Cotton prices tend lower on week closing day after touching historical highs on domestic, US markets

Buyers were vying with sellers despite prices rising to make history - the spot on Monday rose by Rs200 to Rs8000, while there were no respite. In ready business prices to the highest level of Rs 8600 and spot to Rs 8300. But on the closing day bears dominated the market, as trade slackened to around 27,000 bales in price range Rs 8000-8450 and spot rate reduced by Rs 100 to Rs 8200.
WORLD SCENARIO:
The major cotton players almost tired of cotton futures likely to limits high and have been expecting correction. The Chinese worries and dollar's keeping low to support the sustained rise. Not always marked happened when Texas cotton was hit by odd weather. Many question will this encroach on the profit margins of end users.
Pakistan cotton and yarn availability problems seems is, in commentators view perhaps where prices of stuff make textile products are hiking every second. The fact that this country faced flood ravages is rare in years but made textile sector suffer uniquely. Even the experts in the thick of textile complexities what may have led to such a situation. Except worrisome condition in Pakistan and uncertainties expressed in China, cotton yield has been reported well over local needs.
The USDA has reported good cotton demand but production was to have an edge. The keener cotton observers are hoping a quick correction. In China, being the largest producer, had some weather problem and some setback can be expected, though it had door open for supplies - India and America being the major one. China still has some to harvest, besides it always maintains stocks to balance prices going berserk at times. Besides, above cotton in Africa was grown with vengeance in the face of yielding better returns. Some CIS states too have cotton where it is meant for exports only at good margin. Australia had good yield and hoped to sell on good demands.
On Monday the US cotton futures vaulted the daily limit to an all-time high on speculative fund and investment buying, sparked by a fall in the dollar to a 15-year low and worries over the damage caused by storms in the major growing state of Texas. The dollar sank to its lowest level since 1995, hammered by news the G20 countries agreed to shun competitive currency devaluation, which was taken as a signal for investors to dump the greenback. A bullish jolt was also provided by storms from Thursday to Saturday that raked Texas, which produces about half of the US cotton crop, and a rally in China, which sparked cotton values on the ICE Futures US commodity exchange.
The National Weather Service said Lubbock, Texas, in the heart of the US cotton belt, would be hit by blowing dust on Monday, with gusts up to 45 miles per hour. ICE Futures US key December cotton contract gained for the fourth straight session, rising the five-cent limit to trade at a new record of $1.2471 per lb. The day's low was $1.205.
On Tuesday the US cotton futures surged, hitting a record high and ending nearly four percent higher on frenetic buying by mills, speculators and funds. ICE Futures US key December cotton contract gained 4.88 cents or nearly four percent to finish at $1.2959 per lb. Before a late bout of profit taking, cotton touched a record high at $1.305. According to report, the recent dramatic rise in cotton prices is likely to generate more global cotton plantings at the expense of grains and other oilseeds, Hamburg-based oilseeds analysts Oil World forecast on Tuesday.
US cotton futures touched an all-time high on Monday on speculative fund and investment buying, sparked by the weak dollar and worries over the damage caused by storms in the major growing state of Texas. Global cotton prices have risen by around 50 percent in the last three months because of strong demand and tight global supplies. "The steep increase of cotton prices seen in recent months will translate into larger than expected cotton plantings in a number of countries, winning acreage from other oilseeds and grains," Oil World said.
The world's cotton sown area may rise by up to three million hectares on the season to a four-year-high of 33.9 million hectares in 2010/11, it said. Other report said that soaring prices would bring about a quick recovery in Brazilian cotton after a dip last year, a senior industry representative said, with production, exports and yields all set to jump from last year. The next cotton harvest, which will be picked in early 2011 could soar about 50 percent to 1.7 million tonnes, versus 1.05 to 1.1 million tonnes this year, said Sergio De Marco, head of the combined government and private sector "cotton sector chamber" on Tuesday.
On Wednesday the US cotton futures closed six cents lower after dropping by their trading limit at the open and remaining there for much of the day. Brokers said speculative profit taking triggered a rush to the exits, a day after fiber contracts pushed up to record prices, reaching their upside limit on heavy volume. Traders said cotton futures fell limit-down on technical selling and in reaction to a stronger dollar. ICE Futures US key December cotton contract tumbled their 6.0-cent limit to end at $1.2359 per lb, a 4.63 percent decline. On Tuesday December futures ran up to a new all-time record of $1.2854 per lb on sizeable volume by mill and speculative fund buyers. Tuesday's futures tally jumped to 52,707 lots and followed Monday's 17,012-lot volume. Tuesday's open interest grew by 1,176 lots to 239,499.
On Thursday the US cotton futures finished lower on fund rolling-related sales, with pressure from the process of moving positions out of the spot contract seen pressuring the market into next week. ICE Futures US key December cotton contract dropped 1.91 cents to end at $1.2168 per lb, three ticks above the day's low. Total volume traded in cotton hit a hefty 56,404 lots at 2:53 pm EDT (1853 GMT), some 131 percent above the 30-day average at 24,379 lots, Thomson Reuters preliminary data showed.
On Friday the US cotton market ended the wildest month in its history, with prices soaring to its highest level since the American Civil War in the 19th century due to a perfect confluence of strong demand, tight stocks and almost insatiable investment fund buying. Prices of cotton in the ICE Futures US stormed to an all-time high of $1.305 per lb on October. 26, climaxing a three-month long rally that saw values climb nearly 80 percent since July. "Cotton ended its wildest month in history," Mike Stevens, a veteran, independent cotton analyst in Louisiana said. "There's nothing (in cotton trading history) that compares to this (month)." The benchmark December cotton contract gained 3.58 cents to close on Friday at $1.2526 per lb. For the month of October, the key cotton contract had risen 23 percent. It was the largest monthly gain since November 2001, according to Thomson Reuters data. The volume traded on Friday reached over 34,000 lots, about 30 percent higher than the 30-day average at 25,000 lots, the preliminary data from Thomson Reuters showed.
LOCAL TRADING:
Brisk trading in cotton was marked on the opening day when season's best 50,000 bales of cotton was lifted in price range of Rs7900 and Rs8500. The lint prices are keeping at peak in foreign trading backed by investment and speculative buying. In Pakistan hit barely by recent swooping floods nearly 25,000 bales have been washed and will have to be imported. The result is available. Lots are being mopped up minding little about size of the bulging prices. The spot rate was pushed higher by Rs200 to Rs8000, while seed cotton in Sindh ruled at Rs3700 and Rs3900, in Punjab at Rs3800 and Rs4000.
On Tuesday cotton prices took cue from foreign prices and soared to highest ever, spot rate leaping by Rs300 one of to Rs8300. Slight swoon was marked in ready off take. Seed cotton rate too reached top at Rs3800 and Rs3900 in Sindh, while in Punjab phutti ruled at Rs3800 and Rs4000. The buyers are vexed on rising prices without respite, a trend-set was certain in the past.
On Wednesday low volume in trading was evident as prices depicted steady trend owing to favourable arrival flow. However, millers, could hardly resist lifting some 36000 bales of cotton. The price range witnessed was from Rs8300 to Rs8600 phutti in Sindh ruled between Rs3800 and Rs4000. In Punjab it ranged between Rs3800 and Rs4100. The world scenario was somewhat depressed, as major players had expected. The same was now expected to show in Pakistan also.
On Thursday profit-taking step in as sellers changed their stance in view of the indication from world trend. The changed scenario in world trend has appeared long after reaching record highs Dec 29.59 cents per pound. The spot rate was, however, not shed rather maintained at the previous level Rs8300. In the ready business over 33000 bales of cotton were lifted without minding the falling trend was evident. The buying price ranged in Rs8200 and Rs8600. Sindh and Punjab seed cotton was ruling at around Rs3700 and Rs3900. The rising trend persisted too long for low dollar value and sudden disruption in supplies from India where harvest was delayed.
On Friday. sport rate was unchanged while prices in the ready business showed steady trend despite the bearish trend in NY cotton futures. In the ready business over 36,000 bales of cotton changed hands between Rs 8,200-8,600. Seed cotton prices in Sindh were inert at Rs 3700-3900 and in Punjab rates came down to Rs 3600-3700. Market sources said that mills were not so busy as they were in the last several sessions, in the meantime, the exporters came back with little interest.
On Saturday bears dominated the cotton market as prices fell on slackening demand by the mills. The KCA official spot rate was restricted from its upward trend decreasing by Rs 100 to Rs 8,200. In the ready business, activity came down as over 27,000 bales of cotton changed hands between Rs 8,000-8,450. Seed cotton prices in Sindh and Punjab were lower at Rs 3700-3800.
IGATEX EXHIBITION:
The International Garment Machinery and accessories exhibition are regularly held for enabling textile manufacturers and exporters to look most modern and result oriented machinery from 450 foreign firms from 33 countries mires local products to sell to foreign buyers. Every year or whenever such rousing machinery fair is held Lahore or Karachi, it comes to mind locally made machinery, too, will be on display. But disappointment greets in whispers. The Pakistani manufacturers and exporters are heard lamenting about Indian and Chinese value added products for having an edge over Pak products.
Those who are suffering and continue to suffer in the face of their rivals, they shudder to talk about their shortcoming. The machinery is always in the process of change in pattern and design as per the choice of the importers of the products and users of the same.
In Pakistan the consumers of machinery look for buying when they money is available in the shape of loan and possibly on easy terms. With little knowledge of switch over in manufacturing country they visit and place order, which is hardly desirable. Because rivals have developed the latest design in the meantime or, fair like the one witnessed in Lahore the other day is considered an opportunity what, however, is deep rooted in the subconscious and far from proving a succor. Unfortunately there is no end to murmur about high cost of doing business. But none, including the ruling regime is bothered what ails the textile sector most: For God sake ponder over tons dollar drained out for chasing chemicals and dyes and ever design changing machinery.
TEX EXPORTS TO SUFFER $3 MILLION:
The upcountry textile exports have been calculated to lose dollar three million due to three-day gas shut down in a week. Is there any country or country's population that see hands tight losing not three million dollar but even a penny. The country, God has gifted with every thing above or under ground. Unfortunately scientists and economists do take pains to tell the rulers the stark truth but to let go like this. Look around to find every form, every industry, every institution is running on usurped money from one or the other and miserably.
Individuals, few and far between, with great strain ask for loan and when they are able to return the money they gesture as if they were in real pain. Against this big loans remains unpaid called non-performing loans released by banks despite collateral, mortgage, monitoring and security and what not are quietly allowed to sleep in memory. Thus country suffers in absence of infrastructure, roads, dams, production of gas, coal inputs greatly needed by the industry.
Today on newspaper pages appear a number of reports voicing textile industry needs gas, power and other inputs in absence of which the fine and unmatchable products are losing edge. The exporters' caution that products would gradually lose market if immediate efforts tax salvage out are ignored. If at all some space is retained owing to our products quality, buyers demand very high prices lives of our dear ones and even our prerogative - sovereignty. Some deals are in the air, give them shape no matter that is coming from Russia, China, Japan or so called the West.
EVEN THE STONES VOICE:
Hardly some hours back free trade policy was welcomed somewhere here. The sources, however, had expressed, as ever their reservation whether untamed sector will allow the vulnerable to keep mouth shut. That stories will voice in such loud tone was certainly not expected. Only side-ways reference was made after weeks and months in not exactly in such harsh words.
The chairman All Cotton Pakistan Power Looms Association alleged that a powerful mafia, which has forced the value-added industry to collapse. He exclaimed state-of-the-art-value added machinery is being sold to Bangladesh at half price, as local industry is uncertain of its survival.
Powerloom industry is an export oriented cotton industry, which is earning billions of dollars in foreign exchange besides providing millions of jobs. The report, quoted industry sources, yarn and electricity are the basic inputs for the industry but during the last few months increase in price of cotton PC, blended yarn is from Rs 1500 to Rs2200 per bag and the rates of electricity are increasing day by day.
This year chairman pointed out crisis will be severer than last year. Recent increase in price of yarn and electricity is going to ruin power loom industry and more than 30pc factories have already closed down. Chairman said the minister for textile industry is helpless and prefers to enjoy protocol instead of helping the near collapsing industry. The Association has written a letter to commerce minister for complete ban on export of cotton and yarn with immediate effect. The commerce and finance ministries are lacking decision, as textile ministry is helpless. A fair deal is possible sources said and advised to wait until ways are found pleasing all textile sector.
FREE TRADE POLICY:
The decision to let market mechanism play the determined role by the people propound with good intentions, is indeed welcome. But years after principle was given choice place in text books needs to be seen in the present-day development, which has not been kept in view.
Authorities, in this case textile ministry's are not unaware how a ban, say a temporary and half hearted, worked to destabilise the market. Authorities should be open hearted and should visualise things in the light of resurrecting or worsening economic plight. Today's conditions are above hoard and can easily be guaged.
A fondly grasped system, foreign in intent and purpose authorities hell bent to impose has dragged crores of people to poverty line. God has not been miser rather is extremely merciful and has showered everything to survive and with dignity and honour with begging bowl in both hands. Let free market economy be the rule in this minus ethics country, but mind it how its looks if value-added textile manufacturers and exporters have to import from abroad, may be, perhaps spin in this country. How do you think, sources question? If such a situation ever, God forbid, confronts. The sources explained, high degree of caution is required where "ethics" has no rate to play, whoever, they may be, say again the sources insisted that ethics is no ones monopoly-wrong interpretation can lead to worse application whoever he or they are.
The all time dependent textile products manufacturers or exporters need can be honestly evaluated by honest sector guard. There must not be any underhand dealing or any hide and seek so that 10 to 12 times more earners of forex don't face hurdles they quite often do face, the sources wished well.