DR ZAFAR HASSAN
LAHORE (February 04, 2011) : With several bullish factors conglomerating to push up cotton prices across the world, New York fibre futures kept spiraling northwards at record pace and performance. Indian refusal to allow shipments of cotton against existing contracts on a vast scale, crop shortages in China, Pakistan and Australia, public disturbances in West Africa and Egypt and net short global supply position have put cotton prices on an apparently unending spree.
The domestic seedcotton (kapas - phutti) prices have risen at mind-boggling speed to range between an unprecedented range of Rs 4,300 to Rs 5,500 per 40 Kgs in both Sindh and Punjab. Similarly lint prices have also shot up to a record range from Rs 10,500 to Rs 12,200 per maund (37.32 Kgs) in Sindh and Rs 10,500 to Rs 12,000 per maund in Punjab. Some sales of cotton were also conducted at Rs 12,500 per maund but on credit basis. Tendency for cotton prices continued to be incline upwards.
In India also, cotton prices are said to have catapulted to range between an unprecedented Rs 5,100 to Rs 5,200 per candy. Anyhow, the fact remains that only around 70,000 bales of cotton have been shipped by the Indian exporters against their reported sale of about one million bales to Pakistan. Karachi merchants added that despite generous settlement rates offered by importing Pakistani mills three or four times for the same transaction, Indian shippers are expressing their inability to dispatch the cotton.
It has been also reported that several mills in Bangladesh, China and Pakistan have approached the International Cotton Exchange in Liverpool to assist them in obliging Indian shippers to perform their contracts. In another move, the Indian government is said to have put a cap of 720 million Kgs on the export of yarn to assist the downstream industry in obtaining yarns at cheaper prices. Thus yarn stocks at Indian mills are piling up and the mills are disturbed at this development. However, these measures have reportedly thrown the Indian cotton economy out of gear and created many imbalances due to interference in free trade mechanism.
Due to record rise in cotton prices, mills in Pakistan are suffering from acute cash crisis with doubling of lint prices in nearly on year's time. These developments are giving an advantage to India which have made Indian textiles more competitive in the export markets. Now reports also indicate that polyester staple fiber (PSF) prices have also risen by almost Rs 4 per kilogram due to increase in crude oil prices to more than Dollar 100 per barrel. Thus some Pakistani mills may change their fiber spinning blend but may also have to close down temporarily in May or June 2011. Due to the government of India interference in their cotton and textile sectors, some parts of the Indian textile industry may also face closure by the middle of this year.
With cotton prices having risen to dizzy heights and interference of Indian government in matters of cotton and textile sales, manufacturing and exports, it is difficult to imagine the damage which would occur in case the commodity prices begin to tumble.
In the evening (almost 5 pm Pakistan time), New York cotton futures prices (ICE) were lingering around 180 cents per pound for the March 2011 contract. Now trade talk is also mulling at the idea of cotton futures prices at the level of US Dollar two per pound. The squeeze nature of this contract may then attain fruition.
In ready sales of cotton as per Karachi brokers, one transaction of 600 bales of cotton from Upper Sindh (Daharki and Ghotki) was reported at Rs 12,200 per manud (37.32 Kgs), while 400 blaes from Rahimyar Khan in Punjab were sold at Rs 12,000 per maund in a very tight market.
