Spot rate, lint, phutti prices at lower levels help activity improve; US cotton also eases

Trading in cotton gained pace restricting fluctuation during the weeks ended on August 27, 2011. The spot rate opened the week at Rs 6300, while it was curtailed on Thursday to Rs 6000.
WORLD SCENARIO
India, Australia and Latin American countries were wrapping up sleeves for pouring cotton orders from mainly China and nominal quantity from Pakistan. But players are waiting for microeconomic news from global markets, which had shrinking every passing day. America the largest supplier is in deep trouble with unprecedented drought, floods and hurricane. However total reported damage is somewhere 20 percent. The make up is expected from Brazil, Argentina and India are likely to fill gap.
Pakistan is to see monsoon rains ahead but are far from being apprehensive. Growers are eyeing at million bales, sufficient to earn from exports rather than drain out billion on imports. China is calculative and has in view how many crops were lost in floods. China is composed, as it has some stocks and imports, as is propounded by players, will be easier and cheaper. Growers have planned to harvest some grains for obvious reasons. Imports may be ordered in September days away. America in short but over its requirement well, besides meeting needs of customers - preferably China.
On Monday the US cotton futures ended with small gains on buying by small investors as a dearth of macroeconomic news prompted many players to stay on the sidelines, while summer doldrums took hold. The key December cotton contract on ICE Futures US rose 0.23 cent to finish at $1.0645 per lb, moving from $1.0416 to $1.0782. Total volume traded hit more than 8,800 lots, over a third below the 30-day norm, Reuters data showed. Total volume traded last Friday hit 10,326 lots, against the Tuesday volume of 7,113 lots, which was the lowest level of business since May 23, ICE Futures US data showed.
On Tuesday the US cotton futures settled lower on investor sales and analysts feel the inability of the market to go past topside technical targets could lead to further losses in fibre contracts. The key December cotton contract on ICE Futures US fell 1.21 cents to close at $1.0524 per lb, moving from $1.0427 to $1.0725. It was an inside day since the range was within Monday's $1.0416 to $1.0782 band. Total traded volume was almost 5,800 lots, nearly 60 percent below the 30-day norm.
On Wednesday cotton futures settled easier on technically motivated investor sales, but the market held above its lows for the week and analysts were uncertain about the next move in fiber contracts. The key December cotton contract on ICE Futures US fell 0.25 cent to close at $1.0499 per lb, moving from $1.0461 to $1.09. Total volume hit almost 14,800 lots, over five percent above the 30-day norm.
On Thursday the US cotton futures settled lower on investor sales as the market fell for the third day in a row and analysts said the weak tone could lead to further losses. The key December cotton contract on ICE Futures US fell two cents to close at $1.0299 per lb, moving from $1.0174 to $1.0639. Total volume traded hit over 15,200 lots, almost 15 percent above the 30-day norm. Total volume traded on Wednesday hit 15,308 lots, more than double the Tuesday level of 6,410 lots, which is the lowest level since June 25, 2010, ICE Futures US data showed.
On Friday the NY cotton futures settled higher on investor buying to end a three-day losing streak as firmer outside markets gave fiber contracts a lift. World stocks surged and the dollar fell after Federal Reserve chairman Ben Bernanke left the door open for future US economic stimulus. The key December cotton contract on ICE Futures US rose 1.33 cents to close at $1.0432 per lb, moving from $1.0215 to $1.0488. It was an inside day since the range was within Thursday's $1.0174 to $1.0639 band. For the week, the market lost 1.79 percent. Total volume traded hit over 7,700 lots, more than 40 percent below the 30-day norm, Reuters data said. Traders said the December contract seems pinned in a band running from $1 to around $1.0416, the area of support it broke down from this week.
LOCAL MARKET
Cotton prices weakened as seedcotton arrival pace sustained during the week, spot rate down Rs 200 to Rs 6300, 8000 bales were lifted and phutti rate in Sindh was down Rs 300 to Rs 2450 and Rs 2550, while in Punjab it lost steeply by Rs 500 - Rs 150 to Rs 2200 and Rs 2800. As raining stopped in cotton growing areas ginners preferred to sell rather than to hold back.
On Tuesday not a single deal was witnessed on the local cotton market because all the commercial centres stayed close on the MQM call for mourning. Even official spot rate was not issued on the day. The seedcotton rate was unchanged at Rs 2450 and Rs 2550, while in Punjab it was quoted at Rs 2200 and Rs 2700. The regular trading was expected from Wednesday.
On Wednesday pace of trading activity accelerated after the full participation of mills and exporters. KCA official spot rate was dropped by Rs 300 to Rs 6000. The seedcotton in Sindh picked up Rs 50 to Rs 2500-2600 and rates in Punjab were at Rs 2200-2800. Nearly 10,000 bales of cotton changed hands between Rs 5,700-6200
On Thursday lint prices remained range bound despite persistent demand on cotton market, spot rate was unchanged at Rs 6000, phutti in Sindh rose by Rs 50 to Rs 2500 - 2600 while in Punjab prices ruled at Rs 2200 and Rs 2800. The buyers were keen and lifted 12000 bales in price range of Rs 5700 and Rs 6100. The phutti arrival was to an extent slow but the sellers were liberal in lifting to their hearts content. The global trend is also gradually down and players are contemplating demand to remain down. However, drought, floods, hurricanes all have been making prediction difficult on.
On Friday activity came down as traders were facing transportation problem ahead of Eid-ul-Fitr. Official spot rate was unchanged at Rs 6000. The prices of seedcotton in Sindh were unchanged at Rs 2500-2600 and rates in Punjab also retained the overnight level at Rs 2200-2800. Nearly 8,000 bales of cotton changed hands between Rs 5,800-6000.
On Saturday activity improved on the cotton market as increase in phutti arrivals forced the ginners to lower prices. Official spot rate was unchanged at Rs 6000. The prices of seedcotton in Sindh were lower by Rs 200-100 to Rs 2300-2500 and rates in Punjab also came down at Rs 2200-2500. Approximately 9,000 bales of cotton changed hands between Rs 5,600-6050.
GGA STRIKE: WHO GAINED WHO LOST?
The ginners, who tightened belt to get growers rid of 3.5 percent withholding tax on purchase or sale of phutti, crushing the poor farmers already under burden of different inputs price , led if any where pulled cotton prices down added loss to growers. The government has shown insensitivity and allowed a fortnight without nodding either way. When the ginners body was making preparations on behalf of growers the superior emotion rather than reason was on display. The end result is speaking loudly. The farmers have now to bother prices falling.
According to the knowledgeable sources cotton in Sindh market had shed Rs 400 per maund. In the same strength loss was marked in Punjab, Phutti was selling minus Rs 200. The ginners stopped buying phutti 15 days back to protest against the complex procedure of 3.5 percent withholding tax. The growers all these days have not come out with resentment against ginners not the authorities. The reason is obvious: the tax would have hit them ultimately but the process ginners had to undergo every day collecting and depositing same in the bank was indeed cumbersome. The growers surrounded by problems like higher input cost and withholding tax had been planning a reduced acreage next year for lower production. The market sources have, however been showing optimism 16 million bales was likely despite various odds. Attitude of the authorities will determine the size of production next season.
BD TEX MILLERS THREAT TO CLOSE FACTORIES
Not too long back all good news was coming from Bangladesh-particularly about exports. India is already their reaping good harvest. BD friends were in humour offering Pakistan to start doing textile manufacturing and exports with all facilities at doorstep. Now a press report reads, which seems at first sight as alarming - textile manufacturers in Bangladesh openly talking to close their factories unless the government hasten to make available more cash incentives, restrictions on imported yarn and fabrics from India, Jahangir Alamin President Bangladesh Textile Mills Association extremely upset said without the referred measures survival was next to impossible owing to shortages of gas and electricity. The same problem harass textile manufacturers of Pakistan also.
If BD authorities failed to supply gas and power, exporters will lose export edge and stake survival. The chief said there are more than 1300 primary textile manufacturing factories in BD textile sector investment involving around $40 billion helping the country to save huge foreign exchange.
It may be noted that goods exported from BD have free access to lucrative countries. Readymade garments are the principal exports earner for Bangladesh besides being the biggest employer after agriculture. However, the crisis faced by BD exporters, could easily be surmounted through its status as the poorest, wages are low and government can enhance subsidy rate available to the exporters.
FBR REJECTS GINNERS PROPOSAL TO CUT WHT
The ginners, who began protesting around first week of August against 3.5 percent WHT got response after two weeks - that too in negative. If the time bar were expected to be such long, giving some relief through even nominal cut would have made some sense. Unknown hours ginners and FBR authorities spent on efforts to find out a solution went utterly naught. The ginners were not victims, they advanced in defence of cotton growers and thus they would have indeed got spared themselves from running about - extracting WHT from the sellers.
The ginners had accepted the reduced figures to only one percent from 3.5 percent. Explaining the outright rejection of the proposal tax authorities rejected the demand on argument that such a major cut or outright withdrawal of WHT would discourage documentation of the entire chain, including growers and ginning industries.
Agreed the decision taken by the organisation had far reaching effect what about drastic loss in the seedcotton and cotton prices. The growers and consumers are already harassed by sudden jump in prices some weeks back and now the same is creeping down pushed harder by FBR decision strongly opposed by the ginners. It is hoped some way out is likely to be announced soon.
COTTON GROWERS CAUTIONED
This is for the second time in a few days gap that Met Office has come with modest cautioning about possible weather to prevail in cotton growing areas. Encouraged by media easy read to intended people the practice seems to take a regular shape.
It is easily believed full advantage will be derived by growers of various grains particularly cotton. The consumers have always been pursuing quantitatively more cotton production. Current target seems to be 16 million bales calling for extra-ordinary vigil against inclement wealth, pest and viruses.
The Met effort salutary demands from grower's answer in the same spirit. The advice issued the other day said dry weather for the cotton belt that farmers to irrigate their crops as per need. Since dry weather is predicted it would be advisable to irrigate the crop as per need. The advice will be valid up to next 10 days. The forecast is for planes of upper Sindh, Central and Southern planes of Punjab, lower KP and adjoining areas of Balochistan, Met specially warns against rise in temperature level by 2-3 degree centigrade in agricultural planes during the next five days. Temperature fall has also been incorporated in the message which demands care to reap good harvest. The message released on August 20, 2011 has been stressed to be valid until the end of August. The BBC watchers must keep in mind that weather is not broadcast only when sky is overcast, but every hour before news.