Adverse weather conditions, ravaging floods and Karachi killings mire cotton trade; push lint prices to Rs 7,000

Cotton trade was progressing despite the fact that prices rising and quality loss was rife among the consumers. The spot rate on Friday, after Rs 200 addition, was noted at Rs 6600, and remained unchanged on the closing day. Rates in ready attained the highest level at Rs7000. Rains, floods and traumatic Karachi situation took their toll.
WORLD SCENARIO:
Cotton futures opened last week on higher 80 cents plus tone owing to dollar keeping low. In spot, October supplies were tight while contract was at 80 cents. Certified cotton is lowest 47,793 (480 lb) bales. Weekly export sales were down, outside support was lacking. Meanwhile, ICAC said cotton output was expected to jump by more than 50 percent to 40.1 million tonnes in 2010-11.
The report was optimistic about global cotton consumption up two percent to 24.9 million tonnes. The consumption increase was up to 80 percent expected in China and India, minus other countries. America was expected to gain from jump in production. Imports were expected to rise 2.9 million tonnes, while other consumers will receive supplies up to eight million tonnes. US cotton growers were apprehensive about damage from tropical storm Bonnie but it weakened.
During mid-week trading, major players were uncertain whether correction is ahead. The production upbeat news matched with slight return to normal global going. In Pakistan, bumper production of cotton was expected, interrupted by fake report about some viral attacks. Now, some are soothed to see huge floodwater gushing and destroying cotton and all crops standing in the fields. Cotton was selling in ready at Rs 6200 and Rs 6800 highest so far.
On Monday, NY cotton futures ended at a five-week peak, as a combination of strong technical momentum and supportive outside markets buoyed values, but stiff resistance near the 80-cent level could spark a near-term correction.
The December contract rose 0.58 cent to settle at 79.34 cents per lb after moving from 78.16 to 79.80 cents. This was the highest close for the second position contract since June 29, according to Thomson Reuters data.
The spot October cotton contract gained 1.49 cents, or 1.8 percent, to end at 83.85 cents. The premium October cotton holds over the key December contract now stands at 4.51 cents, up from the previous session's premium of 3.60 cents. Volume traded in the December contract stood at 15,402 lots.
On Tuesday, NY cotton futures closed at five-week high as ongoing concerns about a tightening supply base kept bullish momentum on track to challenge the 80-cent level. The December contract ended up 0.46 cent at 79.80 cents per lb, the highest level on a settlement basis for the second position contract since June 25.
The session range ran from 78.66 to 79.84 cents. Spot October contract added 0.66 cent to finish at 84.51 cents, while still holding a 4.71-cent premium over the key December contract due to the ongoing market tightness. Volume traded in the December contract reached 11,100 lots.
On Wednesday, NY cotton futures finished lower on trader and producer sales as investors mulled whether prices would rally further or technical factors may undermine the market in the days ahead. ICE Futures US benchmark December cotton contract slipped 0.33 cent to end at 79.47 cents per lb.
On Tuesday, the contract closed at 79.80 cents in the loftiest settlement close for the second position contract since June 25. December traded from 78.97 to 79.95 cents. The spot October cotton contract eased 0.51 cent to finish at 84 cents. October enjoys a 4.53 cents premium over December, down from the 4.71 cents premium in the previous session. Volume traded in the December contract reached 8,551 lots at 2:40 pm EDT (1840 GMT).
On Thursday, NY cotton futures finished at a three-month peak on technically motivated investor buying, but analysts feel end-of-the-week profit taking could temporarily blunt the advance on Friday.
ICE Futures US benchmark December cotton contract increased 0.59 cent to end at 80.06 cents per lb. This was the highest settlement close for the second position cotton contract since May 5, according to Thomson Reuters data. December traded from 79.01 to 81.78 cents.
The spot October contract added 0.20 cent to finish at 84.20 cents. October enjoys a premium of 4.14 cents over December, down from the 4.53 cents in the previous session. Volume traded in the December contract reached 21,536 lots.
On Friday, New York cotton futures settled at a fresh three-month top on investor buying. Tied in part to a tight deliverable supply situation as fiber contracts bucked all-around weakness in outside markets. ICE Futures US benchmark December cotton contract added 0.17 cent to finish at 80.23 cents per lb. This was the highest settlement close for the second position cotton contract since May 5, according to Thomson Reuters data.
December traded from 79.45 to 80.71 cents. It was an inside day since the range was within Thursday's 79.01 to 81.78 band. The spot October cotton contract added 0.20 cent to finish at 84.40 cents. October enjoys a 4.17 cents premium over December, up from the 4.14 cents premium in the previous session. Volume traded in the December contract reached 7,570 lots.
LOCAL TRADING:
Rains caused slight delay in phutti supplies owing to which prices looked firm. The spot rate was unchanged at Rs 6200. On Monday, some 6700 bales of cotton changed hands in price range of Rs 5700 and Rs 6300. Phutti prices in Sindh stayed put at Rs 2500 and Rs 2550 while it ruled in Punjab at Rs 2700 and Rs 2800.
The consumers were looking for quality cotton at reasonable prices considering further rains may restrict arrival due to rains and cost factor.
On Tuesday, most bazaars were closed to mourn the shahadat of a indh PA member following violence. Trading was nil in cotton though phutti prices were higher. In Sindh, it was between Rs 2600 and Rs 2650 while in Punjab, they were quoted between Rs 2800 and Rs 2900. Operators in Karachi informed that many ginning units were inoperative owing to very abnormal situation in city and floods round the country. Cotton were being quoted at Rs 6600 and was hinted may rise further. The spot rate was put at Rs 6200.
On Wednesday, low business was marked during which around 3000 bales of cotton had changed hands in price range of Rs 6500 and Rs 6700. The slow arrival was well received as sellers raised spot rate by Rs 100 at a stretch to Rs 6300. The spot rate, despite being stretched too high, failed far below the rate that was quoted during buying by consumers who were naturally in need. Phutti in Sindh was up seen at Rs 2600 and Rs 2650 while in Punjab it sold at Rs 2800 and Rs 3000. The cause why ginners raised prices, as they claimed, was that nearly 0.5 million bales had been damaged by floods.
On Thursday, cotton mills covered their immediate needs with upper most in mind that prices may stretch further up. The spot rate was raised by Rs 200 to Rs 6500. In ready 5000 bales of cotton changed hands in price range of Rs 6200 and Rs 6800. Phutti rate in Sindh was marked higher at Rs 2550 and Rs 2650, while it was up in Punjab at Rs 2800 and Rs 3100. Slight damage is expected to cotton in flood hit areas.
In the meantime, sellers are looking forward to raise prices while consumers thinking how to keep needs possibly low.
On Friday, no visible change in market sentiment was noticed as supply position remained tight as a result of the rains and floods. Spot rate was up by Rs 100 to Rs 6,600. In the ready business approximately 7000 bales of cotton changed hands between Rs 6100-6850. Phutti prices were almost unchanged: in Sindh, they were at Rs 2550-2650 and in Punjab, Rs 2800-3100.
On Saturday, prices touched new highs at Rs 7000 as a result of tight supply position. Spot rate, however, was unchanged at Rs 6,600. In the ready business, approximately 4,400 bales of cotton changed hands between Rs 6050-7000. Phutti prices were up in Sindh at Rs 2525-2700 and in Punjab, rates were at Rs 2900-3200.
TALKS FOR MARKET ACCESS:
Good news indeed! The government is actively negotiating with the European Union (EU) and the United States for access for textile products under bilateral arrangements.
This is not the first time blood in Pakistan has boiled to read reports about free access before the end of the year. There is a chance to stride if certain country is on the way to conclude agreement. The heavy weights like the EU, and the US can enter to strike a business, commerce deal with strength of size and what in exchange can one give bother.
Last week, the EU had approached, no, actually that union had come into contact to remind that a deal was desired by the EU. And now it wanted to give that a concrete shape-time limit was before the end of the year.
The end deal result was not announced or that was kept a secret for the time being until end of 2010. However, the secretary commerce, the other day in a meeting with Aptma, disclosed that talks were actively under way. The time is close to the visit of the EU to India. Seems somewhat believable that the EU team will enter into a deal with Pakistan which indeed has been contributing hugely to eliminate what is know as "terror".
The agreement to allow free access to Pak textile exporters will be nothing new as to a great extent India, BD, China and others are enjoying like facilities, pushing nearly out to Pak products on one or the other count. But meeting and talking with strength is very different from begging favour; the way David Cameron has aired against Pakistan over what Pakistan is believing has been contributing to global peace. The world believes in give and take!
FLOW OF FLOODWATERS:
Tons of rains and floodwaters were allowed by responsible persons for managing the flow through dozens of ponds, embankments and reservoirs, during over half a century. But where their energy and wisdom are employed seemingly out of borders. Those who dreamt for a separate country for the Muslims of the sub-continent must have been throwing eager towards the blue skies.
The floodwater gave this sordid look, because the cotton, which is nearing harvest time, along with other products, can only be imagined to have beaten blue. The growers, directly hit from rain and floods, will narrate their woes when they recover from the brunt of havoc caused by nightmarish flood. The knowledgeable circles only wished who hold the reign of this country and prevail upon the meagre wealth and fortune could turn attention to the begging bowl size of which bulges with the lapse of time.
The alms givers have not been tired of awarding charity, but the in-depth drive exhibits heart rending fallacy. The season advent saw growers predicting water thieving by India and within Pak borders and the tail end of few canals and now, heavy and continuous rains.
A country which have to borrow for draconian debt servicing and depends on revenue derived from middle and lower income numbering some 0.2 million from among 180 million population. Cotton and cotton products yield maximum forex earning while other agri products spare Pakistan from importing unless very urgently needed.
The end result will be emerging in a fortnight or so when God spared this country from excessive monsoon rains might which slackens by the end of September - pending two months hence. Until all is well - a patient wait is only wise until then.
NEW INDUSTRIAL POLICY?
The business community has been heartily urged to give a serious consideration to the "new industrial policy". The word "serious" is found in the lexicon of not necessarily who is literate. Had one leader in over decades been serious about his self sought or conferred by followers' high seat, the begging bowl would be unheard of.
Coming back to the topic, new industrial policy what strikes most is Dr Abid Bhatti's emphasis on increasing the productivity of labour, who are cheap and attractive yet leave something still desirable.
Still more is his advice that raw material should not be exported. If this advice is accepted, which is unlikely, the textile made up products could earn nearly double of what through past years had been the limit in all around dollar six billion only. The latest export figures showed history-making figure of $19.38 billion - inclusive of all exports.
The advocacy for restraining raw material is likely to invite exceptionally strong protest by some who will take cover of free market economy. There can, therefore, some relaxation is rationally needed. For example cotton is raw material for all, but cotton yarn is as raw material for value-added product manufacturers and exporters. The criteria should be to keep free market economy in view but wherever value-addition is concerned, semi-raw material exporters should be barred from exporting without taking care of value-added manufacturers and exporters.
This discrepancy was hackneyed subject raging for quite some months resulting in hectic talks between senior members of the two textile sectors which has only died down after 15 percent RD on yarn exports was allowed to lapse.