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Latest cotton prices

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The prices have fallen drastically compared to last year

By Syed M. Aslam
Nov 15 - 21, 1999

For a cotton dependent economy like Pakistan, an 11 million plus bale crop this year should have been the cause of joy. Instead, it has posed many problems amidst the slump in international prices, a carryover stock— mostly imported— of 0.5 million bales and a growing agitation of growers over low prices in the local market.

Talking to PAGE, the director of Karachi Cotton Exchange, Haji Yousuf Dada, put the cotton crop this year second only to the record 12.8 million bales produced in 1991-92. Putting the local consumption of cotton at 9 million bales, he said, that though cotton surpluses the world over would make it hard to export cotton at premium price and Pakistan would be able to ship the surplus over months provided it is ready to sell it at the going international prices.

On November 13, cotton was traded in the US at 34-36 cents per pound. While superior in quality than that of its Pakistani counterpart the US government was also giving its exporters a subsidy of 13 cents per pound to encourage cotton exports. This translates into an equivalent of Rs 520 per maund for a variety which is better than its Pakistani counterpart, he added.

Cotton is currently trading between 51-53 cents per pound minus 6-7 cents for tenders if a buyer is ready to take the actual delivery of the commodity, Yousuf told PAGE.

Cotton was cultivated over a total area of 7.4 million acres in Pakistan this year. The increase in average per acre yield from 13 maunds last year to 18 maunds this year is primarily attributed to an ideal weather conditions. While cotton prices differ from area to area in the two cotton producing provinces, Sindh and Punjab, they have fallen drastically compared to last year as well as the beginning of season in August this year. Cotton year lasts from September 1 to August 31 in Pakistan.

Last year the average cotton prices fluctuated between Rs 800 to Rs 900 per 40 kilogram. While the prices of cotton in the local market has fallen sharply at present to initiate agitation by growers including burning of the crop in Khairpur Sindh, sources told PAGE that growers were able to sell the commodity for as high as Rs 975 per 40 kilogram in the beginning of the season.

While these lines are being written the price of per 40 kilogram of cotton in lower Sindh, Mirpur, Tando Adam fluctuates Rs 440-470 while that in upper Sindh areas of Nawabshah, Khairpur and Naushero was traded at Rs 470-515. The prices of better cotton varieties in Punjab which contributes 80 per cent to overall cotton production in the country ranged between Rs 575 to Rs 625 per 40 kilogram.

The average prices of cotton in Pakistan, which produces a better variety than of India and Indonesia, at present translates into 36 cents per pound for low quality and 36-39 cents for the better quality.

Yousuf, who is not only a cotton grower but also a ginner, expressed concerns that the low cotton prices has forced many growers to stop supplying the commodity to the ginners. He expressed concerns that holding the cotton would only deprive the growers of the premium prices available under the prevalent circumstances and would only hurt them in months from now due to various factors.

He said the price of cotton, like all agricultural products, depends on its freshness. The longer the cotton remains unginned the more it loses its quality as it not only gathers moisture but also the other contaminents from the air. Attempts to keep it freshen up with water, a common practice here, only results in degrading the quality, he added. It is advisable to gin the cotton within maximum 40 days once its picked as there is no moisture and the fibre is still in floating purposes to derive the best possible results.

Yousuf warned that prices would further fall in January, February and March next year with the arrival of lower quality of cotton. He agreed with the statement given by chairman of Karachi Cotton Association, Maqbool Sadiq, that some 400,000 bales of cotton can be exported in the near future.

Though Pakistan is producing better variety of cotton than that of India and Indonesia sadly it trails behind these two competitors as far as the production of better quality yarn is concerned. Unlike these two competitors Pakistan produces yarn of 16 to 30 count and only a little quantity is used to produce better quality yarn of 40 count and above.

Yousuf refuted the claims of growers about the high production cost and low prices this year saying that an ideal weather had cut the pesticide bill by half to make their demand for better prices as misleading. Putting the cost of cotton production at Rs 337.50 per maund he said that the growers who were able to sell the commodity for as high as Rs 975 per maund at the start of the season will still make a profit at the prevailing rates.