KARACHI: The leading buyers made deals for better and second grade of lint on slightly higher prices while shrinking better grades put price in comfort zone in lint market during the past trading week, dealers said.The Karachi Cotton Association (KCA) spot rate stayed firm at Rs 7,050 per maund with moderate volumes, while leading buyers made deals with ginners of Sindh and Punjab on competitive price.Floor brokers said mills and spinners of Sindh and Punjab remained engaged in price war with the ginners on issue of better lint besides growing demand for the produce kept market sentiments firm despite shrinking domestic stocks.The ginners of Punjab and Sindh offered lots around Rs 6,545 per maund and Rs 7,625 per maund to the buyers, while Sindh ginners offered their raw produce on competitive prices at Rs 5,975 per maund depending on trash level during the past week.The quality lint of Punjab fetched above Rs 7,725 per maund while the raw cotton of Punjab was traded around Rs 5,975 per maund depending on trash level for most of the trading sessions.Market sentiments remained positive during past week, while ginners withholding fine lint were confident that the spot rate would go further up after some recession in coming days. However, with higher inflation looming, cotton prices should continue to move higher over the longer term on domestic and international front.On Saturday, the last trading day of the week, the spot rate remained firm and buyers made some forward deals for a month period above Rs 6,925 per maund. In the domestic market 200 bales of Multan changed hands at Rs 7,075 per maund, 200 bales of Sanghar at Rs 7,200 per maund and 200 bales of southern Punjab at Rs 7,000 per maund.Last night in New York futures market, May Futures contract 2018 closed at 84.23 cents per pound, while July 2018 closed at 84.26 cents per pound. The Cotlook A index settled at 90 cents per pound. The US Department of Agriculture (USDA) forecasts substantially higher production with a moderate increase in consumption. Global production is estimated at 104. 35 million bales (1 bale = 480 pounds) in 2016-17 compared to 99.54 in 2014-15, up 4.8%. The likely increase in production is largely attributed to US, India, and Pakistan. There aren’t any major increases in acreage, but extreme weather conditions and pest attack of last year that negatively impacted crop yields are not anticipated in 2016-17. In 2016-17, the USDA expects US cotton production at 14.8 million bales, India at 28 million bales and Pakistan at nine million bales, which are 15%, 4%, and 29% higher than 2015-16 figures, respectively. However, Brazil and China are likely to have lower production. China’s cotton production has been pruned for a third consecutive year to 23.8 million bales in 2015-16 and 22.5 million bales in 2016-17. The slide comes in the midst of lower price realisations (cotton prices lost 30% in 2014), reduced support prices and increased preference for foodgrain crops.Global consumptionThe USDA estimates global cotton consumption at 110.78 million bales in 2016-17 compared to 109.02 million bales in 2015-16. China’s cotton consumption (use of cotton by mills) had gone down in recent years on account of factors like higher domestic prices, falling man-made fibre prices and overall industrial slowdown; and no major upturn is expected. However, cotton consumption in China is expected to grow slightly in 2016-17 on lower domestic prices. China’s plan to auction two million tonnes of cotton began on schedule on May 3 and will run through till August end. The International Cotton Advisory Committee (ICAC) estimates that China’s auctioning of its cotton reserves will reduce Chinese stocks to a five-year low at 2008-09 level. China has also expressed its intention to purchase high-quality cotton from international markets between September and February to improve the quality of its reserves. This creates doubts over the quality of existing stocks. Reduced Chinese import hurt India’s cotton exports, prompting India to focus on alternative export destinations, such as Bangladesh, Vietnam, and Turkey.Domestic scenarioThe USDA expects India to harvest 26.8 million bales of cotton in 2015-16 against 29.5 million bales in 2014-15, down almost 9%. However, local sources expect India’s cotton production to decline 17% to 33.5 million bales (1bale = 170 kg) in 2015-16 due to whitefly and cotton leaf curl virus attack in northern India. Traders estimate total cotton availability at 40.1 million bales with total consumption at around 39.2 million bales for 2015-16, which would leave a surplus of nine lakh bales by September. However, carry-forward stock from the 2014-15 season was 5.5 million bales as opening stock for the 2015-16 season. Domestic prices are strong amidst reports of significant crop loss, firm export demand, and positive global cues. The Cotton Corporation of India has reduced the export forecast to 6 million bales from 6.6 million bales forecast earlier amid firm domestic prices.Published in Daily Times, April 16th 2018.