Downtrend permeates as lint, phutti prices and spot rate drop amid reduced activity

Much less than usual cotton was lifted during the week ended on March 13, 2010, as prices sustained at lower level, spot was down at Rs 5550 and rates in ready Rs 5400 and Rs 5700 depending on quality. Phutti in Sindh and Punjab ruled at Rs 2300 and Rs 2400.
WORLD SCENARIO:
Two major factors had led to some extend growers in major suppliers country to spare more land for the crop-one being good recovery and short end-stocks despite consumers competition bound to go up. India at one stage was certain to stop exports of cotton, but has since denied following this course, neither during current or the coming season.
Egypt's white gold as was so favouritely known some two decades or so back is now being ignored. The manufacturers are vexed on this count for failure to rectify. In one respect Egyptian textile manufacturers are travelling along Pakistani, as they also now believe in cheap cotton imports. China is faced with over a billion population which it needs to feed and dress while catering also to the needs of billions elsewhere. The WTO should be given recognition to offer solutions to victims of subsidies in Africa in Brazil even Pakistan. Brazil has declared to avenge on major power by thumping import duty on around 100 items shortly. But that will do any good? Is a question mark. Australia is one country has no problem except weather. It is third largest cotton growers and committed to supplement cotton shortfall in countries known for textile exports. It is hit by rain but still hopes to produce nearly two million bales during 2011.
In New York trading the contracts proved weak. The data shortly about supply and demand was keeping players in wait. The opening day May contract remained firm at 80/84 cents a pound. China was expected to release orders with low production of 32 million bales and India, which produced 23.5 million bales - against for the latter was looking for exports a bulk of the Bt cotton. World will be waiting spell bound whether Brazil gives practical shape to impose duty on import of 100 items from the US who subsidies its farmers violating the WTO rules. The rising trend in world markets has contracted a hit on realisation that over 80 cents a pound at the moment has shed fund buyers away. Besides China in tight corner also has not asked for new imports. However, coming trend will be seen in changed scenario.
On Monday, the NY cotton futures sagged to a poor close on investor sales as players tweaked positions in front of the release of a government crop report two days hence. The benchmark May cotton contract retreated 0.39 cent to finish at 82.04 cents per lb, dealing from 81.34 to 82.44 cents. Last Monday, the contract hit a session top of 84.60 cents, the highest intra-session level since mid-March 2008, according to Thomson Reuters data. Volume traded in the May contract was at a light 5,236 lots.
On Tuesday the NY cotton futures finished at a two-week low on investor sales as players looked toward the release of a government crop report due out Wednesday.
There was no reaction to the plan announced by Brazil to hit 100 US goods with duties next month because of a dispute with Washington over US cotton subsidies because the amount of cotton traded between the two nations is small at best. The benchmark May cotton contract retreated 1.71 cents or by 2.08 percent to close at 80.33 cents per lb, dealing from 79.81 to 82.04 cents.
On Wednesday the NY cotton futures were sharply lower on falling demand by the buyers. The benchmark May cotton contract was lower by 12 cents to close at 80.21 cents per lb.
On Thursday the NY cotton futures fell, finishing at a three-week low as investors liquidated and the market looked to attract possible mill interest, The benchmark May cotton contract dropped 1.44 cents to close at 78.77 cents per lb, dealing from 78.70 to 80.27 cents. It was the lowest close for cotton in 3 weeks, according to Thomson Reuters Data. July cotton fell 1.37 cents to end at 79.28 cents. New-crop December eased 0.36 cent to close at 75.13 cents. Volume traded in the May contract was at 7,931 lots.
On Friday, the NY cotton futures closed higher in a modest rebound from a three-week low and analysts feel fiber contracts will likely trade in a band for now while waiting for fresh leads.
The benchmark May cotton contract gained 1.70 cents to close at 80.47 cents per lb, dealing from 78.76 to 80.77 cents. July cotton rose by 1.74 cents to end at 81.02 cents. New-crop December added 0.49 cent to close at 75.62 cents. Volume traded in the May contract was at 8,084 lots.
LOCAL TRADING:
Rising price trend and enough stocks with the textile manufacturers restrained buyers from going all out. The result was that prices sustained at prevailing rates. However, 2000 bales of cotton was lifted on the market for mills immediate needs. Spot rate was unchanged at Rs 5650, while phutti in Sindh and Punjab was selling between Rs 2500 and Rs 2800. The rate in ready off-take was between Rs 5450 and Rs 5650.
On Tuesday lint prices eased owing to subdued trading the sales were restricted to just 3000 bales in price range of Rs 5454 and Rs 5650 depending on quality. Official spot rate was unchanged, while phutti was selling in Sindh and Punjab at Rs 2500 and Rs 2800. The local buyers were optimistic about prices to come down further in line with world trend. The production too is near the target, around 12 million bales.
On Wednesday Karachi Cotton Association (KCA) official spot rate remained unchanged at Rs 5650. In the ready business over 4000 bales of cotton changed hands, ranging between Rs 5500-5650. Phutti prices in both the Punjab and Sindh were at Rs 2500-2800.
On Thursday insipid trading was marked as mills were still in planning stage as a result only 5000 bales of cotton changed hand, which however, was better in relation to other days of the week. The spot rate was unchanged at Rs 5650 per maund. The rates in ready ruled between Rs 5500 and Rs 5700, while phutti in Sindh and Punjab was selling at Rs 2500 and Rs 2800. The cotton consumers buying at lower level is not indicative of the fact that they are not in need, but showed reservation over high prices because world cotton price trend was on the down side and local arrivals had been showing rise.
But will cotton buyers succeed? Seems they are on the wrong food as the sellers are placed in comfortable position due to short stocks of quality products. The textile millers are also worried in view of rising yarn and utility supplies being uncertain and not in line with demand.
On Friday the Karachi Cotton Association (KCA) official spot rate was down by Rs 100 to Rs 5550. As a result of fall in the spot rate, in the ready business over 5000 bales of cotton changed hands, ranging between Rs 5300-5500. Phutti prices fell sharply by Rs 200-400 in both the Punjab and Sindh were at Rs 2300-2400.
On Saturday the Karachi Cotton Association (KCA) official spot rate was at Rs 5550. In the ready business over 4000 bales of cotton changed hands, ranging between Rs 5400-5500. Phutti prices in both the Punjab and Sindh were at Rs 2300-2400.
NPLs DATA SOUGHT BELATEDLY THOUGH:
The banks have in the past often resisted to oblige loan seekers with the request. Those were the days when loans were given liberally with a view to earning and multiplying the economy and country but proved disappointing. At the end of the day the disappointment proved far more vexing. Not that loans were released without collateral or mortgage, but if the knowledgeable sources are to be believed because in a democratic country taking loan is legal. The newspaper reports have always been vocal in pointing out small and big facts about failure to pay back bank loans. But nothing except that part of news is well kept in the files for future reference if the deal is repeated.
This time textile ministry has ventured to collect data of non-performing loans and their current status (operating, closed etc) to adopt a two pronged strategy for revival of the sick units. As is covered by the reporter there were 80 units in the process of closing down, for one reason or another. The textile ministry has taken up the issue of revival and restructuring of the sick textile units.
Several factors have been quoted leading to such extreme vulnerability. How ministry will tackle depends as, perhaps, the banks or the finance or commerce ministry had tackled in the past decades. However, responsibility or the losses taxpayers thus had to suffer never was brought in the print. The ministry's steps will also bring in its effort-fold an attempt to do away with the enigma. Such incidents, sources said do occur in democratic countries, but frequency certainly is much less.
WILL RESORT TO STRIKE:
In business and trade strike is last word if you are ready to take risk. It may not necessarily hurt one party, may hurt both the parties without sometimes yielding gain to all. However, spinners have had enough of calls to be given justice or even given an even playground. This was all against the equally loud calls by value-added products textile exporters, which was acceded by the authorities (ministry) and according to aggrieved sector's allegation had caused gradual setback.
The authorities initially barred yarn export above 50 million tonnes a month. Later the size was cut to 35 million tonnes. But the moves were received by the spinners with reservations. Who claimed that they were barred from reasonable earning after around three years. During the indicated period, spinners alleged in the press conference "if no action against the bar is taken within the next 10 days to resolve the spinners problems, APTMA members will go on strike followed by further protest in every manner it deemed fit".
The right of strike is what authorities cannot take away from spinners. The authorities, however, take actions that should remain balanced. The type of allegations are being traded should instead be studied in the light of past history and in the light of production, exports and need of local textile millers and strictly whatever due is made available so that competitive edge against regional rivals is maintained. There may be other ways such as adequate availability to manmade fibre to the textile millers and in requisite quantity. The ministry should tap sources and requirements of all concerned only then a correct cure is possible. The spinners have given the production of yarn at 241,000 tonnes but exact need of the value added sector and its availability is sure way to end the row in futility. Such internecine scrimmages will end in losses of both, which they are trying to convey to authorities.
CURB WAS TO GO AUTOMATICALLY:
The voices against unbridled exports of yarn has to be restricted, which was landing in the hands of our arch rivals and making Pak exports products access impossible. Initially the sealing was 50 tonnes a month, was later reduced to 35 tonnes. But the yarn exporters hardly demonstrated they were reconciled, rather continued to export without any quota curb.
As a matter of fact it was made later clear that quota curb will automatically go after two/three months. Or, a meeting was likely soon to take decision to serve the curb. However, report talked hard about the protesters alleging they violated quota curb and exported 70,000 tonnes of yarn when limit expressly was 50,000 tonnes per month. The declaration that such and such number of mills have been closed down needs to be taken care of. The fact cannot be ignored because they involved huge investments. The yarn makers should also not ignore what plight the government is in.
How many pay taxes and dues out of 160 million is not unknown to the knowledgeable people. And the foreign debt each Pakistani has to pay is 34000 according to IMF estimate. The authorities, however, should also be aware of needs of business, about importers and exporters, as they have no other sources to approach to. Regular and at reasonable rates of utilities should be available so that exports are pushed to peak high and deficit is kept in control. The past six decades have lapsed without significant contribution to economy and country. The future is bleak unless each of us promises to stay within ethical boundary.