Influx of Afghan Cotton Prevents Rise in Local Cotton Prices 

Cotton Spot Prices declined by Rs. 200 last Monday and remained stable at Rs. 17,500 per maund for the whole week, the arrival of Afghan Cotton being one of the main factors keeping the prices in check.

Phutti prices on the other hand increased by Rs. 550-700 per maund across Bahawalpur, Faisalabad, Jhang, Toba Tek Singh and Multan while prices in Kasur rose by Rs. 250-300 per maund.

Pakistan Cotton Arrivals rose by nearly 19.3 percent in the first two weeks of October clocking at 7.3 million bales according to fortnightly figures released by Pakistan Cotton Ginners Association.

The arrival figures were primarily within industry expectations and may not affect the market activity but multiple other factors are depressing or rather keeping in check the Cotton market activity.

Foremost is the massive gas price hike from 100 percent to 130 percent for which millers have been protesting and have also called for burning the export orders and marking ‘no export days’ frequently.

Millers were already reluctant to buy huge stocks as electricity and gas were already high and lower quality of Cotton but have become more cautious in light of the recent hike. Second is the dollar’s slight recovery after the successful IMF Review of the Stand-by agreement.

The dollar movement has been driving the market based on sentiment only since international Cotton prices have remained way higher compared to domestic and importers have kept facing restrictions on LCs.

Market sources also hint at a large quantity of high-quality cotton being held back by farmers or ginners in certain markets like Rahim Yar Khan, though it will have to be seen how long they hold given both entities are vulnerable to liquidity problems.  But another least talked about reason behind preventing the rise of local cotton prices is the arrival of Afghani Cotton which is reportedly

“Afghan Cotton is coming at Rs. 450-470 per kg i.e. Rs.  16,795 – 17,542 per maund (maund = 37.23kgs) which comes lower than local produce and also has better quality with less moisture and low thresh level,” stated Rashid Khan, Commodity Trader and Head of Sales at Fund Marketing International while talking to ProPakistani.

He added that Afghan Cotton has been coming to Pakistan for some time now but it’s only used in a limited number of mills. Talking about the actual quantity of cotton flowing in from across the border, he added that industry sources often exaggerate the number up to 1 million bales but its actual number would fall around 0.6-0.7 million bales at most.

He also said that following the successful IMF Review, LCs are expected to be reopened for the non-exporters and the rest depends on the post-Christmas orders.

International Factors

International prices have fallen by nearly 16 per cent from 90 cents per lb at the beginning of September to below  75 cents per lb in the first week of November breaking a 12-month rangebound pattern despite the global output falling to an eighty-year low driven by a decline in the output of major producers including China and the United States.

The major reason has been reported as a continuous decline in cotton consumption, reflecting a prolonged period of demand contraction despite 18 months of price decline.

But prices have risen by 8 percent in the last as a result of “major buying activity from China and as traders are buying contracts to settle the unfixed cotton ahead of the first notice day of December Future so the market is ” noted Khan

He added that the near-term market depends on consumption numbers following Thanksgiving Giving Day but the demand side is still a major concern which can again put the market under pressure.

 



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