Cotton business volume, prices at all stages attain all time high levels; short supply may push prices further

All big lot trading was witnessed on the cotton market during the week and every day flattened showing great hopes are being pinned on export prospects. Spot rate opened at Rs 7450 when at week ending on October 23,2010 it was put at Rs 7800. In ready business prices hit the peak at Rs 8000. Seed-cotton rates were at unprecedented level at Rs 3550-3600.
WORLD SCENARIO:
Major cotton players waited export sales report as there were feelings elsewhere that a million or more estimate was being floated, which may give a corrected version. However, for the prevailing scenario speculators and slump in cotton are keeping prices higher. China's orders are always expected for needs remain higher than local production, which is indeed largest. This season harvest in this country has been deferred for two weeks.
The local inflow gap has pushed prices up, which authorities were trying to hold in check. In the meantime cotton futures continue to soar with occasional dip, for the last few months.
Lately in Delta and some higher growing areas setback was marked, though, harvest there of 75 percent was completed. Many wonder why futures should rule high in the face of reports pouring about cotton production remaining on the higher side, or, at least not less than demand.
The optimism, fiscal though, that dreaded global recession evaporating only slightly, will be over with world leaders using various fora to arrest the trend. Pakistan in a deep crisis, besides internal problem about availability and prices, cotton still needed about three million bales. India has sufficient to feed its own mills, but rising prices are attractive enough to sell the surplus. The accord with Pakistan has probably not been met. The fresh accord would be still preferable because of the nearness that will save freight and time.
On Friday the US cotton futures rose the daily limit on fund and investment buying after storms ripped through the key growing state of Texas late last night. ICE Futures US key December cotton contract increased the 4.00 cent limit to close at $1.1971 per lb. The session low was at $1.1525. It was the third consecutive day of gains for cotton, having topped out last week at the record top of $1.198. Volume traded in the cotton market stood at 21,430 lots, about 6.0 percent below the 30-day average at 22,794 lots, preliminary Thomson Reuters data showed.
LOCAL TRADING:
The more the prices leapt to a threatening point, consumers of cotton lifted every lot on offer the other markets like American was to far away to be cheaper.
On the opening day of the week 16,000 bales of cotton changed hands in price range of Rs 7350 and Rs 7600. Seed cotton prices in Sindh ranged between Rs 3350 and Rs 3400, while in Punjab they ruled between Rs 3150 and Rs 3400.
Indian cotton uncertainty has emboldened local sellers who ignore the size of arrival where prices mattered.
On Tuesday tired of leaping prices, cotton buyers turned to authorities for planning ways to restrain unchained rise in prices. The textile sectors who are optimistic about some grace trading offer are indulging in panic buying lifting 30,000 bales of cotton in price range of Rs 7400 and Rs 7700. Phutti in Sindh ruled at Rs 3400 and Rs 3500, while in Punjab at Rs 3200 and Rs 3450. However, the relevant sources looked at the buying spree sort of in view of the global recession receding seemingly.
On Wednesday the spot rate took the heels with a raise of Rs 100 to Rs 7550. But the cotton consumers, spinning mills and manufacture of value-added products undaunted lifted 34000 bales of cotton. The prices at which cotton lifted were Rs 7450 and Rs 7700 per maund. The ginners are taking cue mainly from the foreign price trend where China is keeping countries with surplus like the US and India busy with supplies.
On Thursday lint prices moved further off to Rs 7900 in ready business where cotton buyers lifted 44000 bales of cotton, highest in this season.
The spot rate was put at Rs 7550, while seed cotton in Sindh ruled between Rs 3450 and Rs 3500 and in Punjab Rs 3300 and Rs 3500. Market sources while kept in view foreign bulging prices expressed surprise at the panic like buying in local market apprehending there was no hope of easing.
On Friday demand pushed prices higher. The Karachi Cotton Association (KCA) official spot rate was raised by Rs 100 to Rs 7650. In the ready business, over 30,000 bales of cotton changed hands between Rs 7600-7900. Seed cotton prices in Sindh were at Rs 3500-3550, in Punjab at Rs 3450-3600.
On Saturday panic buying by mills and exporters pushed the prices at the new peak. The Karachi Cotton Association (KCA) official spot rate was raised further by Rs 100 at Rs 7800. In the ready business over 43,000 bales of cotton changed hands between Rs 7650-8000. Seed cotton prices in Sindh and the Punjab were at Rs 3550-3600. Some viewers said that panic buying of cotton is indicating that the prices are likely to search for new destinations after hitting all-time high levels, it is most likely that the rates may hit the new high at Rs 8,500.
TEX SECTOR IGNORED:
The Chairman value-added textile sector, Mushtaq who was addressing a press conference at PHMA House expressed disgust at the treatment meted out to value-added textile sector by authorities. He was particularly very vexed at present finance minister who he said listened to representatives of apparel sector hardly for 15 minutes. He, however, called upon the minister to bring the ailing textile industry out of deep crisis. He took note of EU concession announced recently where after prices of yarn had escalated hitting hard production of value-added textile sector and warned that output slump could result loss to forex earning besides thousand of jobs at a time when investment is nearly at a standstill in industries.
He held out helping hand to the government clamp down on the hoarders of yarn who do not belong to spinning sector and are from outside just to take advantage from prevailing crisis. If this is so, sources said a look into the problem was urgently required to find out truth. Yarn available at Rs 8000 was now selling for Rs 16000.
He called for all stakeholders including spinning millers, growers, ginners and apparel sector. Such hints are dropped only rarely but if given a regular feature would be of enormous gains for chain of textile manufacturing. What he was forgetting that he held mainly responsible to outside mafia for little responsible for little gains. What is more missing here is the mention of the someone in textile ministry. Involvement of textile ministry is very important, which may set problems right. Is it not also worth mentioning here that voicing from different forums, one united voice can be more effective.
TEXTILE BILL TO BE TABLED SHORTLY:
It is for the first time that a textile bill is being planned by the textile ministry, which if proved any worth will be a certificate for the ministry for good and hard work. The ministry has asked the industry's various sector leaders to submit recommendations to improve the Act's draft before the deadline, which is Dec 31, 2010.
The federal secretary textile industry, Dr Waqar Masood during presentation at PHMA house detailed 13-chapter draft, which the ministry has evolved keeping in view industry's demands and problems. Before presenting the Bill in and outs of industry will be thoroughly debated in textile centres of Pakistan. The primary purpose of the Act was to induce investments, generate employment, add-value production, improve productivity, promote R&D and reduce cost of business and manufacturing. No doubt if the Act is properly implemented yield result but stress is on implementation.
The other objectives to have their own utility, as expect very lately promotional and market development efforts were not heard. The act if will effectively proceed and encourage developments of markets abroad and promotion of industry in country. The experience of the past, sources said, is meagre. The value-added sector has often voiced for short or non-availability of raw material. There is provision of a fund, another good thing, provided a fair distribution system is adopted.
The Act will also provides scope for establishing standards of textile manufacturing. This apparently appreciable effort, but an exporter termed the standardisation act of textile product as 'opening of a new door to financial corruption. Ministry will have hard time giving the Act a shape.
GARMENT EXPORTS MAY LOSE EDGE:
The garment and value-added products ensure much higher per unit return to country compared with returns from cotton or cotton yarn. This fact is being placed before proper authorities right from Dr Mahboob's time. But under free market economy cotton and cotton yarn is allowed, while it is every ones knowledge they work as deterrent on when they are turned into value-added products in countries where Pakistan also has market.
The value-added sector leaders have always called for ensuring availability to local manufacturers so that it may compete abroad. Since this free for all was being observed here and value-added sector, sources close to sector, was always pushed to wall. The recently EU favour indeed has come, which may help but not as much the exporters had dimmed hope. The larger share has come to cheap fabrics and cotton yarn. As the garment exporters have always been pin pointing that in view the light prices of cotton, yarn and other items such as polyester fibre without interference and taking steps to create favourable conditions value-added sector was likely to face badly during 2010-11. The Chairman Pakistan Cotton Fashion Apparel Manufacturers Dr Shahzad estimates drop in exports from $3.2 billion to $3 billion, which taking up the plight of the country and economy is thought provoking.
The EU is being probably approached expressing sentiment of the exporters that some more value-added products added to the list presented some days back. Dr said the loadshedding of gas, price of cotton yarn, increase in electricity had created a situation that exporters may fail in meeting the European and American orders, dealing the foreign exchange reserves to a great extent, while rivals are taking advantage of our weaknesses that could be overcome.
MoTI NOT SATISFIED WITH EU LIST:
The EU a conglomerate of 27 states, just not out clean from the global recession has issued a list of items for allowing some sorted out textile and other items easy access into the Union. As expected the items, picking up primarily 64 items, which relate to textile sector, while 27pc of Pak exports to the 27-member EU nations block. Here it will particularly the textile sector be brought in limelight. The effort to get free access in EU markets were being made for long but recent sweeping flood damages that took away houses, crops and infrastructure with them multiplied the urgency to call for help for global community including the EU.
The Union had for sometime looking into prospect and finally agreed to offer incidentally where FoDP donors were also to part with agreed release of fund sometime back in Japan. When the textile team had met two different perceptions were floated-one showing satisfaction and the other comprised of value-added sector had commented a better offer was expected.
Now the textile ministry so far in trance, has wakened up to known at EU doors that the unilateral trade concessions announced by the European Union will have negative impact on employment besides supplies will earn much less. If more garments and bed linen were given access would have gone a long way in creating more jobs and earned much more and would be of real help to the embattled Pak economy.