Cotton prices fall by Rs800 in one week

Prices of cotton fell by Rs100 per maund (37.324 kg) in the domestic market on Friday. By the end of the day’s trade, prices in Punjab had slumped to Rs6,500 per maund while those in Sindh dropped to Rs6,100.

CEO Usman Cotton Company, Ayub Usman, told The Express Tribune that August deliveries were sold as low as Rs6,000 per maund in morning trading on Friday.

He said such trades provided an early indicator to the day’s activity. He compared the decline in rates, saying “the Punjab market plummeted from Rs6,900 in the morning to around Rs6,450 by the evening.”

Usman cited that “a steady flow of phutti (raw cotton) into ginneries and regular drop in prices of raw material” will likely cause a further decline in prices in the days to come.

Member Pakistan Cotton Ginners Association, Ahsan-ul-Haq, pointed out that the “price of cotton has seen a decline of about Rs800 per maund in the past one week.” He added that at the same time, “supply of phutti to ginning factories has increased by 25 per cent.”

The federal government has announced that the regulatory duty on yarn export has been extended for one more month. Traders say this is one of the latest factors driving down prices of cotton in the local market.

International cotton rates have also been declining in recent sessions and domestic prices that had held up until recently were expected to come down, say analysts.

Last week, local cotton rates soared to a record level of Rs7,750 per maund. That increase had been attributed to a rise in demand from local manufacturers to complete orders received from Chinese garment companies.

Ayub Usman said that the fall in prices is expected to have a big impact on the industry relying on raw cotton. He said that the value of one lot of raw cotton has dropped by about Rs0.47 million since last week.

He revealed that there are about 50 ginneries operating in Punjab at present, adding fears of pre-monsoon rains had also pushed up prices of raw cotton in recent days. However, these concerns have been allayed by a change in the weather in the country. Experts have predicted that raw cotton rates could fall further next week.

Published in The Express Tribune, July 17^th, 2010.