Cotton breaks another record

Prices of cotton touch another peak at Rs7,650 per maund drawing support from the New York cotton market.

KARACHI: Prices of cotton touched another peak at Rs7,650 per maund on Friday, drawing support from the New York cotton market where heavy demand and a weak dollar were providing support.

The fresh high eclipsed the previous record of Rs7,550 per maund (37.324 kg) witnessed on Wednesday. In open market dealings, prices went up to Rs7,900.

Domestically, the recent floods have damaged around two million bales of cotton, prompting ginning mills to rush for purchase. Total consumption of cotton is around 16 million bales compared with the expected production of 12.6 million bales this season.

The continuous increase in raw cotton prices will eventually send textile rates soaring in the domestic and international markets, said an expert. Textile manufacturers have already been clamouring for a control on runaway cotton and yarn prices and have demanded that the government ban yarn exports.

“Small mills will not be able to buy cotton at such high prices, eventually leading to their closure and mass unemployment.  Only the big mills are purchasing,” cotton analyst Shakil Ahmed told The Express Tribune.

He said China has become a major importer this season after floods damaged its cotton crop in some areas and it is looking for sellers in the international market. “It is also searching for yarn in large quantities which may prompt Pakistani yarn makers to sell to Beijing.”

Discussing the crop condition, he pointed out that the weather had gone dry in recent days which may affect cotton plants. “Cracks may appear in cotton fields because of the dry weather and shortage of irrigation water.”

In the world market, in addition to the China factor, the weak dollar is pushing investors towards commodities like gold, silver, oil and cotton, a research analyst said.

Gold has hit successive highs in recent months and currently stands at $1,325 per ounce while oil prices have surged to around $82 per barrel.

In the US, cotton prices have soared 65 per cent since late July and touched 119.8 cents per pound last Friday. On Thursday, prices for the benchmark December futures rose to 115.71 cents per pound, recording an increase of 1.45 cents in a single day.

Meanwhile, in the local market a large quantity of 28,800 bales was purchased by ginners on Friday afternoon at prices ranging from Rs7,600 to Rs7,900 per maund.

Published in The Express Tribune, October 23^rd, 2010.