Textile millers' call to withdraw TCP from cotton market was probably not heard, and the pace of seed-cotton supplies was accelerated. Both these factors influenced cotton trading during last week ended on November 27, 2004. It was difficult to understand which direction the market would take.
However, the spot rate of grade 3 cotton was reduced by Rs 25 to Rs 1900 on Thursday. A new dimension was added to TCP responsibility as a result of which its stocks may constitute 'Buffer Stock' as desired by spinners and textile millers.
WORLD SCENARIO: Activities on New York cotton exchange dampened as players proceeded to have moments away from hectic business hullabaloo ahead of year's longest recess beginning on Thursday for Thanksgiving.
The market would now reopen on Monday, November 29, 2004.
However, the opening day closed firmer with small gains on speculative buying in quiet trade, and the market was seen grinding slowly higher ahead of this week's US holiday.
New York cotton futures opened a touch higher, briefly retreated to session lows, and gradually worked their way higher on buying by small speculators. The market took notice of first notice day for deliveries in the spot December contract.
Fundamentally, analysts opined, the market would be contending in the weeks ahead with the harvest of record or near-record cotton crops in the US and places like China.
On Tuesday, futures finished mixed as sales by small speculators nudged benchmark March down, with most players slipping away for the longest holiday break of the year.
Traders said it had started to get a pre-holiday feeling. Analysts said the market would also be looking at demand for cotton in the 2004-05 season. Traders, however, noted they needed to see if demand would stay at a level which could help absorb the large cotton harvest in US and other areas such as China.
Just ahead of holiday, cotton futures on Wednesday ended with small losses on speculators' sales in quiet dealings for the long Thanksgiving holiday break with players looking for leads when trading resumes on Monday next.
Traders said people were just eyeing up positions before they go away for the holidays. Follow-through speculative sales dropped fibre contacts to their lows for the day, but same speculative accounts covered and the market wound up roughly in the middle of its trading hand. December ended up 0.67 to 48.40 cents and March down 0.36 to 42.92 cents a pound.
LOCAL TRADING: Exporters were conspicuous by their absence, but TCP showed it was not tired on the back of govt's green signal. Spinners abhorred TCP's presence but continued with their physical presence for keeping updated with cotton stock in view of the quotas phase-out from January.
However, spinners must have been greatly relaxed to know TCP's regular buying was to serve as 'buffer' stock. New York cotton futures also did not set any positive trend and closed up 0.67 to 48.40 cents and distant March down 0.36 to 42.92 cents a lb.
The opening day, as a whole, was steady with spot rate sticking at Rs 1925. Despite accelerated seed-cotton supplies, ginners were stated to be restraining sales in the hope that a better price was likely, on not very clear reason. Punjab cotton, which was in slightly better demand, was sought at Rs 1900 and Rs 2000 range, and Sindh at Rs 1800 and Rs 1975 range.
The growers, particularly the not very sound ones who could not hold back seed-cotton supply for a day, complained they were being refused government fixed price at Rs 925 per 40 kg. Over 9000 bales were sold.
The second day the TCP buying almost eclipsed the spinners who had good quantity bought on the first day. The seed-cotton in Punjab was paid Rs 850/930 for 40 kg and Sindh phutti at Rs 840 and Rs 900. Spot rate remained unchanged at Rs 1925.
On Wednesday buying by TCP slackened though spinners did some shopping. Spot rate of grade 3 cotton stayed at previous rate and seed-cotton, which continued to flow into ginneries in Punjab was bought at Rs 820/825 and in Sindh was paid at Rs 750/850.
On Thursday spot was brought down by Rs 25 to Rs 1900 manifesting that ginners could not hold on cotton for long at ruling level. Bumper crop had demanded of them to buy, meaning keep ready money to pay.
Friday's session was little changed as a few deals were struck at the ruling rates. The spot rate was also left unchanged.
On Saturday, seed-cotton supplies spilt into this day and prices eased somewhat. The millers and spinners were in the market with pleasing news that TCP's regular buying may not be necessarily for exports but for a 'buffer stock'. Punjab rate ranged Rs 1950/1975 and in Sindh rate was Rs 1900/1930.
The official spot rate failed to show its firmness, losing Rs 25 to Rs 1875 without upcountry expenses. In Punjab, the cotton prices resisted further erosion at Rs 1775-1925, dealers said. In Sindh cotton was available at Rs 1750-1925.
Seed-cotton prices were down at Rs 775-875 in Punjab and in Sindh at Rs 750-850.
TCP ROLE OPPOSED: There is no doubt that transition period requires value-added products' support for stepped up exports. Oil prices have done much harm but the entire burden was taken up by the government who paid in dollars without raising prices of local products. But that does not mean to recall bad old days to encourage somebody at someone else's expense. Cotton body has turned rightly down the call for TCP to stop procurement of cotton.
Trade sources posed the question why TCP role should be discontinued. They recalled that not long ago the ginners had suffered due to huge unsold stocks. Sources said that textile industry's demand for withdrawal of TCP should be asked why the ginners had called for TCP's entry into cotton market.
The industry probably knows that ginners may be getting fair price for their cotton, but growers still remain deprived of the price fixed for their goods. Later authorities bound TCP to lift cotton from those ginners only from whom growers were getting Rs 925 per 40 kg. But it was not seen happening because of increased supply of seed cotton.
Whatever the reason for heavy price fluctuation or undesirable rise or fall there are interests besides the interests of cotton and the like players.
However, the millers should also set some pattern exposing their intention that they stand for others' interests. Also, supply and demand may be a criterion. But ethics should not be lost sight of.
From time to time flaws have been pointed out by knowledgeable circles but what is there that makes growers to burn their cotton in front of press club and ginners to import cotton to import cotton and spinners' "go slow" to press for cut in rates? Unfortunately, authorities have failed in their duty to set business pattern to harm no one. When once it was pointed out that cotton bales contain lower or higher weight to serve somebody's whims, when ginners were calling authorities to induct TCP (to suffer certainly monetary losses) neither ginners nor spinners were asked how huge stocks piled up and who was responsible.
The TCP has been inducted and reports speak that ginners are very happy. Suppose TCP is withdrawn or spinners will be happy. Sources question is this the solution?
However, weekend papers report has put all interests in win-win position: the stocks TCP will preserve as 'buffer stock.
WTO STEPS IN: Cotton growers everywhere, particularly in South African states, are worst hit from subsidies, particularly what America provides to its growers--more than it provides to the Third World countries.
In Geneva some months back, the meeting of member nations while provisionally allowing WTO to open up its wings and start flying from January 1, 2005 onwards the subsidy issue was as ever left in lurch.
In fact, the poor and non-resourceful nations of Asia, Latin America and particularly Africa were solaced that the issue was to be resolved in a year or so. The African nations left were perplexed not to know what business to start to live on. Very recently again from Geneva another report sent a good news that WTO had taken first step on November 18, 2004, towards seeking a deal to rein in rich nations' cotton subsidy.
The WTO appeared conscious and genuinely worried about the West African (states) cotton producers who say they are on the verge of out of business. The WTO has launched a special sub-commission for cotton, confirming it is not sitting idle but thus it has set a priority area before it in the search for a deal on forming world fraud-free trade.
The suffered nations have welcomed undertone but made it perfectly clear that the sub-commission needed to be followed by quick action on subsidies, particularly in the US.
For over a decade meetings held under the shadow of protests to make the organisation a truly "philanthropic", the major cotton growing areas like Benin, Chad, Burkina Faso and Mali had in July demanded that cotton be treated as an entirely separate issue at the free talks, providing that it was given special status within the overall farm negotiations. But keeping Benin's WTO envoy Samuel Amehon's view appears essential. He said that removing subsidies altogether is desired and not that amount is reduced.
FREIGHT UP: The year-end is always rush hour for exports, particularly for textile products, to the West. The exporters are aware of this fact because after a month, from January 1, 2005, exports and trade pattern is likely to be changed altogether.
Today, exporters get late for meeting the export quota. At such time shipment space is always scarcely available for which freight inevitably is raised. Only in September, freight has already been enhanced by familiar amount by India, Pakistan, Bangladesh, Ceylon Conference--150 dollars for 20-ft and 300 dollars for 40-ft container. All member shipping companies are under obligation to update freight.
The exporters bother for the freight, no doubt, but prefer that quota is not exhausted. It is not known whether or not exporters had asked airlines to allot some space so that export quota target reaches destinations in time.
According to reports, exports to US have overflowed. So they were not as much worried as for exports to European Union.
The apprehension is that any delay in exports will be subject to duty, following expiry of current scheme of generalised system of preference (GSP). If nothing untoward happens the exporters are alert and ready to meet the deadline.
TAIL PIECE: These are some 20 poor countries which apprehend massive job losses in their textile industry when WTO regime sets in next January and quota system will be phased out.
Countries certain to stand gainers have no sympathy with textile producers in poor countries.
The WTO appears sympathetic which said it was lining up World Bank and IMF support to LDCs. The nature of support has not been given out. Perhaps that help may work. But the question is whether countries likely to be affected produce cotton, dyes and chemicals and requisite textile machinery. If not, competition will be very tough.
Why not such field is taken up where maximum self-sufficiency in raw material, machinery etc are available. Initially, some patience and time will be required but soon confidence and prospects will come their way. If TCP is buying for a buffer stock, the entry was not based on any principle? Details next week.
Comments
Comments are closed.