The falling trend in cotton prices internationally was readily accepted by the major buyers in Pakistan who slowed down purchases but ginners held firm to their own shortfall figure in arrival report and sharply raised spot rate to Rs 2225. Even TCP over 40,000 bales disposed was ignored.
WORLD SCENARIO: Fund buying to quench the long appetite for long position, weekly export sales report, Katrina and Rita final reports all combined influenced to lethargic trading. The December and March contract opened at 54.24 and 55.56 respectively. On the opening day futures were steady on speculative fund buying.
Traders said a close above 54.45 cents basis December opens the door technically to 57 and 58 cents. Fundamentally the market is monitoring the start of the US cotton harvest and news from China. The market is still waiting for direction report about Katrina and Rita damages.
On Tuesday speculative sales pulled futures down. Traders said cotton futures have see-sawing the past few sessions as players seem to be marking time while waiting for a key supply/demand report next week. Fears that the cotton crop in China may have been hit by disease triggered in part by heavy rains helped support cotton prices.
They expressed happy sentiment for getting pretty good support when December gets to 52 and then it gets capped near 54.50 cents. Futures finished higher on speculative buying.
Analysts said the current pattern will persist until production data is released. The experts are hoping US cotton sales will range from 200,000 to 275,000 RBs (500 lbs) while shipments were seen ranging from 200,000 to 250,000 bales.
On Thursday futures settled mixed as trade appeared to be gearing up for the release of a key government production report next week. An analyst said steady fund support and absence of any sizeable harvest pressure has enabled cotton to edge higher.
He added most players seem to be adjusting their positions before the release next Tuesday of the USDA supply/demand report. The fund buying kept it steady for most of the day, but the locals rant out near the close a dealer said.
On Friday cotton futures ended mixed in thin trade in view of the clear cut direction still not in sight. December contract eased to end at 53.63 while March stayed put at 54.40 cents.
LOCAL TRADING: The sellers and buyers developed different perception about the cotton production and acted in their best interests. The softening trend in world cotton sales sidelined spinners and the little millers but ginners believing in its shrunken arrival figure pushed prices up.
The TCP entry with a sale of 43,000 bales had no effect on the price. However, coming week will bring fresh news to give market a direction. The sky is clear and cotton must get a new life. Supplies will enhance giving hope that next ginners fortnightly report will depict different picture. The price trend was varied and the spot rate was raised sharply to Rs 2225.
Exporters are very much on the market doing purchases on favourable prices. However, on Monday spot rate was raised by Rs 16 to Rs 2165. The rainy weather and aftermath had dampened smooth supplies. Phutti price rose so the cotton ruling in the range of Rs 2250 and Rs 2275 depending on quality. The exporters had meanwhile entered market with modest buying.
The TCP had already announced for the auction of 2004-05 season remaining cotton. The PCGA arrival report favoured the sellers but spinners and textile millers had also an eye on the cotton doing abroad. Phutti in Sindh was selling at Rs 1020/1040 and in Punjab at Rs 1050/1100 cotton had move up higher also. Exporters had started covering their needs with pace. On Wednesday TCP announced sales of 43000 bales but showing no impact on local selling. Spot rate was pushed sharply by Rs 35 to Rs 2225.
This restrained buying but few believed, sources said that shortfall being shown in arrival report is real. Exporters were not buying very actively but covering their immediate needs. On Thursday spinners and textile millers seem interested in lifting making out nothing above PCGA arrival report. Spot rate stayed put cotton prices in both Sindh and Punjab matched at Rs 2275/2300.
The arrival shortfall infused fears that target of 14/15 million bales will not be achieved. On Friday firm conditions continued to prevail as buyers harassed by wide variety of speculative reports considered wise to buy as much as their immediate requirements demanded. In Sindh phutti prices jumped to Rs 1025 to 1075 while in Punjab they were noted at Rs 1050/1100. Nearly 3000 bales of cotton changed hands at prices ranging between Rs 2300 and Rs 2350 depending on quality.
The official spot rate extended its ground, picking up 25 rupees moreto Rs 2275for the 2005-6 crop, wiyhout upcountry expenses. Thus showing Rs 110at the end of the week due tohigher demand by the mills and spinners, dealers said.
FOLLOWING DEALS WERE REPORTED: some 1000 bales of cotton from Sanghar at Rs 2295 to-2325, 200 bales from Gojra at Rs2350, 600 bales from Bahawalpur at Rs 2350, 200 bales from Khanpur at Rs 2350, 200 Bales from Arifwala at Rs 2325, 600 bales from Khanewal at Rs 2350, 200 bales from Shujabad at Rs 2375 and same number from Lodhran at Rs 2380.
THROUGH LDCs:
Will US manufactures not grudge some categories exported to US by Bangladesh to match Chinese sales? The BD knitwear exporters have been overly jubilant over the scenario change. Well, should BD exporters wait for US manufacturers to call for ban on Chinese type "ceiling to come" Even Doha Round (2001) had failed, yet the sponsors insisted to put WTO on test whether it can go on without agriculture subsidies sticking.
Bangladesh felt aghast at the speed with which working garment factories had started pulling down shutters. Since US capped Chinese excessive imports of some 10 categories and was contemplating another half a dozen category products to meet similar fate.
The EU separately negotiated a solution to end by the year 2008. As a result some LDCs seized the opportunity to enjoy the freedom they had before the quota phase out was effective before 2004.
Only last week, a Bangladesh team was in Pakistan not only announced room China had left for them due to penal action, poor country was free to exports to their hearts content.
Surprisingly BD team leader invited Pakistan fellow travellers in textiles take advantage of free market access available to BD by virtue of being the LDCs whether Pakistan had agreed was not readily available. But textile gain declared so far has been reported 10-15 percent. BD team proudly narrated their exports to Europe recorded a rise of 116 pc. It would not be confirmed but Sri Lanka booked orders in a fair for good quantity of Pak products: was meant for exports the country/countries where free duty access was acceptable.
TRADE DEFICIT ENDEMIC: Trade deficit has taken for granted for every successive govt's through decades. From our major foreign exchange earner textile and made-up sectors - down to Benglal foreign Ka Maal Hai flowed down to Pakistan without ever giving to look to the fact that a plant for textile machinery was must from day one.
Instead even today despite authorities and textile sector leaders knowing importing textile machinery is a heavy drain on our meagre foreign exchange earned annually.
But its perennial character has not been checked. The sources interested to see improved exports of all items including textile products see no bar except hypocrisy of people who without thinking implication and a means to hit hard at our edge in the exports of product had depended on imports of mostly second hand machinery. Not many days back China and India had been here to show how can they sell textile machinery.
Apart from what and how much was bought or kept purchase in Abeyance, never injected a feeling that once textile machinery plants are set up and aftermath experienced, whether enhances competitiveness. A recent report exposed the authorities' worries for improving agricultural crops by importing 7500 tractors, which would add to the cost of export products.
The machinery is the needed until the doomsday and once courage is pooled resources created and plant set up will work for decades. The sudden set backs such as oil prices could be offset would have greatly helped offset the cost drained on imports of rotten machinery at throwaway prices.
The authorities have been warned right from 1960 and before to think a textile machinery complex was helpful for all times to come. But a report printed in newspapers presently alleged, regretfully that deficit cannot be stopped and brought lower in size of exports because the grants for permission is allegedly sanctioned on political grounds! In the presence of steel mill, sources question, what leads to neglect when no sophisticated technology is required?
INDUSTRIAL MACHINERY EXPORTS: The Heavy Mechanical Complex Taxila, has been directed by the NA standing committee on industry and production recently to explore prospects of enhancing export of industrial machinery.
The prospective machinery name has not been given. It should have been rather made known to the people to feel complacent. The complex is decades old and has worked, without letting the world know its worthwhile achievements.
The country is endowed with rich agriculture land. The land had been, it is narrated in sugar quoted words, feeding entire Indo-Pak particularly would supply wheat. Today unfortunately every item of food is imported be it wheat, sugar or cereals from India and as far a country as Australia. The circles who wear no crown of think tank or such thing said Pakistan lacks manufacturing plants - unfortunately disinterested are the industrialist and the authorities alike who run the government.
The highest amount of foreign exchange is earned by textile products, till recently 67 percent came from cotton - agri cash crop. Circles regretted they have heard textile millers travelling to Eastern Europe, America and keeping in contact with textile machinery makers in India and China, but has never heard this country much above lowest developed countries (LDCs) to venture in like other countries have.
Once upon a time Heavy Mechanical Complex had announced it not only manufacturing sugar manufacturing plant but would export to Bangladesh. It was understood to make textile products cheaper and competitive in the world textile manufacturing plant, chemicals and dye plants would be set up to make textile products cheap and competitive but the chemicals and dye importers queue up for China and India to import in tons.
In sort of whispers once Pakistan would hear about Millat Tractors, probably they had started with assembling. Nothing is heard tractors are being made in thousands and thousands. Instead of this a report said government has allowed import of 25000 tractors some, it said to oblige favourites. However, relevant minister has snubbed the charge but spoke nothing what Millat Tractor is doing.
TAIL PIECE: The outgoing KCA Chairman highlighted a couple of achievements during his tenure such as one being installation of high volume instrument (HIV) Spectrum. He claimed with HIV installation the KCA Lab is equipped with all types of tests relating to cotton fibre. He seized the opportunity of informing participants afresh the hedge in cotton trading. He revealed that the KCA has removed apprehensions of PCGA and Aptma regarding the hedge trading.
The latest reaction was however, not known about the thinking the two major players had on hedge. Meanwhile, the KCA has left the matter to Commerce Ministry to tackle the long lingering issue. He was hopeful commerce ministry would allow resumption of hedge trading per the decision of the cabinet dated 25-3-2005 by the KCA. Last, but not the least, the outgoing chairman while bidding good bye gracefully welcomed some of the most tried hand in cotton in the new board of directors including Zahid Bashir, Maqbool Said besides others. Let Almighty help the new team give hedge trading a way out!
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