The Trade Policy 2004-05 prospects pushed cotton trading on the local market held up for quite sometime looking for a direction during the week ended July 24, 2004.
The official spot rate of Grade-III cotton was brought to size to lure spinners from Rs 2,575 to Rs 2,500 without upcountry expenses.
WORLD SCENARIO: Early week sustained buying kept the futures high enough to face weakening trend toward the closing days. The October began at 47.50 and closed at 46.45 cents and December opened at 47.84 cents, and closed at 46.62 cents a pound. The futures opened slightly higher on Monday on buying by small speculators.
The US market was looking for some inspiration. Meanwhile, a daily report spoke of weather woes plaguing the crops in both China and India. Indian cotton output is estimated at 12.50 million (480 lbs) bales while Chinese production at 30 million bales. On Tuesday combined commercial and speculative buying pushed futures higher.
The USDA export sales report was also eagerly awaited. Players will also gauge the impact of Green span's testimony, which would affect the pace of US cotton sales. The third day's session saw futures easy on trade and speculative sales. Traders observed that speculators dumped cotton even though futures had surged to past few session after being horribly sold.
On Thursday futures closed three-week low on commercial and speculative sales, with market seen sliding further on follow through pressure in coming days.
Meanwhile, the US Agriculture Department weekly export sales report had little impact in the market. The USDA said combined upland cotton sales were 327,500 RBs (500 lbs each) as it would range from 250,000 to 350,000 RBs with at base one analyst pegging it at 400,000 RBs shipments stood at 270,100 RBs.
The last days trading depicted the same picture as on the previous day sending futures three-week low on option linked and speculative sales, with market likely to case further next week. Analysts said they were uncertain whether the lows have been seen in cotton around the mid-40 cents area, basis the December cotton contract.
LOCAL TRADING: The ginners must have taken a sigh of relief following the announcement of trade policy, which was stated to help boost exports. The cotton trading, in fact, had started right from the beginning of the week. Though exports see pace would be seen when new cotton crop start flowing to the ginneries.
The ginners were quite willing to sell as their request to the authorities to lift fell flat, reduced spot rate by Rs 75 to lure spinners.
Trade policy added fuel to the fire. The very first day of the week saw price cut by Rs 25, signalling the buyers make inroads. Some deals were struck showing the shape of thing to come. The official rate was quoted at Rs 2,575 and in ready the prices was still low at Rs 2,400. The second day had seen well of a few thousands bale changed hands. The rate was again reduced by Rs 25. Over 5,000 bales changed hands.
The price range was between Rs 2,150 and Rs 2,500. The ginners voice turned louder calling the TCP to come to their rescue. The sales of flow had soothing effect on the sellers who are bothered for their stuck up money. Almost regular lifting of cotton had firmed the prices as sales ranged between Rs 2400 and Rs 2500. On Thursday, only deal was struck but the same signalled that flow would continue, the deals was priced at Rs 2,450. The official rate was unchanged at Rs 2,500.
The trend meanwhile in New York had reversed from climbing up to come down. On Friday a couple of deals were struck before closing. The sales gave ginners added satisfaction while spinners also felt they had been doing justice to the ginners who were calling for help or will lose hugely.
The trading on Saturday was as usual as half a dozen deals were noted till late in the evening. The spot rate was unchanged at Rs 2,500. The sales appear to have come to stay much to the glee of the settlers.
HIGH COTTON PRICE: The high cotton price had its pinching effect on textile exporters. So a headline of a report said that textile sector felt trapped under high cotton prices attracted relevant people.
The ICAC had in a report few months back indicated that for several more months to come will remain high. But the trend on ground was not as such, until of course, China entered would cotton markets for making its shortfall caused by heavy rains and floods.
The prices on uninterrupted buying by China started spiralling from around 30 cents pound to plus 80 cents until some weeks back for whatever reasons. Whether China realised the mistake for mopping up cotton from mainly America and pushing prices high or calculating the new crop size quite worthy it stopped.
The prices have come down half way from where they had climbed up. Pak textile exporters failed to assess what was happening internationally and their own deeds took literally easy when ginners offered around Rs 2,200 or even less.
They went on pressing the ginners to bow down to as low as Rs 1,800/2,000 per maund. But sellers had, according to some of them, shed the habit of embracing pressure without resistance.
The determination paid them. The farmers who have no chance to sub shoulders with high ups, were in fact helped by international (China) factor!
QUALITY PRODUCTS: It sounds like somebody calling from 50 miles when anybody urges exporters to revert to producing quality products. The Punjab Chief Minister would be cited for inviting industrialists and businessmen to limit their businesses to mere profit alone but also better the standard of their products.
The plea comes in the wake of WTO regime at arms stretch. The CM was announcing establishment of garment city in Lahore. The CM by saying this has tried to lend tacit caution that mere yarn of low counts and gray cloth export will not take export target to beyond $13.7 billions. A textile city is also being planned in Karachi and elsewhere in the country.
The relevant people close to cotton and textile expressing their happiness who prayed proposals are given concrete shape at the shortest possible time. After 55 years of country's existence the CM wants made in Pakistan label carry the same weight as "made in Japan". Commerce Minister speaking on the occasion boasted that "we had achieved the export target of $12.3 billion. Indeed, because exports until very recently were fetching just $7-8 billion dollars. Had commerce minister also hinted how much some countries with Pak cotton and yarn earning annually, to cite S. Korea. He has also warned Pak exporters by saying that it is the era of competition (probably he has advent of WTO in six months).
The completion was always hallmark of enterprising exporters who believed in diversification, change in style and consumers choice.
This is besides the question, the circles said, that competition has not been ever embraced. However, mere announcement and proposals are hardly like to make things rosy. In Lahore garment-city appears a reality of a near term but textile city in Karachi and elsewhere with all their value and gains appears pious wish! For the near term!
TAIL END: The farmers have protested water shortage badly affecting cotton, onion, chilly and sugarcane crops in Sindh. The farmers did not agree with authorities who explained that Indus River level had decreased resulting in supply breakdown to canals at the Sukkur Barrage.
However, farmers welcomed assurance held out to start rotation plan to ensure even water supply to tail-end area.
Meanwhile, authorities have not responded to ginners plea to ask TCP to lift cotton lying with the ginneries putting them to loss of nearly Rs five billion. The knowledgeable circles said that a probe is called for to find out why spinners did not lift cotton so that background fact is brought to light!
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