Deliver early, cotton farmers urged

prices – or risk losing out on high prices in the pre-July window, experts have said.
Last week, stakeholders in the cotton industry pegged the delivery price for seed cotton at US85c per kg, which is in line with the current world prices.
But the upside potential on prices could be eroded by the declining lint prices.
The price of cotton from the farm is net after taking into account the cost of production, ginning and marketing.
Cotton lint is 41 percent of the cotton produced by the farmer while 5 percent is ginned seed and 1 percent is waste.
Therefore, only 41 percent of farm production is what is sold on the international market by ginners after processing and incurring ginning, transportation and export expenses, among other costs.
The seed is normally sold to local edible oil expressers at an average price of US20c per kg.
Commodity analysts say the world market for futures trading of lint is already showing a huge drop of US60c in the post-June period until December.
The Liverpool A index for the year beginning July 1 is also reflecting a projected price of US138c per pound of lint.
Both Liverpool, forward “A” index and New York futures trading prices have been declining since the beginning of the month.
Between April 1 and 18, Forward A Index declined from US155,75 per pound to US149,10. During the same period, New York futures dropped from US188,10c per pound to US149,10c.
Commodity analysts said the international yarn market is currently under heavy pressure hence prices are likely to be on a downturn as a result of subdued demand from weavers and knitters.
Buyers of yarn are believed to be adequately stocked for now and are therefore reluctant to enter the market until greater price stability becomes discernible.
Similarly, lint prices are equally under pressure, as spinners can no longer afford high replacement costs to buy new stock at high lint prices given the fact that yarn prices are on the decline.
In countries such as Pakistan, ginners are being forced to discount heavily on their lint stocks in order to stimulate buying interest.
In China, stocks that had been previously bought at a higher price are being sold back into the market at even lower prices, resulting in a negative impact on prices.
Cotton Ginners’ Association chairman Mr Godfrey Buka said in the past few years, the cotton industry had seen a crisis of expectations among the farming community as the global lint prices were at an all-time low, resulting in cotton farmers facing viability challenges.
But prices had since risen sharply during the season at a time when the lint from countries in the southern hemisphere had not yet been processed.
“To take advantage of this buoyant market, there is need for growers to make early deliveries so that ginners can get enough volumes to start processing and market the lint.
“If deliveries are slow, the industry will not be able to benefit from the current favourable prices as the prices are already declining,” he said.
But the final producer prices will be based on competition among cotton merchants, which comes with price adjustments at the end of the season as the overall guiding factor is the international market price for lint.