains in cotton market

S A AZIZ SHAH

KARACHI: Cotton-trade circles estimate that only less than 700,000 bales are left unsold with the ginners by the end of March, 2000 Spinners consider it insufficient to meet their requirements till the commencement of new crop normally sometimes in July. The private-sector exporters may also require some 100,000 to 150,000 bales to fulfil their exports commitments. Cotton consumption by domestic mills appears quite encouraging, which may go up to 9.3 million bales. During the seven-month period up to January 2000, reports indicate import of textile machinery worth Rs 5.524 billion. The Aptma is demanding substantial allocations of forex running in million for replacement and modernisation of spinning industry to make it enough potential to meet the challenge of free trade by the year 2004. Final cotton production figures for 1999-2000, season are expected to be around 9.8 million bales (ex-gin). So far import of cotton has reached the level of 270,000 bales of 170 Kgs while by the close of this season this figure may increase to 400,000 bales. Up till now, total export shipments are lower than total imports. However, by the end of this season, actual export shipments may not be more than 600,000 bales. The tight statistical position may eventually lead to some abnormal situation.

The Trading Corporation of Pakistan (TCP) is reportedly examining the viability of simultaneously adopting the second option of cotton disposal i.e., releasing some 100,000 to 200,000 bales to domestic spinners for which they are already demanding. The Pakistan Cotton Ginners Association (PCGA) is not in favour of this proposal.

Cotton policy is expected to be announced this week. Reportedly, the government has kept some selective role for the TCP to play towards stabilisation of cotton prices. The ginners generally feel dissatisfied with the performance of the TCP with regard to cotton procurement operation during this season.

The Corporation has not been able to settle their final accounts even after lapse of more than three months. Although, as per contract, these accounts were to be finalised within one month's time. The ginners have not been advised about their final results of their weights and evaluations.

PCGA Chairman Shaikh Saeed said TCP Chairman had adopted an indifferent attitude towards the problems of the ginners.

He further said he disregarded the decisions he had agreed to in the meetings with the PCGA. Reports indicate that government is going to implement the cotton standardisation and grading system at ginning stage from July 1, 2000, through Pakistan Cotton Standards Institute (PCSI). This would go a long way in improving the quality of our lint cotton and this is a right step in the right direction. All cotton players such as growers, ginners, spinners and exporters should contribute positively to make this system a success. Under this system, the Karachi Cotton Association will change its pricing pattern from variety to grade and would establish base grade price on each working day. However, the premia and discounts for higher and lower grades respectively would be established by the PCSI and published in daily market reports from time to time. Cotton sowing in tail end areas of lower Sindh is reportedly suffering from serious deficiency in canal irrigation. Tail-end growers are delaying cotton sowing in hope of improvement in canal irrigation, which may eventually cause delay in arrival of new crop by at least one month. This set back would further squeeze cotton inventory and inflate local prices in the closing months of the season.

Local lint prices remain subdued due to slackness in spinners' buying interests. The exporters, who had sold cotton at lower rates are reluctant covering their commitments at higher rates. Some of the international merchants, who purchased Pakistan cotton at cheaper rates from the TCP in open tenders, are easy sellers in Southeastern markets in competition with traditional exporters. Punjab's better grade cotton is selling around Rs 2000 to Rs 2050 per 37.324 Kg ex-gin while Upper Sindh at Rs 1950-2000 and lower Sindh at Rs 1800 to Rs 1900.

On Friday, New York Futures May Contract has improved by 57 cpts to finish at 58.14 and July Contract by 77 cpts to settle at 60.01 after gradually falling for a few days due to liquidation of long positions. The rebound was due on the expectation of lower new crop planting intentions in the USA which now stand at 15.558 million acres slightly lower than 15.8 million acres. China is reported to be releasing 500,000 tonnes of lint cotton to its domestic mills from old stocks. There are indications that China may use most of its carry-over stocks locally by making adjustments in cotton area. Viable lint inquiries are emerging from some European countries like Italy, Belgium and Turkey beside from countries in South Asia. The intention of the oil producing countries not to let global oil prices go down by $25.0 per barrel of crude oil, would render MM Fibre in competitive. The TCP has confirmed two export sales of 10,000 bales each for the Afzal 1.1.16 and Alaka1.1.16 at 44.10 cents and 43.55 cents respectively to the best bidders. Now TCP's total export sales amount to 196,910 bales out of which less than 10,000 bales have shipped, but not a single LC has so far been negotiated even after two weeks of the loading into containers. The LCs have not been looked into properly for necessary amendment in time. The TCP is missing the vessels because of delay in preparation of shipping documents. The LCs are expiring, against due shipment of about 100,000 bales by March 2000, only less than 10,000 bales have been done. The two TCP forwarding agents appear to be lacking necessary experience in cotton handling so then may not deliver the goods. Most of the time, the senior officers concerned are reported holding meeting which apparently yield no results. In cotton procurement, matters relating to finalisation of weight, quality and payments have not been professionally handled. In exports, there should not be any delay in shipments when goods are already available. May be, all are working hards but results are poor. The TCP people lack experience while Ex-CEC people, who are working for the TCP lack trust and command. Cotton trade people appear very much worried about the capabilities of the TCP in successful accomplishment of cotton procurement and export/shipment tasks. The government should look into this matter serious by before the situation reaches the point of no return.