Source: Pakistan Observer

Tuesday, June 11, 2013 – Karachi

Cotton The volume of business on the cotton market was once again lackadaisical this week as mills await the finer varieties of the new crop slated to hit the Southern centers by the end of the month. As far as ginners are concerned, the last 3 weeks have seen their unsold stock slowly whittling away and although there were some concerns initially, sources say the market is not completely devoid of buyers.

Traders report that although a large number of composite textile units are covered up till August, a small number of textile units (mostly smaller towel and undergarment producers) are still buying sporadically. Currently, some 80,000-100,000 bales of useable (but lower-quality) cotton are said to be in the ginner's possession, however hardly any trade activity is expected in the next few weeks.

On the global front, a slowdown in buying during the early sessions this week saw prices fall down to settle at around 83.5 cents/lb. However a fresh round of Chinese buying at the close of the week was enough to cause worries about the tightening supplies outside of Beijing. Consequently, fiber futures rallied on Thursday and the first weekly gain in a month was recorded as buyers were encouraged by an increase in US weekly export sales and a weakening greenback.

The most-active July cotton contract on ICE Futures hence settled up by as much as 1.35 cents, closing at 84.87 cents/lb on Friday. As of this week, an increasing global consumption of fiber, lower American production and incessant buying by the world's largest consumer is putting the cotton stock situation in a precarious situation.

Though huge quantities of inventories exist, the absence of physical cotton from the market might mean another round of vicious rallying. However, as before, the Chinese state policies-in all their inherent unpredictable glory- shall continue to be the single biggest factor influencing the direction of the swing that prices take in the medium term.

(Source: Pakistan Observer)