Hectic trading was seen in the cotton market last week amid sharp rise in the prices, experts said. Steadier condition obtained on the cotton market as local and world trend caused upsurge in prices leading to almost panic buying by the millers, showing no regard for higher asking prices. The spot rate jumped by Rs 50 to Rs 3125.
WORLD SCENARIO:
Buying by small speculators pushed prices higher owing to general perception that less acreage fixed for cotton sowing. On Monday, ahead of New Year Day on Tuesday, cotton futures rose on buying by speculators. The market was abuzz with speculation that speculative funds are determined for increasing their long position. They said it was expected the steadiness would persist for quite sometime.
They said that USDA has fixed nearly 9.185 million acres for cotton plantings, lower than 10.487 million acres in 2007. Industry analysts hoped lint prices not even to close to a level to prevent US cotton sowing during current year from falling sharply due to strong rally in other grains, ICE futures open outcry March contract rose by 0.12 cent to 68.01 cents a pound. May contract was higher by 0.9 cent to 69.57 cents a pound. Traders saw resistance in the March open outcry at 68.60 and 69.20 cents a pound.
When the NYCE trading opened after a days closure on Wednesday contracts closed with highest gains since early 2004. The futures scaled up following funds buying. The perception about situation in 2008 has prompted full pace buying, market operators said. The analysts are expressing optimism on coming days as they expect 9.185 million acres under cultivation which all known is the lowest since 1983, as per USDA data.
The surge in crude (Oil) prices to the psychological $100 per barrel spoke loudly that synthetic fibres would also follow suit. Meanwhile, investment funds have increased their long position. Leading operators are putting March open outcry at 69.30 and 70 cents a pound.
Cotton futures finished on Thursday with modest losses because of bearish option strategies, that pressured futures prices despite speculative buying, traders said.
The day was a continuation of heavy speculative buying and the only thing that kept from going higher was extremely bearish options strategies.
ICE futures open-outcry march cotton contract ended 0.17 cent lower at 68.71 cents a lb, after trading in a higher range between 68.10 to 69.05 to cents. May lost 0.19 to close at 70.40 cents. The rest settled from 0.25 cent higher to 0.27 cent lower. The ICE March electronic cotton contract was down 0.21 cent at 68.67 cents a lb by 2:57 pm EST (1957 GMT).
Industry analysts were of the view that cotton prices might continue to play catch-up as rallies in other grains have curbed US cotton plantings in 2008.
The US Agriculture Department said it saw US 2007 cotton planting at an 18-year low of 10.847 million acres.
On Friday cotton futures turned softer amid profit-taking as the market extended its pullback after its recent rally. Brokers said prices may drift in a range while waiting for leads from an industry conference and a crop report next week. ICE Futures open-cry March cotton contract settled off 0.02. At 68.60 cents a lb. May lost 0.04 to 70.36 cents a lb.
LOCAL TRADING:
When cotton market opened after almost a week closure owing to disturbed condition and holidays, market initially moved with snail's pace. Few operators were seen who showed no interest in business. The official spot rate was maintained at previous level at Rs 3,025. Of course, next day (Tuesday) some deals were marked totalling around 4,000 bales at price range of Rs 3,115 and Rs 3,200.
Official spot rate was unchanged. Phutti in Sindh and Punjab was selling at Rs 1,450 and Rs 1,500 respectively. The firmness seen in trading despite deplorable situation was said to be due to setting some 5,000 bales of cotton on fire. As Pakistan cotton consumers reported imports up by 107 percent in five months, local cotton spot rate was raised by Rs 50 to Rs 3,075. And, buying, too, was marked undeterred by the consumers, which totalled around 3,200/3,300 bales in the range of Rs 3,090/ Rs 3,200.
The Phutti prices were steady at Rs 1,450 and Rs 1,500 in both Sindh and Punjab. The local cotton considered costlier which was said to be behind record imports idea has turned favourable.
On Thursday, spinners and textile millers pounced on market to lift cotton spinners on offer widely thought to rise on the back of international trend. The spot rate was unchanged yet at Rs 3,075 but phutti rose by Rs 50 to Rs 1,500 while the better type was higher by Rs 100 to Rs 1,600, market had no explanation while phutti was selling at Rs 1300/1500. In ready firmer condition was marked as over 13,000 bales traded on the day was in the price range of Rs 3,075 and Rs 3,225.
PCGA in its fortnightly arrival statement has said ginners received 2.2 million bales less than the past year. Besides world trend, shipping cos which have increased freight has boosted cotton price.
On Friday, the spot rate was scaled up further by Rs 50 in one stretch to Rs 3,125 and its impact was visible in panic lifting of cotton by the consumers who had avoided saying local prices are higher compared with imported ones. Perhaps week's highest number of bales were traded at prices ranging from Rs 3,125 and Rs 3,300.
On Saturday, prices maintained firm outlook in modest trading. Spot rate remained unchanged at Rs 3,125. Some 17,000 bales changed hands in a price range of Rs 3,175 to Rs 3,300
RECORD COTTON IMPORTS:
The shortfall in cotton crop has increased the country's dependence on imports, which have gone up by 107 percent during five months. Such a lament has appeared in newspapers after regular gap. But except that demand has gone up, or some damage was caused by virus or pest attacks, floods, etc and finally making target, such as during current season 14.1 million bales, impossible is aired. The sources felt that such presentation may be to cover imports and draining out of hard earned foreign exchange.
They said they had often been suggesting to also be noted whether growers were not interested in sowing cotton on more acreage for lack of investment or return of the investment after harvest? They reminded that growers pestered if they take steps to grow a bumper crop. While they in a hurry to sell and meet after math obligation, buyers sideline demanding cut in prices. This is where growers have to decide how to meet textile miller demand and save them from that moment when they have to burn down.
The authorities should decide after a meeting with all the stakeholders, discuss millers need growers problem and deficiency if any investment problem input availability problem, etc and then fix target. The growers need should also be given due attention until the harvest when they have marketing problem and face odds pressing them to grow as much to sell in shortest possible time. So that they are not unnecessarily pestered to be dictated to call for such and such prices favouring the consumers.
Growers are sometimes faced with early sowing problem due to some growers insisting some other crop in cotton growing areas. The consumers ever enthusiastic to import cotton at all cost, call cotton offered for sale by ginners is dubbed as below quality international importers of cotton or cotton products deny buying. This is mainly because contamination is found in seed cotton supply and is not fully cleared even after ginning.
Like the problem cotton shortfall in this country, cause of which has not been placed, why sustained sales of contaminated cotton is resorted to, has not been determined.
A number of ginners have claimed to have brought to the notice of authorities that dirt-free cotton is deliberately denied to be lifted which ginners in hurry sell at the cost they sell so called contaminated cotton. But once, the growers and ginners decide not to make the same mistakes ever in future! Authorities should look into all these problems and find out solution for all times of come!
NAPHTHA CRACKERS: WAS AND NEED OF HOUR:
Ever since Pakistan came into being, consumers' interest was zealously guarded by all succeeding governments and stuff that made countries developed Naphtha Crackers unit was showed continued indifference which was needed most. How can they deny they were in dark about the importance of naphtha cracker aspiring to rule this country. Oil fields were not exploited on pretext of being much costlier than imported oil. And coal exploitation is being talked, discussed and debated but a final decision is yet to be taken.
After oil, coal is cheap stuff that can ensure an industrialised country of any level existent in Far East, China or Europe and like countries. Today, a whisper is heard that newly chastised Engineering Development Board (EDB) is thinking if a naphtha cracker unit is a possibility. In a recent supplement of chemicals and allied industry Khamzad a Euran H. Khan has again been waking up (last time in July 2006) the authorities to focus on base of chemical industry. Saying the heart of global chemical industry is Naphtha derived from Crude oil or coal or any hydro-carbon at refining stage that form the basic feed stock of most larger scale activity falling under head of chemical industry.
He said that Pakistan has better stuff than crude oil-COAL. But be appeared somewhat pessimistic whether Pakistan could withstand the counter efforts of powerful oil lobby? He re-counts ways how chemical products serves the mankind needs from plastic, metals wood, food, or the medicines like paracetomol, aspirin, clothes we wear like polyester, nylon, acrylics or other man-made fibres and what not. All experts and engineers who write on this pathetic subject has lamented that PhDs and experts could have turned this country into developed country were dropped hints to go abroad for money reason though money was available for imports of fashion items.
According to knowledgeable circles raw materials were at hands reach, even though some say oil way not available 20/30 years back. But today both crude oil and coal are available in required quantity but requisite focus is needed. Can one hope Engineering Development Board takes up this in right earnest and Pakistan hear good news sooner than later!
MINISTRY AWAITS A REPLY:
The textile ministry has in a bid to keep a record of how facility in respect to expenditure being used had issued a 9-page pro forma seeking the details from all registered textile units. The response could not be seen due possibly the prevalent violence. The ministry particularly mentioned name of top textile units such as Aptma bedsheets and upholstery manufacturers, hosiery exporters, bedwear exporters textile exporters/denium exporters and cloth merchants association around November 17, 2007.
The details sought were about business and expenditure showing facility's various applications. If may be interesting to note of a textile ministry for long past. But the gift made available after half a century, in line with close neighbours like China, India, Bangladesh and Sri Lanka, seems to have presented at wrong time.
Before this pro forma on two more occasion the textile bodies ignored invitation to attend them. Even this simple fact-finding information as sought by the ministry was considered a one of "concerns" which prompted them to decide to a joint strategy against the notices demanding how the R&D facility was being utilised. The ministry had responded to this facility on complaints of allegedly textile millers being faced with high cost of doing business.
Besides a package and other facilities government announced 5-6 percent R&D support on exports to make the exporters competitive with rivals in world markets. But apparently the plea had been linked with provision of complete business and the registered textile units. There is no harm to form joint strategy, which makes clear that textile exporters were ready to send a joint response. It was, however, not known whether top textile exporters could meet and prepare a joint response to ministry's. Sources failed to make out the stock response but hoped ministry will be given requisite details to ensure the purpose R&D is fulfilled!
EXPORTERS SHOULD REJOICE BACK UP:
The exporters were enjoining long-term financing facility which were taken back probably they had practically outlived the utility they were offered for. Short-term facility for imports of machinery had to be lifted for facilitating already arrived machinery to be cleared. Whether the short-term facility still available is not clear.
However, the long-term financing facility (LTTE) had to be introduced to probably shore up sagging exports due to tough competition under WTO rules with the rivals who were following the challenged an opportunity and were tightening up their belts along side.
Leading among them were India and China who set up their own textile machinery and petro-chemical industry catering to the needs of wide variety of things mainly the textile sector. These two have not to import and thus save billions of dollars and earn too on exports. Pakistanis particularly imports chemicals and dyes from India and other countries.
However, despite so much chaos in the country government gave exporters what they required, though demand lingered on. The latest SPOP move to introduce financing facility seems to be in the chain what has the bank and authorities are doing. Meanwhile, exports have continued to fluctuate gaining at times, while dipping generally. The government worry, however, is on the leap because of depressing exports and bulging deficit.
Exporters must have been at their best with requisite where that and pouring government help. The ports have continually assuring that they have been functioning normally, meaning that setback to exports was not seen on that count. The feature of this facility is that the SBP in its notification said that exporters (including SMEs) can avail financing under this facility through participation financing institution (PFIs) for new imported and locally manufactured plant and machinery. The new and manufactured plant for also manufacturing machinery, sources expressed satisfaction that country have plants if correctly understood for producing machinery (and chemicals and dyes).
TAIL PIECE:
This week only headlines are being given which speak for themselves where necessary a word or two may be added to make messages clearer. To ascertain weak areas of collection FBR analysing sales tax data of sugar - delayed long enough should be monitored as a matter of principles, routine.
Output (wheat's) may miss 24 million tons target for 2007-08 if rains do not start in the next 10 days -well- see today's papers- rains will start any moment now on dateline Islamabad: country wide rains likely from today (January 4). Stage set for Pak-India trade across LoC: a new development towards closer ties but faster and more genuine development are need of the hour. Key question should be addressed as early as possible.
Body set up to take steps for lifting Europen Union ban on seafood, such bans have taken chronic shape-pray the committee is successful in preparing a comprehensive plan to take necessary steps for lifting the ban on the country's seafood - not for few month, a year or two as is seem today but all times to come.
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