20000207

Strong lint prices place TCP

S A AZIZ SHAH

KARACHI: The fortnightly cotton figures up to January 31, 2000, released by the Pakistan Cotton Ginners' Association do not appear speaking of a bumper crop of over 10 million bales despite tall claims of the government agencies.

At the close of January, seed-cotton equivalent of 9.245 million bales arrived in ginneries as against 6.836 million bales same time last year Ñ an increase of 35.23 percent and domestic mills purchased 7.129 million bales against 5.334 million bales of last year Ñ 33.65 percent increase.

The Trading Corporation of Pakistan procured 525,000 bales and private exporters 177,000 bales. Unsold stocks stand at 1.429 million bales as against 1.502 million bales same time last year.

In the second fortnight of January 2000, flow of seed-cotton was 527,000 bales as against 249,000 same period last year. Mills consumption during 1999-2000 season is expected around 9.4 million bales as against 8.6 million bales of last season.

Total imports last year were equal to 1.23 million Pakistani bales, while by close of January, 2000, imports is equal to 50,000 Pakistani bales. Textile circles expects more imports of better grade cotton of 1.1.8" and extra long staple of 1.3.8" to 1.7.16" staple lengths to make total exports during this season would be equal to 500,000 Pakistani bales. Thus cotton stock position by the end of 1999-2000 season is projected as under:

Carry-forward to 1999-2000 season = 0.85 million bales.

Expected crop in 1999-2000 season = 9.98 million bales.

Imports during 1999-2000 season = 0.50 million bales.

Total availability up to close of 1999-2000 season = 11.33 million bales.

Expected domestic consumption = 9.4 million bales.

Expected exports during 1999-2000 season = 0.75 million bales.

Total Disposal during the season = 10.15 million bales.

Carry-over of 1999-2000 season = 1.18 million bales.

Thus carry-over stock at the end of 1999-2000 season would be 033 million bales i.e., 38.82 percent more than that of last season. If the production prospects during 2000-2001 season would appear better than at the end of this season larger unsold stocks would exert selling pressure on lint prices keeping them even below Rs. 2,000 level.

Seed-cotton prices have jumped to the level of Rs. 900 per 40 kg and lint prices to Rs. 1,950 per maund of 37.324 kg level in Punjab. In Sindh low grade cotton, which was selling around Rs. 900 per maund sometime back, is now quoted around Rs. 1,500.

In the last 30 to 40 days, local prices have registered tremendous increase of 50 percent, while real increase in lint values in international market has been around 25-30 percent.

The spinners have been the sole buyers while higher local prices have kept the exporters at sideline. The local yarn prices are very strong specially for ring-spun yarns which is fuelling lint prices.

The spinners are trying to procure lint cotton even beyond their season's requirements. Next meeting of the Crop Assessment Committee is being held on February 7 to review the size of cotton crop. This time cotton growers have suffered unprecedented loss in sale of their cotton produce as the heavily trumpeted bumper cotton production proved to be fake propaganda. They will take a long time to recover from this heavy loss. The government should take notice of this situation and all measures should be taken to avoid recurrence of such situations.

The appointment of Mirza Qamar Baig as the Commerce Secretary has been hailed in trade circles as he brings with him good experience in trade specially exports of raw cotton and TCP may take benefit of his experience in exports of raw cotton.

TCP have made export sales of 1,000 bales T-1467 staple 1.1.16 from the first tender at 42.0 cents/lb, while one bulk sale of 10,000 bales (T-1467 staple 1.1.16 at 40.0 cents/lb pending decision from first tender, is reported to have been cleared. Out of second tender, export sale of 23,000 bales (13,000 bales Afzal 1.1.16 at 41.55 cents/lb, 10,000 bales Alaka 1.1.16 at 41.0 cents/lb) have been made.

On January 6, TCP floated third tender of 50,000 bales (25,000 bales Afzal 1.1.16, 15,000 bales Alaka 1.1.16 and 10,000 bales Alaka 1.1.32) for opening on February 16 with bids validity period up to February 18. All export sale prices are on FOB Karachi basis.

The average sale rate of 34,000 bales works out to 40.945 cents/lb FOB Karachi which is equivalent (Rs. 1,735 Ñ FOB Expenses 150) to Rs. 1,585 per maund of 37.324 kg ex-gin.

If Rs. 1,500 per maund is considered as average price, TCP earns Rs. 85 per maund i.e. 2.0 cents/lb. In selling lint cotton in local market, TCP may earn handsome profit of Rs. 400 per maund instead of only Rs. 85 per maund in export sale. But in local sales, Pakistan will not be able to get the much-needed foreign exchange. However, the decision should be taken only in national interest. It is, however, quite clear that despite paying at least Rs. 250 per maund of lint cotton above the local market price, the TCP would make huge profits beside earning foreign exchange of about $100 million.

The New York futures which were moving up strongly, have declined by about 200 cpts/lb in three consecutive sessions to close March contract at 56.0 and May at 57.72, while A-Index and B-Index stood at 51.90 and 46.60 respectively on January 3. This fall may be attributed partly to profit-taking, delay in further fixation of cotton rates of CIS cotton and resumption of lint selling by China.

International merchants are hesitant in offering for sale CIS cotton; both high grade up-land and ELS.

China is reported to have sold sizable amount of its cotton 129,229 and 329 in South Eastern markets at rates around 54.

The cotton market is expected to remain stable for some time around the level of 60 cents. However, international market is expected to gain values slowly and gradually in the coming months.