Cotton prices shoot to all-time high

Cotton prices rise by Rs100 backed by a constant increase in prices of New York cotton amid tight global supplies.

KARACHI: Cotton prices rose Rs100 hitting an all-time high at Rs7,450 per maund (37.324 kg) in the local market on Friday backed by a constant increase in prices of New York cotton amid tight global supplies.

The previous record high was Rs7,350 per maund. In open market dealings, prices shot up even further reaching a peak of Rs7,625 per maund.

Floods in Pakistan have damaged an estimated two million bales of cotton, but this shortfall may be offset by widespread sowing of high-yielding Bacillus thuringiensis (Bt) cotton varieties. Bt cotton gives an output of 15 maunds per acre compared with seven maunds yielded by traditional ‘Niab’ variety of Sindh.

However, despite getting close to the production target of 14.6 million bales, farmers will not be able to meet the total industry demand of 16 million bales.

To bridge the gap, traders are expected to make purchases from India which is expecting a bumper crop of 35 million bales this season. However, any import deals will be made only in November when India is expected to make a decision about supplies to Pakistan, cotton analyst Shakil Ahmed said.

Earlier, Delhi had stopped export of 550,000 bales contracted at low prices of around 70 cents per pound. At present, Indian cotton is being sold at $1.32-1.35 per pound for December-January shipments.

Ahmed said supplies are smooth in the domestic market as farmers are transporting around 90,000 bales per day to ginning factories, adding any estimate on total cotton production can be made only after December when a good quantity of the commodity would have reached the market.

According to reports, in the New York market, cotton prices rose to a 15-year high on Thursday on buying spurred by high Chinese cotton prices and the weakening dollar. Prices there have risen over 50 per cent since late July.

On Thursday, December cotton futures rose to 114.87 cents per pound compared to 110.87 cents a day earlier.

Prices of cotton in Chinese market are advancing because of high demand and tight supplies. Besides, the weak dollar has spurred investors to go for investment in commodities.

“As the US has consumed most of its cotton, authorities are wondering why prices are flying high and have formed a committee to investigate the matter,” Ahmed said.

Published in The Express Tribune, October 16^th, 2010.