The cotton market remains range bound during the past week. Ex-Gin Karachi prices of cotton were offered at 17897 per 40 kg, slightly lower than the cotton rates of Rs. 18648 prevailing during the same period last year.
However, in terms of dollars, the current cotton rates in the country are equivalent to 89.
70 cents per pound while last year during the same period local cotton rice was equivalent to 118.70 cents per pound. This year the current cot look index is 101.55 cents per pound, which is 12 cents higher than the current cotton prices in Pakistan. Last year, the difference was much less as against the Pakistani cotton rate of 118.7 cents per pound in December 2021 the cot look rate was 121.85 cents per pound.
Cotton trade, however, is very tricky this year. The cotton rates at the New York cotton market for March and May deliveries are 84.24 cents and 84.13 cents per pound. These are lower than current cotton rates in Pakistan and the quality of US cotton is also superior. Chinese cotton trade is controlled by the state and it currently offers cotton at 97.
74 cents per pound. Indian cotton’s Shankar quality is quoted at 88.43 cents which is cheaper than our short-staple cotton compared with medium-staple Shankar quality.
Pakistan produced much less cotton than the demand of the local industry. The bigger players’ anticipated a huge shortage after the floods devastated many cotton-growing areas of Pakistan much before its harvest. They rushed to book large quantities of cotton from around the world. That was the time when cotton rates were hovering around 125 cents per pound.
The prices slumped later to current levels.
Many are sitting on cotton stock bought at 37 cents higher price. They are finding it hard to market yarn produced from expensive cotton. We have seen that this week the textile giant Nishat announced to take over 51000 spindles from production. Nishat is not facing cotton shortages but has seen orders decline because of its high yarn cost.
Cotton rates vary in Pakistan in different regions. The rate of cotton in Punjab is between Rs. 15000 to Rs. 17000 per maund. The rate of Phutti in Sindh is between Rs. 5000 to Rs. 7500 per 40 kg. The rate of Phutti in Punjab is between Rs. 5000 to Rs. 8000 per 40 kg.
In the global markets, the cotton futures have been trading around 85 cents per pound since November amid weak demand, especially from the three largest consumers China, India, and Pakistan.
Cotton prices soared in the first four months of 2022 to hit an eleven-year high of 156 per pound in April as a pandemic-related increase in demand came together with unfavorable weather conditions in growing areas in the US, and Pakistan, high energy and fertilizers prices, and lower exports from Malaysia, Brazil, and India. However, prices have been falling since then and are now 45% below the April peak, pushing the 2022 loss to 25 percent.
The US Department of Agriculture recently estimated global cotton consumption at its 2nd lowest level in nearly a decade in 2022/2023, pressured down by lower profit margins for spinning mills, falling yarn orders from fabric and apparel companies, and higher inflation levels. On the production side, global stocks are seen up, and global trade is down by roughly 1 million bales, led by a decline in China.
The cotton features are available on the New York Mercantile Exchange and Chicago Mercantile Exchange. The size of each contract is 50,000 pounds. The biggest producers of cotton are China and India, followed by the United States, Pakistan, Brazil, Australia, and Uzbekistan. The United States is the biggest exporter of cotton (40 percent of total exports). Cotton is the world’s most widely-used natural fiber for clothing.
