The TCP presence and modest buying by exporters kept cotton prices firm despite world rates remaining under constant pressure. The cotton prices opened and closed at Rs 1925, though pitfalls were marked until Friday.
WORLD SCENARIO: Cotton futures moved both ways but bulls could not drive away the bears due to lurching weak fundamentals during the week. On the first trading day cotton futures ended lower on speculative sales with the trade apparently betting a key government report will be bearish.
The market has been defensive all day long in anticipation a bearish report regarding the monthly USDA supply/demand report. Dealers feel the world must still contend with large crops in all major producer countries including US. On the second day the futures remained weak on speculative selling in the face of record crop.
Analysts predicted more losses could be in store for the market. They said the market will now turning attention to the weekly USDA export sales report to provide an indication whether the large cotton supplies available are funding homes.
On Wednesday the futures turned the table and ended higher a trade buying and speculative short covering as the market absorbed the bearish influence of recent government report.
Analysts said that is really the question confronting the cotton trade whether prices could go low enough to spur demand to absorb the large crops which are going to reach the market.
Traders said market will now be looking at the weekly USDA export sales report for an indication that cotton supplies are being absorbed by China. On Thursday futures closed mixed as nearly months got a boost from speculative buying, with the trade waiting for new in the coming sessions.
Traders have accepted that fundamentally the market must contend with large world crops. Only American production has been breaking a new high 21.54 million bales from 20.9 m bales only few days back.
The focus now will be on export sales and shipment and China. The weekend saw futures down on modest fund and trade sales with fibre contracts seen drifting in a range for now given the dearth of news to inspire a move in the market. Traders observed that we might see further pressure in cotton after the US harvest report next month.
LOCAL TRADING: The ginners were apparently satisfied to see TCP and private exporters in the market keeping the tone pleasing.
The prices came under pressure, which was caused by ginners misjudgement but then shape was soon brought upright. It was never aggressive trading but movement was regular.
Prices on the opening day was raised by Rs 75 to be Rs 1925 without upcountry expenses. In ready prices ranged between Rs 1850 and Rs 2000, Punjab snatching more for quality.
The opening day was marked by buying by both exporters and mills. The second day spot rate was unchanged. The seed cotton arrivals have increased as weather had been suitable. The TCP stayed on the sideline but some sources observed that mills and exporters buying at its behest?
The usual cry was heard from ginners prices were falling despite exporters mills and TCP purchases. However, on Wednesday prices fell under the accelerated seed cotton flow, Rs 25 was pulled down.
The impact was heavy also because world crop production in US was breaking record every day-US latest at 21.54 million bales. On Thursday prices resisted decline on extended local buying.
Exporters appear to have some good buying orders in hand. But mills and spinner were doing calculated marketing. They did not participate in today's goings. On Friday prices moved higher Rs 25 to the opening level Rs 1925.
The growers were reported in pressure from supply side and manipulation. However, even world situation was not coming to help them. They were keeping hard look on the supplies and buyers attitude, and bringing down prices to keep buyers in humour.
ARRIVALS LOWER: That seed cotton arrivals will fall, following rains was quite expected, observers said. The bumper crop was announced and with that a cause was being looked this and that way to falsify the fact that bumper crop was expected. God is merciful is never thanked.
Actually when cotton crop is good prices would fall is apprehended. The growers are with no instrument to manipulate await how their three months of almost sleepless days are going to pay them. Too much rains, to little rains, more heat than needed and pest attacks all drive them almost mad.
When some setback is noted they are warned by the government and the field workers to do something before damage chances go beyond ones expectations. Growers run for cure seeking drug, which is spurious on the one hand on the other high prices are demanded.
The poor and non-resources farmers take sigh of relief when they harvest the crop. Then the worries about sales begin. The ginners turn is as worse. When spinners will indulge in importing cotton sometimes in the name of low price and sometimes high quality, cannot be predicted. If not to cite how many times such a situation is created so far in half-a-century but taking the case of 2003-04 crop.
While spinners have imported over two million bales and have some still probably in the pipeline. The ginners were stuck up with nearly two lakh bales for which TCP was to be inducted.
The TCP is buying at its own fixed prices at Rs 2149 per bale while market sources say spinners are buying at much lower rate.
The situation is very confusing and TCP is passing on message that it should not worry. Their luck is just a month away, a windfall awaits them. Such an ugly situation is always seen when God shows mercy to farmers.
GOVERNMENT BEING DEFAMED? The subdued cry, from TCP chairman, vindicated time has come to begin accountability of cotton and textile sector to provide justice to all.
The TCP called to enter market to help ginners asked cotton sellers to restrain from "defaming the government." The chairman clearly had in his mind that the government had done a favour to them to induct TCP for lifting stuck up cotton stocks with the accusers. The TCP is doing this risk filled business from taxpayers' money. The TCP is doing it at higher than prevailing cotton cost.
The relevant circles are openly saying TCP might not be able to sell at a reasonable profit. World cotton is signalling that cotton futures prices may turn range bound (48-52 cents) a pound or lower. It is well-known TCP was called by the government on persistent persuasion.
The ginners were ceiling spinners for ignoring buying cotton 2003-2004 cotton which it was left out must have caused huge loss to the ginners.
Incidentally the exporters have also in the meantime entered the market which is bound to help ginners additionally. The first time government fixed cotton purchase price at Rs 2314 per 40 kg, 9 III staple 11/32" which was almost rejected by the ginners. However, latest report said that TCP contracted 133,000 bales while it was delivered only 7000 bales.
The ginners accuse government for such low buying pace while TCP says ginners are not showing interest in allowing inspection for the lint TCP wanted to buy. TCP announced it was also ready to by 1000 bales from every ginnery but the response, TCP said is poor.
The situation has come to such as pass that weekly inter ministerial meeting has been fixed and TCP has said it will continue to keep contacting the sellers. But the relevant circles call such exercises utterly wasteful involving time, energy and money.
TAIL PIECE: To minimise the growers' losses, the government has urged the Trading Corporation of Pakistan (TCP) to improve its role and buy further cotton. It also assured the cotton growers to take effective measures to stabilise in the coming days.
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