The rains and heat apart of September growers are always apprehensive a significant cotton area in Muzaffargarh facing damage unless authorities actively help growers in eliminating chances of CLCV attack widespread.
On trading side, textile exporters are indulging in cautious buying in quality stuff at their dictated price. Spot rate twice dropped and last seen at Rs 3400.
INTERNATIONAL SCENE:
Is dollar poised for a rise with signs of fall in oil and optimism about global recovery is around bound to influence world cotton. The leading economists and analysts express optimism but the planting report by end June is to fix a direction of cotton in Brazil, Pakistan, India an China provides due to move along market assumption.
Brazil lately not adheres to exports of cotton owing to ethanol production. Pakistan is ready within days to offer local cotton consumers new crop at much higher rate. India and china waiting opportune moment to take importers along, China is heavily dependent on imports particularly from America.
Technical pressure at times weighs on future contract. The heat ruled in most Texas areas where even irrigation facility is there. The cotton production was in likelihood to suffer. The week quite expectedly depicted softness and for quite sometime holding firm lost nearly limit down and then to seven-week low. Meanwhile noted traders see support in July cotton contract at 52.75 cents with resistance at 52.75 and 53.85 cents.
Russia recently had said it has no intention to change trading in dollar but at summit with CIS countries tone against the dollar was significantly different. Will dollar be affected? And to the size to hit cotton trading?
A white fly news having found signs, which ends up in cotton leaves curl virus (CLCV) somewhere in Muzaffargar. The CLCV cure had not been found in Pakistan if not checked by authorities and growers together large-scale damage could not be avoided. However, authorities are, as ever taking their advice to growers as all care taken and damage saved. Intruding beyond Pakistan players seemed vexed on huge losses in the contracts. They lamented Wednesday's close was the lowest finish late April.
The new crop December's retreat considering quality was near harassing. However, they maintained that disappointing present apart December would firm up before long. They see temperature in Texas going 100 degrees Fahrenheit, telling adverse effect on growth. They however, pinned towards the weekend cotton contracts changed tone slightly coming under investors buying.
The outside cotton market, grain markets, refused to hit hard enough and let contracts budge. The players were partially at grip on trading believing in cotton to collect its value if stock exchanges and crude world over embrace weakness. They also hold USDA report on cotton planting acreage could shake scenario. That day is still more then a week away. On June 30, whether expectation come true is a guesswork.
On Thursday, the NY cotton futures settled higher investor buying as fibre contracts recovered after tumbling to multi-week lows, with brokers saying the market will be looking at several leads going into next week.
The July cotton contracts climbed 1.79 cents to end at 53.82 cents per lb, dealing from 51.48 to 54.50 cents. Volume traded in the July contract was at 4,633 lots at 2:36 pm EDT (1836 GMT). The new-crop December cotton contract rose 1.54 cents to settle at 59.14 cents, moving from 57.01 to 59.71 cents.
On Friday, the NY cotton futures settled sharply lower on investor sales and switch trade as players got out of the spot contract before it goes into delivery next week.
The July cotton contract sank 2.31 cents to end at 51.56 cents per lb, dealing from 51.53 to 53.83 cents. It was an inside day since the range was within Thursday's 51.48 to 54.50 cents band. Volume traded in the July contract was at 3,386 lots at 2:35 pm EDT (1835 GMT). The new-crop December cotton contract fell 2.76 cents to settle at 56.38 cents, moving from 56.23 to 59.24 cents.
LOCAL TRADING:
The 2009-10 budget probably took heaviest toll of cotton trading in Pakistan as few lifting was marked during pre-and post budget session. The result was the opening session depicted deserted look with no deal struck. As has been practice in recent weeks opening day of week saw sharp drop in spot rate - this Monday down by Rs 50 to Rs 3450 per maund.
This is usual with the budget and textile that some incentives come in some shape, but the report expressed just disappointment. Hence coming days trading and activity will prove that intentions of the textile manufacturers and exporters. Naturally they will pin hopes in textile policy shortly and more particularly how the textile fund likely to be announced.
Instead with holding tax on commercial imports has been raised form two percent to four percent, and in all likelihood there was no way to rid of this. A recent report had explained how this tax was not being realised by the collectors.
Even second day's session witnessed just one deal while fate of TCP tender for 15000 cotton bales was not clear, though highest bid was at Rs 3440. Cotton traders said they were not in a position right now about the mind of textile manufactures and exporters who stay for help from government to move.
On Wednesday a story dateline Muzaffargarh landed pronouncing danger of white fly spread in cotton areas, which if remedial measures not adopted will cause sweeping damage. Only growers will take effective measures was doubtful. The agri field workers should spread over with drug and know how and mentally prepared to help growers weed out signs of white fly existence, which God forbid turns out to be deadly CLCV.
The sales having lost lustre among the cotton consumers, further spot rate cut was considered by setters. Spot was down further by Rs 50 to Rs 3400 per maund. In all 1300 bales of cotton changed hands in price range of Rs 3300 and Rs 3350. Sources said the sellers must weigh their own benefit when consumers visit market to see whether prices had been down. It was good sellers tracked world trend to act wisely.
On Thursday trading was seen modest, millers did not show interest in fresh buying. The spot stayed put at Rs 3400. Nearly 1200 bales were traded at Rs 3300. Good news about textile sector is not showing change in trading pattern. If consumers are waiting for prices to come down bad news about white fly likely spread can have adverse effect on cotton rate.
On Friday easier trend was seen as mills kept on the sidelines, mainly awaiting incentives with the new trade policy for textile sector. The official spot rate was left unchanged at Rs 3400, they said. Trading activity came under pressure as some 600 bales changed hands at Rs 3275-3300.
Commenting on the thin business some cotton analysts were of the view that first major factor behind the low business was lack of buying interest by the mills, mainly because of falling trend in the NY cotton market. After achieving no desired incentives in the budget, the mills have started hoping for some good news in the trade policy, expected next month.
On Saturday activity partially improved as ginners were trying to clear the unsold stock with them ahead of new crop arrival. The official spot rate was left unchanged at Rs 3400. Business activity picked up as approximately 2000 bales from different stations changed hand at Rs 3100-3400. Comenting on the present trend on the cotton market some brokers said that the feature of the day was stability in the rates as prices were matching with official rates.
Cotton analysts were of the view that the big liability for the mills is there was no encouraging news in the budget. Besides, exporters have to pay one percent on export proceeds instead of 35 percent on the net profits, which in fact is a liability, as exports are not showing any progress due to world recession and higher cost of production is also a reason behind the slinking business.
FEDERAL, PROVINCIAL GOVT DO NEED REVENUES, TOO:
If individuals or groups are in Pakistan for themselves, who should guard also the interest of governments who need revenues to build infra-structure, dams and roads and many things to cater to the needs of public holding investment opportunities and export prospect. The newspapers carry daily one or more to open the eyes but.
A recent story explains the amendments made through SRO 567(1) 2008 do not cover exemption of withholding tax on the import of raw cotton. Since the SRO 567(1) 2008 is consistent with the provisions of the sub-section (10) of section 239 of the income tax ordinance 2001, therefore, is invalid. As a result goods falling under the chapter 52.01 i e raw cotton was made subject to with holding tax at the time of import @ two percent of the value. It seemed collectorates at Karachi were following the SRO and not collecting two percent of on import of raw cotton.
In recent days another news paper report stated that importers leave thousand of containers un-cleared at ports ahead of budget 2009-10. This is an annual feature to see the positive or negative impact of the budget on their business. About the possible port demurrage reporter quoted sources saying inside port storage had always been inexpensive, hence a good choice for traders to avoid sky-high rents of warehouses. The report said this is an annual practice as importers have developed a budget awaiting mentality to take advantage of some expected incentive..
The sources according to report both the importers and the government responsible knowledgeable sources however, said who ultimately suffers is the poor. According to report, experts, said PPP-led coalition government should get rid of the decades old SRO culture and adopt long term strategies of reform the ailing economy. Pray for good sense and ethics to save worsening condition of the country and economy, sources suggested.
STIMULUS, PACKAGE AGAINST GLOBAL TRADE:
Exporters world over getting restive owing to increasing uncertainties in global trade, which continue to more and more and more victim of protectionism. In Pakistan leading textile exporters are fed up with calling for so called "free access" to rich countries. The exporters feel WTO is being unnecessarily stretched too long nearly eight years without any valid reason except particular countries voters may go against in elections. The move behind such philanthropic action can be genuinely gauged for greater good of those remained deprived of two square meals since their birth despite labouring more than those who work much less.
So called Doha Round is again been talked louder at recent leading world agriculturists get together in Bali. Hopes are expressed progress in talks has been made among couple of main opponents such as the US, EU, India and Brazil. Subsidy by major proponents for agriculture is main hitch and so far all is said to be fine on the front but when this world will be over come and finally surmounted God knows.
In this country main export sector the textile exporters hue and cry apparently seems "high cost of doing business" is getting out of hand. The budget 2009-10 is thoroughly being criticised for offering nothing while twice fix - no lowered export target at $19.1 billion is being continually rejected as far too distant. The WTO which talks free global trade is not in weak hand of Pakistan. The friends of Democratic Pakistan loosen their purse, but they just ignore earnest request to free trade. The time will only decide whether war on terror being fought on whoever needs or war on corruption was need of the country.
ROZs AS LAST RESORT:
The Pakistani authorities are now seemingly tired of asking friends favour this country with trade rather them aid. The fact that you must have something to pay if demand is expected to be met. Wearing suits to look Western is hardly enough; 60 years are proof. Thus the Rozs has been accepted by the government, which has allocated presumably Rs 3 billion to develop small industries in militant sensitive areas.
Thank God more than this has not come either from the US nor from authorities in this country. The textile exporters who had expressed distress and disappointment that areas were so fixed that they were not legible to avail the duty free access in the US, have now shown willingness to spend money in those favoured areas to be able to export specified textile products from there. The buying that is seen on the cotton market and imports speak loudly the exporters of textile getting ready to make most of the opportunities.
Besides the ROZs, government is creating scope in budget presented on June 13, creating textile fund and facilities by rationalising utility rates gone in their products unworthy to have an edged over the rival exports who are, according to Pak exporters enjoying facilities in their countries while Pakistanis are desired. In any case, despite government's every possible bid to facilitate relevant quarters are septic about twice revised export target at $19 billion plus.
BUDGET HAS DISAPPOINTED TEXTILE SECTOR:
Not even modest satisfaction was expressed by any relevant textile exporters, who mattered. The state finance minister should feel discouraged, as she has so fondly expressed in such lucrative words as industries can rightly look for better days, ahead. In the meantime they are sweeping cotton lots from wherever they get at favourable prices. Cotton consumers, have so far not expressed satisfaction on ginners arrival figures, which speak good production.
Consumers often text sellers stiffness in regard to rate that should dip with reports of high yield. They stay on the sidelines to observe favourable fixation by the sellers, but prices remain stuck up with the trend of world rates. How far report saying that collectorates had missed collection of two percent with holding tax owing to may be confusion about SRO regarding imports. One hope for good news could be expected to be contained in first full-fledged textile policy not in too distant a future.
It is expected fund in the offing, which may be helpful in export with practically no competition problem, which for couple of years were covered by so called research and development. But R&D is said to be being replaced by fund amounting to Rs 40 billion. The fund will be constituted with contribution of both private and public sector.
In fact subsidy is being gradually rid of in view of the WTO hoped by some to be in shape of deal by most countries of the world. The fund has still be set up and how helpful it will be future knows.
Textile sector so much bedecked with hitch and odds in plane words high cost of doing business. It is contributing maximum forex earning and offers target number of labourers. But has never been without ills. Some textile manufacturers have expressed hope some knowledge based sector to supplement economy in no good shape ever.
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