The timely increase in procurement prices of phutti had impacted positively inviting buyers to life before they face more losses. The maximum lint sales in one day in days was seen at 30,000 bales. Spot was at the outset raised by Rs 20 to Rs 2360 without upcountry expenses. It stayed but until Friday.
WORLD SCENARIO:
Higher trend persisted on the NYCE owing to small speculative buying as players said there was nothing to ignite the market. Players wanted for supply/demand figures and clear signal from China. However, future edged up slowly which opened on Monday March at 51.77 and 52.90 cents a pound.
There was no life in the market and awaited any factor that could ignite and activate the market. One factor that has worked was that players knew the supply and demand position.
The USDA report on this count was expected later in week. When cotton players speak about supply and demand is Chinese orders in view. China after settling terms, may be not favourable to it, with the US and EU is taking stock of own cotton production estimate and stocks. Hence there is no news from China about fresh buying.
America has pressed China for upgrading yuan which China says yes but when it will like. May be this may be another factor for taking time which has worried in the US exporters.
In the meantime speculative and trade buying kept market active and futures on the rise. The major stakeholders were particularly concerned because they were viewing huge supplies pouring but demand signal remaining vague. The factor that India and Pakistan won't have their cotton production in the region of targets. But how much this will enhance demand and whether America will be approached is being awaited.
Analysts said foreign figures could only move the market which were unclear right at the moment. Surprise was being expressed as to why hefty 574,800 RBs (500 lbs) sales went almost unnoticed. However, the fact that record crops report was taken slightly with care as speculators hit by report started profit taking. The futures ended March at 52.75 and May ended at 53.62 a pound.
LOCAL SCENARIO:
Stepped up buying in cotton and thus firming up prices were seen following supportive news like raise in phutti and lint prices flanked with news of shortfall in arrival sustaining were the events of the week ended on December 10, 2005. The spinners and textile millers were after quality lint despite higher asking prices.
The spot rate was raised seeing the buyers enthusiasm. On the opening day spot rate remained firm at Rs 2325 without upcountry expenses. The ginners were pretty disturbed on pending unmanageable stocks of over two lakh bales plus new arrivals.
However, hope of TCP remaining as second buyer was great consolation. Phutti ranged at Rs 1000 to 1125. Punjab lint was selling at Rs 2375 and Rs 2400. The spot rate went up by Rs 15 to Rs 2340. On perception demand was to remain higher than supplies.
Around 15000 bales of cotton were lifted. Ginners were disappointed at lower than usual buying despite their efforts through imports of high-tech machinery to supply good quality cotton. However, on Wednesday saw follow up buying which must have consoled the ginners. The sale went up to nearly 30,000 bales, highest in one day score in weeks.
There was another lift in spot rate by Rs 20 to Rs 2360. Rise in prices and buying both moved side by side. On Thursday buying activity continued firming up prices in ready. Short crop in Pakistan and neighbouring India and boost in exports under WTO has led buyers to stay in the market over 10,000 bales changed hands.
On Friday ginners took a sigh of relief as it was confirmed with prices announced that TCP will step in as soon the prices fell below Rs 2279 per maund. However mills continued to mop up their immediate needs in view of the fact that prices may not be as lower tomorrow as they were ruling now. Spot rate stayed pu at Rs 2360 and Rs 2425.
Over 10,000 bales of cotton in big lots showing spinners perception of dearer lint ahead. On Saturday, following deals were reported: some 600 deals from Hyderabad sold at Rs 2375, 1000 from same station at the same rate and 1200 from Lodran at Rs 2400.
LINT PROCUREMENT:
The Economic Co-ordination Committee (ECC) of the cabinet raised lint prices to Rs 2279 per maund for 2005-06 year, hoping growers and ginners will ensure increased production of cotton. Earlier a meeting of the Agri price commission held on December 5, 2005, after preliminary assessment fixed intervention price for phutti around Rs 1000/1050 per 40 kg.
It was expected that raise will encourage farmers and ginners for growing more and cleaner cotton. The cotton need is expected to go up as trade under WTO has boosted the flow. The meeting was attended by cotton stalwarts and therefore hoped that price fixed by price commission will be duly approved.
The time was right and help both the growers and ginners to go for producing even more cotton in view of the increased supplies. Earlier ginners and growers were also had been offered incentive for growing dirt-free lint to the line of Rs 100.
For the last couple of years have witnessed huge imports on the pretext of quality cotton not available in Pakistan. They must change the trend as far as possible, and it was expected, they would supply to mills lint with a maximum of 2.5 grams. But the growers and ginners who are always at sort of service to needs of the country go all out but today the authorities need to cover to save their increased investment.
Ginners have again charged buyers and defended themselves that they are not behind supplying dirt-full lint. The buyers fail/refuse to pay the increased price due to making special efforts gin clean cotton. In the past too much time was consumed in listening to the demand of the suppliers to introduce TCP and save them from losses. Just few months and it is hoped the ginners won't have to complain to the textile minister or authorities they have been betrayed. And the clear proof would be that imports of so-called quality cotton should be minimum brost.
TCP ACTIVE AGAIN:
The TCP had been left good quantity of cotton when came the authoritative instructions from Liverpool (London) based association the corporation's predecessor had been stopped from indulging in sales of cotton. A lot whispering continued for sometime what legal guilt had been involved in stopping Export Corporation of Pakistan and as a follow up TCP was also intervened to stop when the corporation well on the road to provide comfort from the buyers.
The TCP is well-known to people that it is never profit earning, though no one can be sure of this, but why is it that when it's to buy cotton asked to tighten its belt, money in billions are given, without any grudge or ill feeling, it never furnishes how the money which is generally borrowed from any foreign or local banks, was spent.
Anyway at the moment the question is how is it that buying instructions have been issued. Some activity has been seen such as fixing 31 ginning units for buying 310,000 bales of cotton. In fact TCP as third buyer is need of cotton trading. The one buyer is always at an advantage with specially free to import as much as spinning and textile units need.
Thus ginners come under intense pressure and the rest of the brunt falls on poor growers. Entry of cotton exporters only allowed when authorities are absolutely sure local mills will not be left to starve. The result is always loss for the growers and the ginners. The staying back of the field is certainly to ensure good return.
Quite hefty amount has been added procurement price of cotton by ginners also - it has been raised from current Rs 972 to Rs 1000 to Rs 1050 subject to approval of the cabinet. It is, however, just matter of days. It seems that amount will be okayed. The presence of TCP will balance trading and prices, subject to authorities being monitoring movement not going against the growers.
PESSIMISM ALL AROUND
Senator Republican Saxly Chamblis, who largely controls the 'Agricultural agenda in the US Senate, has strongly rejected proposal by global trade ministers to give duty free access to the world's poor, he told to an agency on December 6, 2005.
Only less then a week left for 6th WTO ministerial conf begin in Hong Kong on December 13, disappointed senator if that's all that comes out of the WTO conference then we had accomplished nothing.
The backdrop of the blunt statement from US senator was probably reaction to decision that EU, Japan, Brazil, India and Australia had sought in a meeting to reach a deal on duty free access for the world poorest countries injecting in them hope that they got something from the trade round. The idea was meeting participants thought would downgrade expectations from the august ministerial meeting in Hong Kong between December 13/18.
Probably not gone through the statement. The US agri secretary Mike Johannes had said that now is the time for WTO to change global subsidies and tariffs. Otherwise he said amendments will become more difficult to advance after congress begins writing the farm law, 2005. Increased estimated govt money for farmers is at 22.7 billion dollars.
The Congress is getting ready for formulation of a new policy and it would go without a wait for the conference outcome. The wording and the tone makes it clear that a deal not favourable to US will not stop from writing the farm bill in anticipation of what might come out of the WTO, Chamblis said.
And for the likely failure of the Doha Round America holds European for offering little in shape of farm imports tariff. The EU on the other hand wants more from stakeholders in respect of manufacturing and services besides it is not clear what America is going to offer over the years.
America announced sometime back it will cut subsidy by 60 percent. A leading US cotton trader Duvanant is true America was not going to end its cotton subsidies. He questions are subsidies good.? He says No Are they (subsidies necessary, he says "Yes". Is there free trade in the world. He says Absolutely "Not."
BIT, FTA, TIFA ETC:
The commerce minister's a two-day US visit was important as he was upbeat that Pak efforts to earn BIT (Bilateral Investment Treaty), Free Trade Agreement (FTA) and Trade and Investment Framework Agreement (TIFA) is under intensive negotiations and will take some more time. He reminded that trade and commerce, particularly textile issue is a sensitive and political issue in the USA hence a patient wait and breakthrough.
But he was quite optimistic that talks were in progress. He was however happy to say that there was a healthy growth evident the post quota era. There was some challenges in home textile and fuller attention was being paid for expansion. He did not specify the challenges but hoped they would he surmounted. In respect of exports growth there was apparent progress.
On world wide basis textile and apparel came to 59 pc, and in case of USA it was 85 pc or ahead by 23 pc compared with last year. He appeared worried on the question of aside-dumping duty around 13.1 percent in European Union as he thoughtfully said issue is being looked into but this is under continued review.
Humayun said he was optimistic about GSP plus cadre will be June 1, 2006 and MFN will together will mark down by 20 pc and a great relief. About October 8, quake he admitted some setback in textile sector for workers rushed to quake areas to see their family and build houses etc. This is a temporary phase and will be back shortly.
However, he stressed that BIT, TIFA and FTA progress has been slowed due to sensitivity of the issue and politics and where these steps in long negotiations are required which are time consuming. The knowledgeable circles who are following the efforts commerce minister and the president himself is duty bound to yield result.
The Republicans are envisioning coming presidential elections in a few months time and they must be free from involvement in textile or such issues. Pakistan was considering its position as front ranking country against terrorism and countries had often expressed satisfaction at the Pak attitude. But extending all that help that Pakistan thought it was qualified America had to see from its own angle.
However, the progress as placed by commerce during his two day visit was satisfactory.
TAIL PIECE: The HK commerce secretary, the host to ministerial WTO meeting, upbeat some weeks back rejected pessimists that December 13-18, 2005, meeting may be cancelled.
Meaning that the WTO meeting in HK will not be held but will settle entire agenda left over in 2001, Doha Round. Now the poor of the world and IMF top executives doubt success of WTO talks. The WB President has dropped an advice to the countries, at the negotiations table to look beyond their vested interests to save HK round and the 1.2 billion poor world over. This was probably the last of the sermons ahead of the meeting a couple of days hence.
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