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Home > Business > Business Headline > Commodities

Pak offers cotton at cheaper rates

Commodity Online | July 19, 2007 13:33 IST

Pakistani cotton scene is turning out to be interesting with the domestic producers offering the commodity at rates lower than the international prices.

According to market analysts, Pakistani cotton is available to the international and domestic buyers with a difference of 10 cents per pound to the global price.

The domestic price of lint might go up by around Rs 100 to Rs 200 per bale due to the growing demands of textile sector, especially the spinning sector in coming months. Due to a stable supply line and growing interest of the buyers, especially the private sector commercial exporters, Pakistani lint is in high demand.

There is no ban on the import of cotton from any of the cotton growing country and the textile or yarn sector is no more in need of imported cotton for the next four months, as the yield acreage effect in the country has increased by around 5 per cent.

He said that the yarn market is up and the demand for domestic cotton is increasing day by day on the back of growing international demand. Traders and importers of the commodity said that the country imported around 2.3 million cotton bales from USA, India, Brazil and Central Asian states during January to June 2007.

Due to higher price of lint in the international market, the importers have stopped signing new agreements. However, the arrival of previous consignments are in progress.

Indian lint Shankar 6 is being offered at around 70-71 cents per pound to the international buyers, similarly USA offers its lint around 71 to 72 cents per pound and the same rates are being offered by other cotton exporting states. Brazilian cotton is available on very high rates of around 77 cents per pound and the leading players also settled future deals up to 2009.

Importers look for lint in the price range of 56-60 cents per pound, as production in this price range remains feasible for the spinners and weavers. Pakistan's cotton sector can prosper further if the problem of contamination in raw cotton, use of polypropylene bags and standardised system for production is fully implemented.

Though the governments planned to ban the use of jute and polypropylene bags for the transportation of seed cotton, it was not fully implemented. Pakistan exports around 60 per cent of its cotton in shape of raw cotton, yarn, cloth and garments while the remaining cotton ends up for domestic consumption. Cotton and cotton products contribute about 10 per cent to GDP and 55 per cent to the foreign exchange earnings of the country.

The fundamental picture in cotton is almost a repeat of the picture of this time last year. The USDA had forecast a 17.0 million bales export projection for the 2006/07-crop year with a slightly larger crop. China was expected to be a large importer and what the market found out was that China did not surface as a major importer until after the harvest of their domestic crop.

As a consequence, the USDA scaled down US export projections almost on a monthly basis to where the US might ship 13 million bales by August 1.

With only 901,000 bales sold for new crop to date there is a risk that a similar fundamental scenario could develop in the coming months as mills in China reverts to buying more competitively priced domestic cotton supplies. India is expected to produce 7 per cent more cotton this coming year.

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