Friday, 11 October 2013

Pakistan Cotton Industry

Cotton Arrivals: Sindh Leads The Path Of Victory!
Pakistan Cotton Ginners Association (PCGA) recently released figures of cotton arrivals up to October 01, 2013. In today's Karachi Stock Exchange Analysis we present an analysis of recent cotton arrivals trend along with our outlook on the same.

Cotton Arrivals Up By 7%YoY In FY14TD
Pakistan Cotton Industry
Despite heavy rainfall in upper Sindh and lower Punjab, cotton arrival figures portray a positive picture during the current season. Cotton arrivals, according to  the  data  released  by  PCGA,  during  the  said  period  grew  by  7%YoY  to 3,684k  bales  as  compared  to  3,447k  bales  during  the  same  period  last  year. During  the said period,  Sindh  contributed  59%  (2.2mn  bales)  in  total  cotton arrivals  so far, while  Punjab contributed 41% (1.95mn bales) during  the aforementioned period. On fortnightly basis, cotton arrivals declined by a massive 38%YoY to 1.1mn bales as compared to 1.72mn bales during the corresponding period last year.
Province-wise  analysis  shows  a  massive  change  as  far  as  cotton  arrivals  are concerned.  Sindh,  remained  the  show  stopper,  as  arrival  of  cotton  from  its leading producer district Sanghar posted a colossal growth of 27%YoY to 1,083k bales as compared to 851k bales during the same period last year, sharing 29% of total arrivals.  Similarly, Hyderabad and Tharparker's cotton arrival also improved by 38%YoY to 215k bales and 11%YoY to 274k bales, translating into13% participation in country's total cotton arrival so far. In  the  province  of  Punjab,  cotton  arrivals  from  its  major  producing  districts were  still  subdued  as  its  districts Khanewal  and  Vehari  each  accounted  for  a 6.8% weight in total cotton arrivals posting a massive decline of 27%YoY to 251k bales and 26%YoY to 252mn bales. Following the same declining trend, cotton arrivals from Sahiwal, Bahawalnagar  and Bhawalpur were  also on the declining  path.

Local Cotton Prices Increase By 39%YoY
Pakistan Cotton Industry
Expectation of  low  cotton  production  coupled  with  increasing  demand  of cotton on local front are the major concerns fuelling up cotton prices by 39%YoY to  Rs7,250/37.325kg on  October  01,  2013  as  compared  to  same  day  last  year. However during the ongoing season (from 01, Sep 2013 to date) the average prices  remained  at  Rs6,886/maund  as  compared  to  Rs5,523/maund  in  the same period last year. However, during the said period cotton prices on the international front increased only by 16%YoY to 92.95 cents/bbl due to higher backlog of cotton stock.

Outlook: Rising Demand Pulls Cotton Prices Higher
During  the  Current  Season  which  is  expected  to  end  by  May-14  we  expect cotton production to remain at 12.2mn bales against the revised government target of 11.95bales for FY14. Moreover, on the price front we expect cotton prices  to  touch  Rs8,000/maund  mark  during  the  year  as  Cotton  Yarn  and Cotton  Cloth  demand  from  China  is  expected  to  remain  on  the  higher  side which is likely to keep cotton demand high.

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