Cotton prices hit 11-year high on panic buying

KARACHI: Dwindling supplies and delayed imports lifted cotton prices to a fresh 11-year high of Rs14,500/40kg this week, traders said.

As textile and spinning mills went on a stockpiling spree, cotton prices picked up by Rs200-300/40kg to Rs14,300/40kg, while Balochi cotton was sold at Rs14,500/40kg, the highest in over a decade.

Similarly, seed-cotton prices also reached their highest ever level of Rs7,200/40kg. The highest prices were recorded in some areas of Balochistan including Khuzdar.

This jump in the cotton prices can be attributed to sharp rupee depreciation, delay in the arrival of cotton imports, and expected shortfall in production. Besides, cotton yarn prices have also been increasing.

Despite this huge increase in the prices, local cotton was still feasible for the spinning mills; however, their profit margins decreased. Sources in spinning industry said the government would have to intervene as this price trend must be arrested before it was too late.

On the other hand, growers are happy with an increase in cotton prices. Analysts say if the growers keep getting better prices, cotton production would increase next year.

However, textile mills are finding it difficult to arrange payments, while better rates of cotton yarn and textile products are rescuing them.

Textile exports, despite the higher number of orders, were also delayed due to an increase in the shipment prices and other reasons, which had affected the financial position of some mills, sources said.

Exporters said they still had plenty of orders with them but they were unable to catch up with dollar rates and cotton rates to set prices.

Sources said cotton production would be higher this year as compared to the last year. Independent analysts said production might be around 8.5 million bales while Federal Minister for National Food Security and Research, Syed Fakhar Imam, in a statement, claimed cotton production was likely to reach 10 million bales. With the exception of a few areas, the cotton crop is in a better position across the country.

However, a pest attack is expected in September, which can hurt overall production estimates.

Cotton prices remained at Rs8,000-8,500/40kg during the end of August last year, while the lint is being traded at Rs13,750-14,300/40kg. Seed-cotton was traded at Rs4,500/40kg during the same month last year. Thus, textile mills are paying Rs5,500-6,000/40kg higher for lint. Similarly, ginners are paying Rs1,000-1,500/40kg higher for seed-cotton compared to last year.

In Sindh cotton prices remained at Rs13,750-14,300 a maund, while seed-cotton was traded at Rs5,800-6,300/40kg, and cottonseed was sold at Rs1,750-1,900/40kg. Cotton fetched rates of Rs13,900-14,300/40kg in Punjab, while it traded at Rs14,500/40kg in Balochistan.

The spot rate committee of the Karachi Cotton Association increased the official spot rate by Rs250/40kg to Rs14,050/40kg.

Naseem Usman, Chairman Karachi Cotton Brokers Association, told The News international markets closed higher during the week after some fluctuation.

According to the USDA report, cotton export from US in the outgoing week remained lower compared to previous week. Cotton prices in Brazil, Central Asian countries, Australia and China increased, while they dropped in India because of the arrival of new crop.