Early monsoon, dwindling demand, higher yield expectation bring down prices; spot rate cut by Rs 650

The mid-week early monsoon rains have infused hope among growers who see production around 15/16 million bales packing prices down. The spot rate, during the last two days of the week was grab down by Rs650 to Rs 8000.
WORLD SCENARIO:
Cotton futures lately is either soft or mixed on major players perception that political and economic developments are not promising, besides countries growing cotton aim at higher harvest. The downward drift, however, is not as slow as was the rise when cotton in 2010 first quarter started surging.
The Indian decision to release one million bales of cotton also had softening effect. Indian exporters were accord bound to deliver million bales to Pakistan but authorities preferred to gain from trend then had surging. In a very imperceptible way Pakistan has said India now had only 0.4 million bales or so had to deliver, which was in the pipeline.
Greek debt crisis is also affecting cotton futures to some extent. The cotton growers and traders are keeping eyes on the annual planted acreage report of the USDA in the US, the largest producers and exporter of cotton. Incidentally the highest cotton growing state Texas has suffered unprecedented drought, while cotton crop either side of the Mississippi terribly washed.
Australia is likely to be completed by the end of June. It is planning to ship record quantities of cotton. Major European countries are out to support Greek debt by allowing 30 years to pay back. But citizen reaction to austerity drive is being keenly watched as masses were opposed to it. The developments in ME and Japan have been affecting normally.
On Monday the US cotton futures ended mixed, with the key December contract eking out a gain after hitting its five-cent daily downside limit, as buyers moved in after enduring an earlier rout stemming from weaker overseas markets. The key December cotton contract on ICE Futures US ended up 0.07 cent at $1.2199 per lb, recovering from its five-cent downside limit at $1.1692. The session peak was at $1.2358. Total market volumes traded stood at almost 15,000 lots, about a third below the 30-day norm, Thomson Reuters preliminary data showed. Losses in China's cotton futures were partly to blame for the weaker ICE futures open. Zhengzhou Commodity Exchange January cotton futures fell five percent to a low of 22,200 yuan per tonne, the lowest since October, after Beijing announced a cut in import tariffs on some cotton products such as cotton cloth to six percent from 12 percent, effective July 1. Mike Stevens, an independent cotton analyst in Mandeville, Louisiana, said December buy stops orders were triggered above Friday's session peak at $1.2274, the nine-day moving average at $1.2265, and Thursday's session high at $1.2302. The spot July cotton contract shed 3.22 cents or about two percent to end at $1.62 per lb.
On Tuesday the US cotton futures ended higher, as a weak dollar and accelerated cross-commodity rally helped fibre values overcome initial selling pressures tied to weaker overseas markets. The key December cotton contract on ICE Futures US eked out a 0.02-cent gain to settle at $1.2201 per lb, after dealing from $1.1977 to $1.2328. Cotton bounced back from earlier downside pressure linked to China's cotton futures market, where the Zhengzhou Commodity Exchange January cotton futures fell sharply for the second straight day. Positive momentum built from there, with a generally upbeat tone in most other commodity markets feeding the gains. As a result, the Reuters-Jefferies CRB Index, a global commodities benchmark, posted its biggest one-day gain in six weeks, as optimism for a resolution to Greece's debt crisis boosted investors' risk appetite. Despite the positive reversal, total market volume in cotton futures stood at a paltry 6,000 lots, more than 70 percent below the 30-day norm, Thomson Reuters preliminary data showed.
The spot July cotton contract fell 1.09 cents to finish at $1.6091 per lb.
On Wednesday the US cotton futures closed lower, in another light-volume session, before release of a key government plantings report due early Thursday. Benchmark December cotton on ICE Futures US fell 0.61 cent to finish at $1.2140 per lb, moving from $1.1981 to $1.2466. Total market volumes remained depressed, with 10,372 lots traded late in New York, about half of the 30-day norm, Thomson Reuters preliminary data showed.
On Thursday the US cotton futures closed lower, hitting their five-cent downside limit at one point, after a government plantings estimate suggested the biggest US cotton crop in five years. The losses dragged fibre values down to close out the second quarter of 2011 with a more-than 40 percent loss. It was the first quarterly loss since the second quarter 2010, brought upon by end user demand destruction after prices mounted a historic rally above $2 per lb in the first quarter. Benchmark December cotton futures on ICE Futures US shed 2.81 cents or 2.3 percent to settle at $1.1859 per lb, after dealing between $1.1640 and $1.23. The losses were triggered by an annual planted acreage report by the US Agriculture Department that pegged US 2011 cotton sowings at 13.725 million acres, the highest since 2006, when 15.274 million acres were sown to cotton. The USDA plantings number came in at the higher end of Reuters poll, with the average analyst estimate at 13.26 million acres. Total market volumes picked up a bit from the sluggish pace at the beginning of the week, but still remained on the low side. More than 16,250 lots traded late in New York, about 20 percent below the 30-day norm, Thomson Reuters preliminary data showed.
On Friday the US cotton futures ended lower, posting their fourth consecutive weekly loss, as fibre values continued to reel from demand destruction above the $2 per lb level. Benchmark December cotton futures on ICE Futures US dropped 0.78 cent, or seven percent, to finish at $1.1781 per lb, after moving from $1.1651 and $1.1989. On a weekly basis, the contract dropped 3.4 percent, its fourth straight week of losses. Cotton prices rallied to a peak of $2.27 per lb in the first quarter of the year, as tight supplies and robust demand, especially from top consumer China, fuelled the charge. But after such a fast and furious charge to price levels unseen since the US Civil War, consumer demand began to wane and prices responded, losing more than 40 percent in the second quarter alone. Market volumes picked up a bit from the sluggish pace at the beginning of the week, but remained on the low side. Only 7,526 lots traded late in New York, down 67 percent from the 30-day norm, Thomson Reuters preliminary data showed.
DOMESTIC TRADING:
Business witnessed on the opening day was low, only 400 bales, owing to higher asking prices, while consumers unwilling to honour. The spot rate was marked unchanged at Rs 8650. In Sindh price of new phutti was put at Rs 3950, while in Punjab rates ranged between Rs 4000 and Rs 4100. Buyers lifted 400 bales at Rs 8800. Cotton rate in China and NY was being keenly observed where softer condition was generally seen.
On Tuesday spot rate stayed put, phutti came down sharply by Rs 200 to Rs 3750 and Rs 3800. In Punjab phutti ruled between Rs 3800 and Rs 3900. The soft tone encouraged buyers who lifted 1400 bales between Rs 8500 and Rs 8900. The market operators said the buying level is on the lower side, as world cotton rate is mixed or lower, cotton brokers claimed buying was subdued owing to sellers tough attitude and buyers were adamant to by at lower rates.
On Wednesday growers of cotton celebrated early monsoon rains, which happily is considered good for the standing crop. Spot rate was unchanged and phutti prices turned Rs 100 lower to Rs 3650 and Rs 3700 in Punjab phutti was down by Rs 100-150 to Rs 3700 and Rs 3750. The rains have made people over optimistic who are placing yield at 15 to 16 million bales. In ready business 200 bales of cotton were lifted at Rs 8450 and Rs 8900. Elsewhere in the world growers contemplating to raise acreage.
On Thursday seed cotton rates dipped on perception that rains were likely to help good crop. Spot rate was unchanged, phutti rates were lower in Sindh and Punjab. The buying level rose though falling rate restrained buyers more against hope that prices were likely to come down further. However, sellers were not liberal, as they expected rains may slow arrival. The world rates too were down, mainly because rates in China were slashed sharply.
On Friday official spot rate was slashed sharply on rising anticipations of higher cotton production in the coming season, KCA official spot rate was cut drastically by Rs 250 to Rs 8,400. Seedcotton rates drifted lower for second day in a row in Sindh, shedding another Rs 200 to Rs 3100-3200, in sympathy, in Punjab prices also came down by Rs 300-200 to Rs 2800-3100. In ready business nearly 400 bales of cotton changed hands at Rs 8450-8500.
On Saturday KCA official spot rate was brought down further by Rs 400 to Rs 8,000. Thus, the rate dropped by Rs 650 within two days. Seedcotton rates in Sindh were at Rs 3200-3300, prices in Punjab were at Rs 2900-3100, they said. In ready business, nearly 1600 bales of cotton changed hands at Rs 7800-8000.
EU TRADE PACKAGE CASE
IN NOVEMBER:
The EU trade package was about to yield, as was being given frequently to understand was a lullaby. Now, if no miracle springs up, the package may come up before the WTO council of trade and goods in November 2011. The picture is emerging very stealthily, as life span of the package in November 2011 will be a complete year. A package keeping in view the ravaging floods to quicken relief as early as possible will stretch to a year, that also not for a decision rather than discussion will plunge readers in surprise.
When first time council rejected the package for some flaws pin pointed by Indian WTO representative. The representative was somewhat harsh but how true he now seems to be. He had given a clarion call to rush help to ease the victims in Pakistan. The package one and all should rest assures has practically lost its value.
The textile exporters have been in the meantime struggling to fight-back despite the stock. Somewhere here development was linked with package that Pakistan may offer GSP-plus also. That is not mentioned in the latest story.
However, lousily mentioned in the stories released name of India. Now so far names of opposers places so far are Peru, India, Bangladesh and host of others whose interest was attacked some way or the other. If it was so then India was right the Union should have collected material to help when it was needed. But in Pakistan no one is to realise that keeping economy and country is way out rather than roaming about with begging bowl.
ENSURE MAXIMUM SUPPLIES OF GAS TO SPINNING UNITS:
Looking prospective markets such as the EU and the US for freer access of Pak textile products is futile in view of the continued gas supply cut heading to closures. The spinners are earning through exports of yarn of various types besides supplying important raw materials to value-added sectors. The authorities who have been in a habit to survive on the pretext of the outgoing government failure. When you fight election and seek votes for winning polls and rule the country and the voters, who vote taking for granted that their party leaders would pounce on doing development work without indulging in foul game of accusing the failed leaders for the plight of industry.
If rulers do not really know that for agri production, water is intrinsic they should keep in constant touch with the voters who chance to meet only during elections. Why floods, rare or frequent come rushing and flow down to seas. The canals go sitting without digging able to hold water. All major dams, which could have held flood waters for watering standing crops, are victim of pretty political issue.
The Kalabagh dam and many more could be now in constant use but even spadework cannot be started, while expenditure continue to rise thousands of times. The issue need textile sector constantly place before the authorities who face them when leaders fail without their help. The spinners are basic to our value-added sectors who cannot do without proper supplies of yarn. All should embrace their share of service, which often turns point of argument and heart burning.
AFTER DUTY FREE ACCESS, GSP STATUS PLUS
Apparently EU's soft corner that decorate pages of newspapers radiates some gain is in offing. The date line Islamabad, however, erodes the warmth the announcement made in December 2010. The package, despite well intentioned has not been through the WTO body said to be some principled members refused to consider Pak devastating floods hunger and thirst. This country brought on surface the crisis through approaches by various officials but in vain so far.
Now it is even more attractive GSP plus status with assurance to soften key conditions when this will take a concrete shape remains to be hopefully watched on. May it be outcome of approach to Germany, France or the UIC, that approached countries come out with strong call for immediate grant of package to Pakistan - but twice or more times sympathy has been shown but WTO keeps the so feverishly offered package back with seemingly, as warmth and leave.
Six months have passed in vain in approaches to EU members and it was responded with disappointment. One or two voices have gone in open opposition to the package making all EU members void, parliament void, and now the patience is getting out of hand. The offer will have time bar and if lingered on without withdrawing the two voices the offers will automatically lose validity.
The sources who have watched textile exporters in lurch suggest that country with strong economy is answer. The all weather friend-China has in the past invited to work together to the extent that it signed FTA. But the credit went to China. It is hoped SCO will be participated actively to spare looking hopelessly to far and wide corners.
GAS SUPPLY: RENEWAL OF CONTRACTS OPPOSED
The exporters particularly textile exporters have opposed contract of gas to IPPs. The problem is again in sight - June 30 2011 when current contract expired. The textile leaders noted contracts for gas supply to IPP amounts to 140MMCFD gas equivalent to shortage being imposed on textile industry. Unless prayer is granted industry will be facing daunting task of lay offs, production and investment decline. It is vital to ensure seven days a week gas supply from. So far IPPs were being supplied gas on priority basis. They said it resulted in gas curtailment to industry for 71 days in summer naturally affecting production.
The leaders pointed out that yarn exports had registered a decline of 20 percent during outgoing fiscal year due to energy shortage. The suggested a balanced attitude for different stakeholders. The leaders recalled that textile industry has potential of achieving $20 billion next fiscal year provided decision makers realise the importance and extend helping hand to textile industry.
The energy crisis is said to linger on for quite some years. However, supply should be released in accordance with needs. The spinners are indispensable for value-added sector earning bulk forex for the economy. In fact value added textile products are inherently dependent of various types of yarn.