Huge buying was marked on cotton market during the week under review, as soft trend in oil prices besides opportunities ahead are encouraging buyers. Ginners are keeping soft attitude. The spot rate opened at weekend level at RS 4000 but closed at RS 3950 while phutti prices fluctuated per the supplies, dearer in Sindh while lower in Punjab.
The end figures were Rs1900-1950 in Sindh and Rs1825-1925 in Punjab.
WORLD SCENARIO:
Falling oil prices to the lowest, hurricanes after hurricanes damaging and Lehman's filing for bankruptcy, all combined led to sharp debacle in cotton futures. The December contract shed 3.39 cents to 62.13 cents a pound and March lowing down 2.69 cents to 66.65 cents a pound on the opening session. In today's world, everything is connected, said players, as they viewed economic turmoil has not ended.
They commented that they ignored market fundamentals like the heavy rains and cool weather in the top cotton growing areas of Texas, which was expected to subvert maturation. Except gold every commodity is supposed to be hit.
On Tuesday futures suffered same fate as on Monday that investors liquidation on news about Lehman bankruptcy. Insurance giant AIG also aggravated fears that demand will be ravaged by a global economic slowdown, players said, adding supply concerns don't count at the moment. Citing example they said news hat ICE futures has declared a moratorium on delivery of certificate cotton stock in Texas port of Galveston and Houston had no impact on the market.
On Wednesday futures regained on investors short covering though traders were worried global down turn will ultimately tell on the cotton value and on its products. They agreed recovery in cotton has been modest, the shape can only change if investors give up running to wards safer haven like gold, people are worried over global economic downturn, which will ultimately drive cotton down too.
On Thursday cotton futures ended easier in New York on fund sales as the market followed other commodities, which rose early and then reeled late because investors remained gloomy about economic prospects, brokers said.
The benchmark December cotton contract fell 0.66 cent to close at 60.76 cents per lb, trading from 59.45 to 63.18 cents.
On Tuesday, the contract finished at 60.61 cents. Based on the second position daily charts, it was the lowest close for the contract since September 2007. March declined 0.64 cent to 65.34 cents. Volume traded in the December contract stood at 23,033 lots.
On Friday, the NY cotton futures ended sharply higher on investor buying stoked by a US plan to stop the rout in global financial markets, but brokers said prospects into next week remain distinctly uncertain.
The benchmark December cotton contract climbed 1.76 cents to close at 62.52 cents per lb, trading from 61 to 62.86 cents. March increased by 1.67 cents to 67.01 cents. Volume traded in the December contract stood at 9,529 lots.
LOCAL TRADING:
Stepped up cotton buying without taking into consideration prices and even quality speaks of two things: background news that cotton production will be much lower than expected or that textile exporters have taken upon themselves task to carry exports sales to peak. Buying started a fortnight back and continued till the week under review. The officials spot rate opened at weekend level RS 4000, phutti in Sindh rose to be quoted to RS 1925 and RS 1950 while in Punjab rate persisted at RS 1800 and RS 1900. The ready prices ruled between RS 4000/4075. The sort of panic buying saw over 13000 bales sold.
On Tuesday no respite in buying was seen as on the day over 20,000 bales were lifted at prices between RS 4000/4075. The falling trend in oil seen lately is source of encouragement for the buyers. The phutti in Sindh dropped RS 25 to RS 1900/1925 while in Punjab it ruled lower between RS 1750 and RS 1850.
The situation has turned upside down as ginners are interested to liquidate at the ruling prices but buyers are reluctant taking for granted prices are coming under stress due to spacious supplies. They buyers textile exporters and cotton exporters are staying at sidelines hoping sellers will come under further stress and reduce prices.
On Wednesday ginners appeared nervous as they were seen submitting to ruling condition, which were in favour of cotton buyers. Though spot rate held unchanged at RS 4000, phutti in Sindh was unchanged at RS 1900 and RS 1925 while in Punjab at RS 1750 and RS 1850. The total sales were seen around 19000 bales at prices ranging between RS 3950 and RS 4025. The world conditions are discouraging as big US financial institutions are declaring bankruptcy and failure to lift up.
On Thursday spot rate fell by RS 50 to RS 3950 despite the report about less production this year. Latest report said that the country's cotton output in the 2008/09 crop year is likely to be less than 12 million bales, falling short of a target of 14.1 million, officials and producers said, increasing the need for imports. Pakistan the world's fourth-largest cotton producer, had to import nearly 4.7 million bales the previous year after production in the 2007/08 crop year fell to 11.6 million bales against a target of 14.14 million. Phutti prices in Sindh were at RS 1900-1910 and in Punjab the rates were at RS 1700-1850, they said.
According to the market sources, the Pakistan Cotton Ginners Association (PCGA) issued fortnightly report till September 15, showing nearly 416,330 bales above the last year's 1,430,147 bales of cotton.
About 14000 bales changed hands within a price range of RS 3900-3975. On Friday firm trend was seen, as mills were active to cover the forward buying ahead of Eid-ul-fitr holidays. The official spot rate was unchanged at RS 3950. Phutti prices in Sindh were at RS 1900-1925 and in Punjab, the rates were at RS 1750-1850. Lifting was a bit down to nearly 9000 bales but price was somewhat higher to RS 3935-4000.
On Saturday steady trend was seen on the cotton market as most of the mills were still busy in forward shopping ahead of Eid holidays. The official spot rate was unchanged at RS 3950. Phutti prices in Sindh were at RS 1900-1950 and in Punjab, the rates were sharply higher at RS 1825-1925.
According to the market sources, prices maintained a firm trend as demand was increased by the mills and spinners. The ginners were looking satisfied as prices resisted decline after the sharp arrival of phutti. It was the mills' buying, which helped in stabilising the prices. It seems that prices may move both ways in the near futures. Nearly 15000 bales were traded, the price range improves to Rs3925-4000.
FAILING INDUSTRIES DID MUCH TO TELL ON BANKS HEALTH:
If banks quietly watch industries collapsing such as textile industries at regular intervals, resulting in ill health of creditor banks, as a result of write-offs, only developed countries can afford. But in this country, like in other developed countries write-offs are legal. In developed countries who may have faced times Pakistanis are today encountering, have learnt to be honest and pay dues, what are due to citizens.
The textile industries, not the governments had ever given that once textile machinery has been set up and starts meeting the local needs spared country from draining out hard earned forex and taxes collected from struggling masses. Similarly for dyes and chemicals we have to look to so called regional countries like India and China, can produce at home.
But the ugly fact stares in Pakistan face because at certain stage leading importers of dyes and chemicals could be seen lining up before PIA windows to fly off to India and China to book import orders stuffs at the cost of forex paid against to nag instantly exporters face high cost of doing business and lose edge on bid to export. Look at any page of newspapers, any bid from government side to earn money (taxes) for building road network, or constructing Kalabagh dam like things to meet power shortage or irrigation water in no times moves are opposed on plea to hit imports, exports or supply of rice, wheat or sugar. Supplies of same item were dwindling, authorities in wisdom planned to see imports available to consumers but SBP alleged to have imposed L/c margin up to 35 percent. But surprised and shocked traders had no way other than approaching the central bank to withdraw the imposed L/c margin.
The failed textile units, equalling probably in number to those who exists, died while ailing ones were given best of treatment, sources close to sector recalled. Something lagged, wealth in the government coffers, or political ill will that KPT, or Port Qasim could both be expanded, deepened constraining TCP to use Gwadar for imports of US wheat, Saudi Urea. Why?
DECEPTIVE PERCEPTION HAS HELD DEVELOPMENT, EXPORTS:
Encouraging imports had made this country poor and imports house for countries, which make investment without concessions and exemption by and large and prepare products including textile products. The proposition that had been first-propounded as back as 1948/49, had been proved deceptive, and currently even State Bank of Pakistan (SBP) is trying to falsify the claim by interested quarters. To be clear, SBP believes in imports but misuse in more than one way has till date disallowed progress and prosperity.
For example, textile machinery being imported from time when textile products were exported abroad, but what if earning stayed much less than fellow regional travellers. Once machinery is allowed to be imported under the impression created by interested quarters that it created more jobs and produces goods for exports at competitive rate, no body bothers whether permission was given for new machinery or the left by industrialists in developed countries, and, indulgence in over and under invoicing etc.
If the textile sector had ever shown promise or for that matter, exports would have budged with the passage of time to be envy of the region or the world like Singapore, South Korea or even Malaysia, China and India action would have proved just other way round. The businessmen and manufacturers and exporters need to be encouraged to produce very thing possible rather than under any circumstance facilitating them to give them exemptions and concessions. The sources wondered how exemptions and concession of any revenue of government earning bring forth the assumed yield.
As far as the perception or may be economic principal that investment (if investment really made) leads to economic growth. How anybody will prove that growth during last 60 years has been even equal to any regional or other countries growth. Apart from concession/exemptions, the sources close to sector pointed out that subsidy is used as condition to make products exportable or face setback. Concessions and expectations have not ensured desired growth. If propounders can prove how this country has gained from concession exemption or the billions worth subsidies will be heartily welcomed.
CHANGE OVER SHOULD BE BETTER:
If there is democracy, election must follow at regular prescribed intervals, of course, if the country has not been in lurch and decadence. This post election issue had not been so pathetic as had been supposed. The change on whatever reason destabilises situation but new comers take advantage of the situation, rather build and amend wrongs if any without grudging.
There is nothing unusual that World Bank (WB) team is touring main centres of Pakistan. Had country's economy been strong or even firm there was practically nothing to take note of but businesses and exports are showing declines, showing at no stage all is well now. However their surveillance Pakistan has to bear as WB experts can offer beneficial guidelines. The experts arrived in Islamabad early this week also tour Karachi and submit recommendation to finance minister before leaving Pakistan. If is hoped the suggestions and experts' studies will enrich FBR and help achieve the targets fixed by it. And, no doubt traders expectations from Asif Zardari, too are well placed.
However, businessmen seeking consultation with the President road map required care as far as bringing country out of the crisis is concerned. Thank God, the knowledgeable circles said that businessmen accept that Pakistan has been blessed with abundant human and natural resources, which need to be utilised in a proper way to boost industrial and agricultural activities. The fact stated by leading industrialist do speak about God's grace but exploitation has led this country nowhere. If "abundant human and natural resources," abound this country, progress and prosperity is unheard of in this country, even today there is no power, irrigation water, roads, schools and colleges, food shortage is felt and the world look down upon us!
MORE EXPORT ZONES:
If the promise is given practical shape, particularly, when a project or two are directly aimed at enhancing exports volume, send heart to throb abnormally. The Export Processing Zone Authorities (EPZA) seems to set for seven more EPZs in country and Azad Kashmir. Can there be bigger joy than any news the authorities are on the move to establish at potential sites like Larkana Multan Sukkar, Faisalabad, Gwadar, Gilgit and Mirpur (AK) so that declining trend in exports is halted, if possible.
Scourge more medium and small size mills is actually a clarion call to push country forward from the languishing mire. It is fondly hoped what is being planed is given a concrete shape. It always happens that louder voice of few who enjoy close ties with authorities in the corridors of capital, restrain plans to keep afloat at the cost of economy and country.
The new set up is looking things on priority basis and hopes rise that projects would be allowed to yield the results they are aimed at. The export zones being planned and likely to move in month's time move forward without looking back. May be the projects being recalled here like textile towns and cities or garment enclaves. May be they form part of export processing zones being planned or not but they are more important as would be inducting new blood highly desirable as more God fearing have to take all fields including trade and business.
The world feeders have been destabilising the whole world, if peeped down into the depth, anybody could see the size had been attained with unscrupulous actions. This country had suffered enough and needs change of attitude to rise, rise above self and build this ever depressing country.
PRIORITY SHOULD BE IN VIEW:
The priority has always been, seemingly sacrificed by authorities leading to, all must take it granted, Pakistan has nothing worth name despite 60 years of struggle in vain. Crop insurance scheme, unfortunately being discussed and put into action five year ago seems to have been shelved once again.
If seen minutely, it is not as being put forward shortage of water, but fear of return of banks' money. Times is still their crop insurance of a man. Four million bales of cotton and 50 tons of wheat and sugar has not been dreaded. But every thing that should have been on top of planning like Kalabagh dam and coal and copper prospects. Their funding and construction change have been multiplying with every passing day. The textile products earn maximum forex, which is derived from agricultural crop, which is showing perpetual decline and hence needs insurance facility as well as input availability and pesticides etc on time.
The insolvent farmers need much of the things to supply better cotton crop besides other crops, which unfortunately suffer from manipulation. Inevitable needed imports if declared to give a bumper yield. This tantamount to denying God's good grace. The authorities, in government, in bank or some institutions are naturally worried about wastage but useful utilisation and throwing things down the drain are two different things altogether. Agriculture health and health of manufacturing are two things needing care and constant care. Unfortunately individuals have been given all the attention. It is time, priority is given to sectors, which are roads that lead to house owing a car as well. An attitude change, ignored for some more years will put country to damage beyond repair.
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