Cotton prices hit fresh highs

Unbridled rise of cotton market continues as prices surge to all-time high of Rs8,000 per maund (37.324 kg).


Ghazanfar Ali October 25, 2010

KARACHI: The unbridled rise of cotton market continued on Monday as prices surged Rs200 to an all-time high of Rs8,000 per maund (37.324 kg) mainly on the back of rising New York market.

Cotton prices have increased around 42 per cent from Rs5,600 in early April when the new season started. In the open market on Monday, prices went as high as Rs8,300 per maund.

Several reasons have been cited for the sharp spike in cotton prices, foremost among them was the impact of skyrocketing New York market. In the US, where prices have risen 65 per cent since late July, cotton futures for the benchmark December contract stood at 119 cents per pound last week.

Heavy Chinese demand due to flood damage to its crop and the weakening US dollar against major currencies like the euro and yen propelled cotton prices higher, cotton analyst Shakil Ahmed said.

Cotton Brokers Forum Chairman Naseem Usman said the New York market has shot up to 125 cents per pound as international investors were pouring money into cotton and gold. Besides, he said Pakistan’s cotton crop has also been damaged by floods and it would fall short of the target of 14.6 million bales by around 2.3 million bales.

Pakistan will need to import a big quantity of cotton to make up for the shortfall and India is the preferred option for the importers. However, Usman said India would not sell to Pakistan which restricted exports in the previous season, though contracts had been signed.

Usman said demand of cotton may also increase from yarn manufacturers who were encouraged by European Union concessions lifting duties on 75 products including yarn.

Pakistan Apparel Forum Chairman Jawed Bilwani appeared perturbed by the runaway cotton prices and said they have called a meeting on Tuesday. “In such difficult circumstances, small textile manufacturers will be thrown out of business and the government should come up with a strategy to cope with the situation.”

Published in The Express Tribune, October 26th, 2010.

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