Swift seed cotton supplies have pressured cotton prices which were keeping low owing to improved buying by consumers around Rs 2250 and Rs 2335, depending on quality during the week ended on September 3, 2005. The official spot rate tumbled and lost Rs 75 to Rs 2175 during the week.
WORLD SCENARIO:
Cotton futures remained subjected to clear report about the aftermath of the Katrina damages. Though analyst hope last months favourable rains in Texas will offset much of the losses. Daily trading was slow due to spec selling and buying. The October contract opened at 476.63 and December at 49.10 cents a pound.
On Monday futures were off highs on Katrina fear and as the speculators bought the market after Katrina slammed into Louisiana.
The traders observed that they always over estimate the losses, but the fact was that we have never had a category 5 hit in this instance so we may not be over-stating the losses. Futures on Tuesday maintained stride on fund and speculative buying sparked by crop losses in Alabama and Mississippi day after Katrina hit the south-eastern US. Another factor for the spike in prices was that for the second day, leading indicators of commodity prices reached new highs. However, as the time passed by players started guessing.
They said as far as cotton is concerned, we are going to see about a half million bales loss between West Texas, Mississippi, Louisiana and Alabama which they hoped was enough to see the market scale up. On Wednesday futures dipped on speculative sales though uncertain crop damage from Hurricane Katrina in the US south-east should keep buyers in the market. Traders said that they still had a 21 million bale plus crop, which was ample to meet all expected needs.
On Thursday futures rose slightly on short covering boosting hope that the market should continue to trade on either side of the 50 cents a pound. Meanwhile, traders said little attention was paid to the USDA weekly export sales report that showed US cotton sales at 211,500 (500lb) RBs, below traders belief.
Shipments amounted to 227,100 RBs, less than previous week. China has disappointed and all eyes are on visit of Chinese President Hu at the head of a delegation to thrash out stuck up imports. Much trading will base on the outcome of positive talks, have failed in recent weeks. Traders however are optimistic Hu will concede ground giving way to resumption in business.
The last session turned easier on speculative profit taking and book squaring as players liquidated their long positions ahead of holiday week-end. Early speculative buying boosted prices into first resistance at 50.56, but as the market stalled, speculative and trade sales near the highs pressured values as players took profit.
The October contract closed at 48.47 and December at 49.85 cents a pound. Elsewhere, unresolved issue regarding China's imports would weigh on prices.
LOCAL TRADING:
The sun is shining over fields having standing cotton crop and apprehensions that floods and rains would do massive damage have been proved wrong. The week that has just ended saw swift cotton supplies, dipping prices and good buying. The foreign reports regarding cotton position due to hurricane Katrina were keenly noted in Pakistan though impact was not significant. Spot rate holding firm gave in only a day after trading had resumed.
On Monday, better supply prospects sent prices down but attracted buyers to the market. About 1000 bales were lifted. Much to the joy of spinners and textile millers, cotton prices declined. Spot rate however stayed put for the day. Buying at Rs 2250 and Rs 2335 was noted depending on quality. On Tuesday Spot rate dipped under impact of increased phutti supplies.
It dropped Rs 25 to Rs 2225. Over 2000 bales of cotton seen changed hands in the price range of Rs 2235 and Rs 2300. Weather had improved and picking also went up. On Wednesday steadier conditions obtained on the cotton market with spot rate maintained at Rs 2225.
The ginners were in a hurry to liquidate as much of stock with them as possible as phutti arrival, were bound to stream into the ginneries on improved weather. A couple of deals were struck, consumer taking breather time to see prices go further down. The perception was backed by the fact that govt was close to raising oil prices.
On Thursday supply rush continued to impact prices sending them down in ready business. In Punjab prices were quoted down around Rs 2125-2127. Phutti in Sindh was quoted down at Rs 925/950 while in Punjab phutti fetched Rs 980-1000. The ginners who held up stocks some days back and were in a position to earn higher profit are repenting.
They had believed in the reports about rains, floods, pest causing damage to cotton. Oil Prices have been raised in the world and in Pakistan have affected not rising trend in prices but reduced lifting by consumers. On Friday further softening was seen in prices owing easy supplies continuing. Official Spot rate down Rs 25 to Rs 2200. Mills, however, were active buyers fearing sudden change in supply on adverse report.
On Saturday, 1000 bales of cotton Mirpur Khas sold at Rs 20754-2125, 1400 from Tando Adam at Rs 2140-2150.KCA spot rate lost another Rs 25 to Rs 2175.
SINO-US ROW ON:
The bewildered Chinese exporters, failing to take US, EU reservations, for they are against WTO rules, had several rounds of negotiation with no end. As the Chinese hold firmly that WTO stands for free global trade, find no cause not to supply the world cheap and quality wears.
The govts in Europe or the United States fearing vote loss press local retailers and exporters (Chinese) to stay within agreed limited - 7.1 pc annual increase. But so far clearly contradicted by China and repeatedly claimed by the EU, and US, China seemingly violated terms by flooding markets in the two countries by 80 to 200 pc.
The EU has adopted a real business like attitude obviously China was their friend in need. The manufactures have however not welcomed decision taken by their own authorities, but have taken for granted with grant deal of reservations. The US has been more conscious of manufacturers/voters/legislators and rushed to cap imports over two dozens categories of mainly clothings. Lately China has been thrashing out with the two countries not giving any ground till the end of August (2005).
Meanwhile a third party has emerged in EU - the retailers who are at logger head with Commission that Chinese imports round the EU member countries parts are actually urgently needed. The retailers are additionally worried for keeping in view the winters lurking and countries facing shortages of warm clothes are voicing in favour of immediate acceptance of imports dumped in EU member countries parts.
The retailers who said " taken a panic solution based on good intentions but without thinking about the wider consequences would have ". A company owner hit hard said her company faced a potential loss after blouses and trousers ordered from China were stuck up in parts across Europe. The commission who continued to hold talks with China and harbour manufacturers woes tried to deflect the criticism "we are dealing with unprecedented circumstances with our eyes open." The parties determined not to cede any ground a solution to satisfy all parties seems unlikely."
MINFAL'S STRATEGY:
A week or two back, a report had hinted mild pest attack on cotton crop, though not much loss was feared. But the growers, who have gained authorities full sympathy had complained about feared losses officials were not traced to know the truth. Now a report datelined Faisalabad quoting Minfal claims having planned cotton production strategy to help growers. Above claims apart the report according to which officials field report regarding the standing crop as furnished by the federal and provincial agencies there has so far been no flare up of any insect pests or cotton leave curl virus (CLCV).
REASON: adequate availability of high yielding variety seed had been ensured. The growers were so much encouraged, according to the report that they went all out to beat target area by 2.86 pc in Punjab and one pc in Sindh. Water, official sources said was adequate, Urea was available 2656 million tonnes against 2.555 million tonnes needs, fertiliser was also available more than the requirements.
Pesticides were pure and low priced. All the needs were at growers door steps and now growers have nothing to nag about. Crop has according to survey reached flowering and fruiting stage. Where cotton was sown early has matured and is reaching ginneries. Generally speaking there seems nothing that could harass or made anxious to the farmers visiting cotton market. They never expressed any concern about contradictory reports in the press.
Minfal statement said nearly all was well on cotton front or at least strategy was such that cotton was expected to give better yield. However, same day somewhere else a report was headlined massive damage to cotton quoting Director Crop Maximisation of Sindh Agri Extension. In assimilating two reports differences could be due to place and observation. But what is of prime importance that some way must be found out to allow different agencies factually apart. The planners get confused when contradictory data are presented and they cannot give nation a better picture of things for a better and positive result.
TCP - A PAT ON BACK:
Not many days/weeks back was blamed for carrying illegal exports of cotton by a Liverpool based international Association, has been given a pat on the back with "Sanction" to stay back in cotton trade during the 2005-06 season and lift 100,000 bales of clean cotton. So far TCP had chances of earning through cotton exports but what it would do with 100,000 bales or even more in days to come, so question the relevant people midst cotton trade for years. Cotton is like "perishable goods" and face buyers manipulation. Besides, the corporation is being made scapegoat for the consumers.
Thus TCP will basically serve as the buffer stock - to serve the consumers and work as lever against the cotton brokers. Strangely, the sources noted that textile ministry has suggested TCP should bear the loss such subsidies US Administration can afford, because tax payers 100pc feel proud to pay taxes to the government. The relevant people pointed that in Pakistan only authorities could be sure the percentage of taxpayers deliver the same in time and without failing.
No doubt textile sector earns 67pc of the total $8 billion foreign exchange. Has ever been calculated how much is spent on textile sector or sector spends to earn 67pc of the total? For buying cotton and recurring expenses Corporation has been is given Rs 1.18 billion. How much is left with corporation out of 1.18 billion or how much more required for investment hardly comes to the press.
The textile ministry is in place now, onwards it will probably take care of the possible gains or losses much ado about contamination cotton is being heard these days.
The textile ministry hopefully seems to have known by now who should be held responsible for recurring five cent per pound annual loss from cotton. The measures every now and then are publicised for upgrading the cotton, textile products, helping growers, helping exporters, losses incurred on account of so-called refunds, under unvoicing over invoicing, duty and tax nor payment, but much remains to be desired and can poor nation see foreign exchange earning leaping up and up with every passing year and fundamentals to be envied upon!
TAIL PIECE: It is next to impossible to decipher the backdrop of out of the way interest of the World Bank, which apparently has appointed a consultant to prepare recommendations for the opening of the two-way textile trade between India and Pakistan. The source of the report were stated to be officials of Pak textile industry, who have preferred to keep mum on the subject. The cotton and textile sources as contact made cautious observations.
They said the consultant has started directly talking ,neither the authorities of the government of the two countries nor the bigger country having consulted. Sources noted that "without the start of inter-textile trade between the two countries, no headway in two-way trade could be made." The wordings of the report quoted here suggests that two-way trade is all important from Pak point of view. Sources took breather time to wait and see trade pundits shed light on the subject. May be in a day or two to find way into the review on September 10, 2005.
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