Rising dollar has depressed cotton value world wide whereas in Pakistan consumers including textile products exporters and cotton exporters have mopped up available lint irrespective of prices - low or high during the week ending on October 31. Spot rate opened on Monday at Rs 3700 and after fluctuating closed on Saturday at Rs 3725.
INTERNATIONAL SCENARIO:
Sustained down trend reported by the USDA in the acreage and production of cotton reflected in price movement during the week, showing December up at 67.41, while March ended at 70.01 cents a pound. The cotton futures rise and fall depended on the fluctuation either ways of the dollar, which gradually has lost value and indications are the Fed chief is in favour of making no change. Look at corn, wheat, sugar, rice, recording slump which caused cotton to slip besides the rise of dollar.
The global recession is on way out or is likely to linger on. It stayed a riddle beyond the reach of even most experts in the trade. However, investors have shown courage to lift cotton aiding futures, which got support and survived from suffering worse. The result showed open interest sustaining higher level compared with preceding weeks.
A more realistic view was thus given by analysts who said investment funds apparently see something in cotton that is not reflected in fundamentals and hence any slip in the value of cotton is viewed as an opportunity to buy fibre contracts.
The brokers, however, viewed the developments turn and twists in the market proved discouragingly detrimental to US cotton export sales. This was, they said reflected in weekly export sales and shipments on Thursday. Both resounded breaking projections on higher scale, sending contracts richer. The trend spoke for days ahead to stay firm.
On Thursday, the NY cotton futures settled higher on investor buying stoked by a broad rise in the commodity sector and values may stay in a band while waiting for leads on its next move, brokers said.
The December cotton contract rose 0.69 cent to end at 67.57 cents per lb, dealing from 66.44 to 68.34 cents. December contract volume reached 13,186 lots at 2:43 pm EDT (1843 GMT). March cotton added 0.81 cent to close at 70.54 cents, trading between 69.24 and 70.97 cents.
On Friday NY cotton futures settled higher on month-end book-squaring as the market defied weakness in other markets caused by a firm dollar, with analysts saying slack demand and the ongoing US harvest could lead to losses next week.
The December cotton contract rose 0.07 cent to end at 67.64 cents per lb, trading from 66.57 to 67.93 cents. It was an inside day because the range was within Thursday's 66.44 to 68.34 cents band. December contract volume reached 12,705 lots at 2:43 pm EDT (1843 GMT). March cotton added 0.35 cent to close at 70.89 cents, trading between 69.70 and 71.14 cents.
Analysts said any fall in cotton futures has often run into investment fund buy-backs and that is seemingly born out by the steady rise in open interest in fibre contracts.
Open interest in the cotton market climbed to 186,551 lots as of October 29, having risen 72.32 percent since the end of the second quarter of 2009 when open interest in cotton stood at 108,256 lots, according to exchange data.
Most of the buying spree has taken place in the last few weeks. Open interest as of September 9 was only at 127,022 lots. Total cotton volume traded on Thursday hit 25,091 lots, from the prior tally of 19,457 lots, ICE Futures US said.
Open interest in cotton stood at 186,551 lots as of October 29, from the prior count of 185,431 lots, the exchange said.
LOCAL TRADING:
The rising cost of cotton and yarn led to shrinking business on the cotton market with important meeting expected to resolve the problem caused. Unless yarn matter is resolved amicably, suffering textile product exports were likely to contract further. Unbridled yarn export hit manufacturers and exports of value - added products. The time factor fixed by the EU and the US is very important from losing exports for the X'mas.
Spot rate rose on Monday by Rs 25 to Rs 3725. Around 15,000 bales of cotton changed hands in price range of Rs 3700 and Rs 3800, while phutti prices rose by Rs 50 in Sindh and Punjab to rule at Rs 1800 and Rs 1900. On Wednesday no relent was marked by the cotton consumers on the day as nearly 50,000 bales of cotton changed hand in price range of the Rs 3700 and Rs 3800 depending on the quality. The volume bulged very naturally because reports about shortfall in supplies prompted to pounce on the available lots. While the world export scenario keeps vogue, the authorities and exports seem prepared to face the situation triumphantly. The all-important meeting announced to be held on Tuesday was not reported for some unknown reasons.
On Thursday buying maintained trend helping prices to go up despite efforts to desist to ensure value addition at a level to beat rivals, but in vain. Spot rate stayed put though rates in ready, after buyers stick to 30,000 bales buying at prices ranging between Rs 3650 and Rs 3825, perhaps being record high. The phutti ruled in Punjab and Sindh at Rs 1800. The textile stakeholders meeting with the textile ministry authorities was expected to yield in favourable ways.
On Friday trading activity slowed down due to falling interest by the buyers. The official spot rate was unchanged at Rs 3725. In the ready business, prices were firm as nearly 20,000 bales of cotton changed hands between Rs 3675-3800. Phutti prices were also steady in Sindh and the Punjab at Rs 1800-1900.
Market sources said that business fell drastically as mills were out of the market to meet the December 31 deadline for shipment. In the meantime, it is expected that the next phutti arrivals may show significant improvement especially from the Punjab.
Slight fall in the rates is also likely as the ginners may try to sell the stock to save themselves from the future losses. Some analysts were of the view that it is early to predict about the next direction of the market, but it appears that trading activity may be range-bound as supply position is not so tight.
On Saturday the official spot rate was unchanged at Rs 3725. In the ready business prices were nearly unchanged as approximately 20,000 bales of cotton changed hands between Rs 3675-3800, they said. Phutti prices were also steady in Sindh and the Punjab at Rs 1800-1900, they added.
TEXTILE EXPORT ORDERS IN DANGER:
The textile exporters have been asking for various facilities, among them being gas, and power continuous supplies, knowing well that EU and the USA are sensitive about X'mas timing. But it seems the textile exporters are in hot soup as they have been warned by the major exporters during X'mas that shipment will not be welcomed after November 30, 2009. The only alternative available is air service, which will be too costly.
Under the circumstance all seems that vast opportunity is already lost. The two major friends were communicating good messages, but the constraint likely ahead is difficult to be fixed. The government is trying its best to gain from the opportunity but the mention of air service likely to be availed is thought provoking.
Confusion over the American aid bill has put pressure on government to issue bonds to meet the recurring needs. The confusion has not been cleared till this write up going to the press. This is how days pass by in Pakistan until change over confers relief on people on the helm of affairs. However, the textile sector needs sufficiently prior to November 2, 2009, should be delivered.
The language the exporters have been using shows clearly that exportable goods were ready in view of the advanced orders and any relaxation will cause unbearable loss since country and economy is in distress. Such occasions should, however, warn in whispers that what is if at all that has not been making this country, economy, businesses and exports necessarily dependent on governments, which are faced to -go round the concern with begging bowls.
UNPRECEDENTED, WAS IT:
If the trading in cotton outgoing week experienced was not unprecedented, it was huge and surprising. How this magic could happen. The answer certainly is not quick. Let us strain our mind whether it was fear that quality cotton will soon disappear, or the cotton itself.
The prices were on the rise without relent, which irks the cotton consumers particularly manufactures and exporters of cotton. The cotton exporters were quite shy for some reason, but they came with belts tightened firmly? Rising dollar was also one reason to attract the cotton exporters, which exporters can sell easily.
Cotton exporters are showing a realistic approach - if they will not be able to sell cotton to markets abroad will keep stocked to resale to local textile manufacturers: world knows the lower acreage used was expected produce much less than in previous years. The sources close to cotton and textile trade taken into confidence added further possibilities why cotton buying sustained in the outgoing week and some weeks before. Primarily they laid finger on the virgin five-year textile policy in which textile exporters have great hope. Several promises have been made and authorities commitment seemed all reassuring.
Last but not the least, is the US determination to take Pakistan out of economic woods. It is well known that the US and the EU are world's largest textile market concentrated and if they have realised that Pakistan of today is not Pakistan was when the USSR was face to face with disintegration. However, textile exporters were struggling for possibly making a history by creating a record forex earning, while local yarn prices staring at textile exporters face!
WHY COTTON IMPORTS?
After a very long time exporter were for reasons best known to them have been finding place in reports. And hints are being dropped that understandably some interests have, as ever in the past, started opposing. The growers have very little approach among the authorities for getting work what they wanted to be done. The cotton consumers, on the back of claim dirt free cotton supply is not available, have always imported cotton - today around one billion dollar is drained out thus. So far army of people serving the relevant government departments have never bothered to find out what the textile exporters deliver to government kitty.
The exporters, as they should bring in limelight say how much people they are employing and earn forex unrivalled by other export sector. This is also often reported the cotton importers pay much lower claiming, and never protested by Pakistanis, about low quality. The world knows quality of cotton is of high class but presence of contamination, which can be removed and quality bettered is always foiled (if the ginners claim is accepted).
The Sindh ginners claim lint cleaners are effective means provided buyers are offered requisite price. The FAP chairman has struggled for long to defend the rights of growers. If he finds time after performing officials duty he will look into the problem which was solved some years back that free trade will be allowed. Fresh efforts are needed to safeguard the interest of cotton growers whose majority cannot speak nor their demand is quickly solved. If cotton is allowed to drain and not money why not cotton be allowed to be exported, which earn for this poor country, the sources close to cotton and textile circles have quite often so voiced.
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