Increase in demand for cotton by mills to build up inventories

At the cotton market, buyers have started building their inventories to keep their mills running till the end of this month with Eidul Azha approaching which will be celebrated during the last week of this month. A bullish sentiment has been build up in the ready local market even though the general condition of cotton on the international market is lackluster and the local yarn prices are sluggish.

In Karachi, there was increased demand for cotton because both the mills and the exporters were buyers on Thursday. It is foreseen that the domestic cotton prices will remain firm till the end of this month. Thereafter, the demand and supply phenomenon is likely to guide the market. Weather in the cotton belt has been on the cold side though it should be warmer for the crop development at this stage. Due to reported increase in the number of ginning factories, the ginners are presently said to be competing for the purchase of seedcotton.

Apparent shortage of seedcotton (Kapas / Phutti) is resulting in rise of the domestic prices. However, a better visualization of the current crop size (August 2015-July 2016) will most likely be available by the end of this month or in earlier October, 2015. General idea of seedcotton (Kapas / Phutti) prices from Sindh was said to be from Rs 2400 to Rs 2450 per 40 Kgs, according to the quality. Punjab seedcotton prices reportedly ranged from Rs 2300 to Rs 2450 per 40 Kgs on Thursday. In Balochistan seedcotton prices were said to have extended from Rs 2550 to Rs 2600 per 40 kilogrammes.

Ginned cotton prices in Sindh were generally, ranged from Rs 4750 to Rs 4800 per maund on Thursday, according to the quality. In Punjab they were said to have ranged from Rs 4825 to Rs 4900 per maund in a firm market. In ready business transpiring on Thursday, 600 bales of cotton from Hyderabad and 1000 bales each from Mirpurkhas and Shahdadpur in Sindh, all were said to have been sold at Rs 4750 to Rs 4800 per maund (37.32 Kgs), while 400 bales from Nawabshah and 600 bales from Tando Adam reportedly sold at Rs 4800 per maund each.

In the Punjab, 600 bales of cotton from Harunabad were said to have been sold at Rs 4850 per maund (37.32 Kgs), while 1000 bales from Khanewal were said to have been sold at Rs 4850 / Rs 4900 per maund. In Balochistan, 200 bales from Uthal were said to have been sold at Rs 4800 per maund, while 400 bales from Vinder were reportedly sold at Rs 4800 to Rs 4850 per maund in a firmly held market.

Amin Hashwani, Chairman of Karachi Cotton Association (KCA), expressed deep concern against the proposal being considered by the government to procure Seed / Lint Cotton at high prices to support the growers. Any unnatural intervention by the government through the Trading Corporation of Pakistan (TCP) will be inefficient, impractical and counterproductive which will fail to benefit the growers.

KCA is of the view that the most efficient way to compensate the growers facing adverse conditions would be to provide a direct subsidy on the basis of acreage sown, as is practised in other countries. This would not only ensure direct benefit to the growers without any middlemen or malpractice but will also help to minimize the losses to the government. To procure seedcotton by the TCP and have it processed in hundreds of ginning factories is cumbersome, impractical and exposes to systematic corruption and mismanagement.

The KCA has strongly put suggestion to the government to allow free market mechanism to function without government’s intervention to ensure price levels that will benefit all the stakeholders.

On the global economic and financial front, several developments around the world have shattered the earlier dream at the beginning of the current calendar year that economies around the world were on their way to resuscitate and rehabilitate themselves and gradually leave behind their sick condition

The main hurdle in the ways of global economic rehabilitation turns out to be the Chinese fall in growth and its unmanageable banking, housing and growing risks of deflation. The result is that several economists believe that hard landing of the Chinese economy is inevitable. The result seems to be that China is leading the world towards a recession. If Chinese economy continues to slide, it is certain to drive the rest of the world into a recession.