Cotton hits fresh high

Price reaches Rs12,500 on speculation over flood losses.

KARACHI:

Cotton prices surged to record levels once again as spot rate reached Rs12,500 per maund (37.324 kg) during trade on the first day of the week, up by Rs500 from Friday.

At the Karachi Cotton Exchange, prices soared to as high as Rs14,000 in open market deals. Cotton prices have surged in recent months, fueled by speculation over flood-related losses to the crop.

“The cotton crop has been quite impressive this year because despite the floods, we have so far received more than 11.5 million bales from the farmers,” said cotton analyst Shakeel Ahmed. “But the hype created over losses has been so deafening that buyers have readily bid up prices in the market,” he added.

Prices have also surged in international markets, with rates in the New York commodities exchange reaching $2.2 per pound last week.

However, analysts point out that while the New York exchange quotes prices on futures contracts that are to be delivered over a period of six to 12 months, the local markets are based on much shorter delivery periods. Despite this difference, domestic prices have followed international markets.

Dealers expect the spot rate to climb further to Rs13,000 this week, because deals executed on Monday had already topped Rs14,000.

“Most of the harvest in Sindh has already taken place because sowing season for wheat is under way, while the same is also approaching in Punjab,” said an analyst. He explained that the supply of cotton is likely to dry up until July when the next crop will be harvested.

Published in The Express Tribune, March 8^th, 2011.