Controversy over cotton yarn brings down volume, prices gradually, spot rate at Rs 4,650

Buying persisted on the cotton market despite soaring prices for apprehension hovering quality lint may vanish. But the conflict over the cotton yarn export between spinners and value added manufacturers gradually brought down the volume of business. The spot rate opened at Rs 4600, after a single Rs 100 stretch on Monday and added another Rs 50 to Rs 4650.
WORLD SCENARIO:
The cotton futures were little obliged to the fibre rather value of dollar and commodities like oil, gold and grains. What naturally had influenced cotton trading was annual belt wide cotton conference in New Orleans. The commodity traders for commission were linking cotton price like in 2008 to manipulations. Which, however, was negated by knowledgeable circles, who termed spike caused by various factors. The noise died down soon. Both ways fluctuations were day to day affairs hit by rising or falling value of dollar and fluctuation in prices of Gold, oil and grains.
The new year's first month, too, is considered important as annual re-balancing of fund investment often leads to rise in prices depending much on the fund managers, owing to their behaviour that cotton, like most other commodities, has stayed under valued. How cotton will behave in days ahead is easy to gauge. Under pressure from WTO to discourage protectionism, acreage cut by large growers have been down. The WTO is coming in the ways of developed countries endangering its own "lingering" life for the last Doha round in 2002.
Except Australia and hazy looking production claim by Pakistan and somewhat India, all cotton producers seem to have been able to produce enough to meet its 2008-2009 cotton needs. China was a welcome market when report that China has lightened credit dampened the enthusiasm. The US looks for cotton exports under apprehension of Brazils likely retaliation. The WTO has allowed Brazil to deal with the US, which remains hung in air. Last but not the least, the worse economic recession in 70 years had its formidable share.
In first trade of 2010 the NY cotton futures settled higher on the back of a weak dollar and broad gains in other commodities, but selling pressure by growers limited the advance. The key March cotton contract rose 0.4 cent to close at 76 cents per lb, trading from 75.67 to 76.77 cents. Volume traded in the March contract hit 10,341 lots.
On Tuesday the NY cotton futures fell to a one-month low, losing nearly four percent due to investor uncertainties related to the Commodity Futures Trading Commission's investigation on market manipulation. The key March cotton contract dropped 2.88 cents, or 3.8 percent, to close at 73.12 cents per lb, trading from 73.04 to 76.28 cents.
On Wednesday the NY cotton futures cut initial gains to end slightly higher, as investor sentiment worsened after prices briefly fell below a key technical support. The key March cotton contract gained 0.43 cent to close at 73.55 cents per lb, trading from 73.15 to 74.27 cents. Volume traded in the March contract hit 11,308 lots at 2:29.
On Thursday the NY cotton futures ended lower, as a stronger dollar and news that China could tighten credit took a toll on investor sentiment. The key March cotton contract dropped 0.66 cent to close at 72.89 cents per lb, trading from 72.56 to 74.12 cents. Volume traded in the March contract hit 11,115 lots. Total volume traded on Wednesday hit 14,850 lots, against the previous 30,746 lots, according to data from ICE Futures US.
On Friday N Y Cotton futures ended lower, as technical weakness dent buying sentiment, but positive demand-supply fundamentals should provide underlying support. The key March cotton contract dropped 0.45 cent to close at 72.44 cents per lb, trading from 72.43 cents to 73.40 cents. Chart-based selling could be seen as the March contract traded below key support at the 50-day moving average at 73.43 cents. Follow-through selling from the previous session also weighed down on the market. Volume traded in the March contract hit 8,319 lots. Total volume traded on Thursday hit 14,881 lots, against the previous 14,850 lots, according to data from ICE Futures US. Open interest in the cotton market stood at 183,474 lots as of January 7, from the prior count of 185,756 lots.
LOCAL TRADING:
The week had record upsurge in prices as far as there was rise in one stretch - such as Rs 100 -on the opening day. The rise had slight adverse effect on sales as on 12,000 bales were lifted in price range of Rs 4525 to Rs 4700. The Phutti both in Sindh and Punjab ruled at Rs 2200 and Rs 2450. The change for better was for local farmers as cotton produced by them was being patronised in view of the surge in foreign markets. China is looking around for cotton to import, keeping its surplus for any worse day.
The Tuesday session saw another spot rate stretch by Rs 50 to Rs 4650. Another setback was marked in sales of cotton - 10,000 bales - at inflated prices such as Rs 4550 and Rs 4800, while phutti prices ranged between Rs 2200 and Rs 2450. But market sources expressed the hope that despite a bumper production the shortfall was likely to be made up by imports at much inflated rates. That spinners are so far not looking for import is obvious, which is likely at higher prices. The situation should open eyes of fond of importers to depend on local cotton, which is always consoling - quantity and price-wise.
On Thursday reluctance was marked both in sellers and buyers resulting in just 5000 bales of cotton lifted in price range of Rs 4500 and Rs 4700. Phutti rates dived down though factors caused so was not on board. Phutti both in Sindh and Punjab at Rs 2100 and Rs 2400. Whether world rate had affected was also not clear. In any case, the yarn related issue may have come in the way. War has taken ads shape, every interest trying to belittle each other. The govt is in tight corner, said sources, who were asked where it was headed to, said free trade mechanism cannot be simply ignored or shunted. Only way out they saw was in that exports of yarn may be allowed with a guarantee that textile manufacturers and exporters are made satisfied by supplying them as much as they need, they suggested. Meanwhile, Beltwide Conference participants in New Orleans believed maintaining mill demand at current prices will be critical for the industry in 2010.
On Friday the Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 4,650. Activity was modest as some 4,000 bales of cotton changed hands between Rs 4515-4700. Phutti prices also came down in both Sindh and Punjab at Rs 2100-2400, dealers said.
On Saturday official spot rate was unchanged at Rs 4,650. Activity was modest as some 4,000 bales of cotton changed between Rs 4550-4700. Phutti prices also came down in both Sindh and Punjab at Rs 2100-2400. Some brokers said that no change was seen in the pace of trade as many participants were on the sideline to see latest developments after the government practical step to keep a check over the export of cotton yarn.
GOVT SHOULD HAVE ITS OWN ARMY OF VERIFIERS:
The war that has been on among the spinners and value-added sector may be good or bad for the two, but it makes relevant to be verified by a third and impartial judge. The government, which in Pakistan changes like weather, authorities naturally can't be well versed, particularly about facts that relate to agriculture or steel making. So to keep abreast with fact when cloud hovers round government must have its own, or activate phutti relation departments to place truth before relevant authorities.
No doubt authorities do have assistants who keep informing but certain subjects are too technical and needed trained personnel. It seems after decades events in Pakistan are taking a turn - and, God bless, for the better, trusting too much on ruling officers will prove misleading. That has been the case since this country came into being. The confrontation among spinners and value-addition sectors have been quite long and authorities put their weight in one or the other bag without slight knowledge of what they were doing. Even so happens that as the other day value-adders pointed out the authorities were reluctant to give a verdict because some spinners relations were influencing the powerful.
The begging bowl has been a source of remorse to this nation and must come to be taken back. The poor of this country has borne the brunt too long and the media and press are proving too much to let things go like that any more. Politicians have democracy for using people the way they want, but if a systems is built up and followed truly is the need of the hour. Some steps are being quoted for the benefit of the government such as NFC award and Balochistan issue. Let spinners and textile exporters problem is also solved.
STRIKE AT LAST, NO?
Most likely, the authorities will still be reluctant to cap 32 count cotton yarn till this write up would be in print. But the determination of the apparel sector was as firm so wait how the dust in the air settles. For whatever reasons, whether, as accused authorities allegedly are being influenced by influentials in the government or in the ministry. The settle around seems unlikely.
Since free trade mechanism is in the practice, government naturally seems has hands tight. As far as the efforts are concerned, the value-added sector alleged efforts to ban or put yarn exports under Regulatory duly or even to cap count 32 yarn has not yielded any result for three months. The fact remains that a pound of yarn fetches much less than a pound of ready made-units. The fact remains that yarn exports tells on the export edge of Pak textile products, more so as apparel exports claim yarn is being exported at $1.2 a kg, while it is locally available at $2.35 a kg. The apparel sector is seemingly waiting for a promised solution. And thereafter will resort to indefinite country-wide strike from.
There is another lurking threat, of course, that the value-added sector could plan like some of their fellow- travellers to relocate their firms in some other prospective country as the disgruntled left for Bangladesh long. Long before and other two destinations quoted were Jordan and Egypt where industry is in bad shape.
The sources hoped such a pass would never come. The dwindling economic conditions prevailing in the country invite attentions of all in power to find ways to salvage value-added sector and economy out of the morass.
SPECIAL TARIFF TO IMPROVE EXPORTS:
Textile sector has no doubt edge over other sectors for it has shouldered the responsibility of highest export earning and employing the largest number of people otherwise would be on roads and streets creating peace problem. The sector under the grab has made demand a practice without taking into considerations whether the contribution is in proportion to demands met? This is not only the concern or should be concern of the sectors calling for every facility on earth, but authorities should be watchful whether exchequer has not been thinning with every passing day and government takes resort in begging from the world rich who have their own interest.
The sources who have watched the country lifting not an inch from where it had inched in decades, said mere meeting the demands and forgetting how the money or the resources were used has led country to this passes. They said all indeed are trying in their own best way to see country progress and flourish. But they invited authorities to ponder whether the desire has come to that.
Sometimes back textile sector wished this sector be based on knowledge based sector. What's the guarantee similar fashion of demand and meeting demand without monitoring of the result and return will not be there too. The government is beset with problems and not try its best to avail money and resources from all four corners of the world but monitoring and openness are not seen everywhere. Time has come sources said ways are formed that every move towards, prosperity yielded result.
BRAZIL & WTO:
The subsidies and like things that tantamount protectionism has been talked out against but when it comes to doing away with such things the eyes of the rich are fixed on the poor. Incidentally the plan to serve centuries suffering poor through liberalising world trade. But even last eight years' hectic exercise to do away with poverty has come to an end without doubt.
The WTO has insignificant existence - insignificant because it cannot execute its thinking more than suggesting what to do and what not to do. China has been often in censure and so the US, but the pious WTO rule is hinted but has not acted upon, nor is possible unless a deal is signed. A time frame for the deal has not been possible for the most powerful word "interest" that immediately strikes hard - some sort of discrepancy in exports of steel products are under scrutiny. But solution is hardly anywhere.
The WTO has been approached by the victim Brazil, who has not decided over the years whether to go ahead with imposing sanction on the US. The subsidies are the nut, which Brazil objects to. Subsidies, which depresses world cotton prices. But issue goes beyond as lifting of intellectual properly rights and protection on drug import spoil the Brazil US ties.
Now ethanol is being hinted to remove the nut provided Brazil applies duty raise on the exports of ethanol. But the hitch has bound decision to give if effect. The stretch is solution of problem once again weaken WTO - has it come to make world poor better off?