Cotton prices keep scaling new highs globally; on domestic market lint prices reach Rs 9,300 mark; spot rate Rs 8,900

Domestic as well as foreign conditions kept lint price in Pakistan skyrocketing during the week ended on November 6, 2010, as spot rate soared gaining Rs700 until Friday at Rs 8900, dragging rate in ready to record Rs9300.
WORLD SCENARIO:
Hard hit cotton consumers owing to shortfall in yield on weather count like China and Pakistan saw setback additionally due to holding back 5.5 million bales surplus cotton by India. Pakistan particularly in quest of lint took available cotton in India for substantial savings on freight. It had booked with India, according to informed circles, some one million bales initially and against the loss of three more million bales was planning when sudden break was caused by authorities directive to cotton exporters suspend calling for licences.
A single episode led to shocking surge in China more or less 26, 270 yuan per tonne and in Pakistan per bale cost of cotton was quoted at Rs9000. The ever ready to supply needs countries America has apologised after it exhausted 18.87 million (480lb) bales, produced after gap of one or two season. Only as back as October 2010 cotton soared or dipped on the back of commodities. But now cotton lent support to other commodities. Cotton, which has been forward looking, gold, oil and wheat lately due to some turmoil also moved along firmly. Quite recently some areas in the US where harvest was delayed due to storm, growers were expecting yield plus quality setback. The sum total of details on cotton front is that situation fuelling a renewed round of speculative fund and investment buying groping in the dark about the damages.
On Monday the US cotton futures ended the daily limit up as speculative funds and investors bought aggressively due to strong cotton prices in China and early weakness in the dollar, analysts said. Cotton hit its session high early as the dollar slid and stayed there even as the US currency firmed against euro and yen after stronger manufacturing data, though those gains in the dollar were fleeting. Currency markets are bracing for more monetary easing from the Federal Reserve this week. A weaker dollar normally boosts commodities because most are denominated in the greenback. Cotton also enjoys strong fundamentals: tight stocks and strong mill demand. The benchmark December cotton contract increased the 4.00-cent daily limit to finish at $1.2926 per lb. The session low was at $1.258. The total amount traded was slightly below average. Cotton volume reached 24,000 lots, about seven percent below the 30-day average of 26,000 lots, Thomson Reuters preliminary data showed.
On Tuesday the US cotton futures rallied to a fresh record due to speculative fund and trade buying sparked by a surge in China's cotton prices and worries over tight supplies spilling into the spring, analysts said. Analysts estimate that 80 percent of the US cotton crop, which is forecast at 18.87 million (480-lb) bales, already has been sold. They said most other major producers, such as Central Asia and Brazil, have sold their cotton as well. The benchmark December cotton contract rose the five-cent daily limit to trade at a record $1.3426 per lb. The session low was at $1.2945.
On Wednesday the US cotton futures rallied for the third day running to a record high due to speculative fund buying, strong Chinese cotton prices and tight supplies. The ICE Futures US cotton market tracked a rally in cotton futures on China's Zhengzhou Commodity Exchange, but came off session peaks due to profit-taking. Cotton rose more than 20 percent in October and has gained over 90 percent since starting to rally in July. The benchmark December cotton contract rose 3.62 cents to trade at $1.3788 per lb, having hit a new record high for the third straight session at $1.392 per lb. The session low was $1.3452. China's benchmark May cotton contract jumped to 29,980 yuan a tonne, setting a record for a third straight day. The contract last traded at 29,715 yuan, up 1.075 yuan.
On Thursday the US cotton futures hit a new all-time record for the third day in a row on speculative fund and trade buying as strong demand from China and tight supplies conspired to ignite a fresh market rally, analysts said. The benchmark December cotton contract set a new high at $1.402 per lb, up 4.68 cents or 3.5 percent. Internal Chinese cotton prices were being quoted at well over $2 per lb, said Lou Barbera, an analyst for commodities brokerage VIP Commodities. "At $1.40, we are still cheap compared to China," he said. "Until you see some type of demand rationing, we're going higher." China's benchmark May cotton contract was last done at 29,855 yuan per tonne, up 190 yuan.
On Friday the US cotton futures rose, hitting a record peak for a fourth consecutive day and ending higher despite losing some momentum late in the session as the dollar rebounded. The benchmark December cotton contract vaulted to a record peak at $1.4460 per lb, before ending up 1.78 cents at $1.4223 per lb, the loftiest settlement close in history for the market. In China, cotton prices rose more than three percent, with the Zhengzhou Commodity Exchange's May cotton contract up 1,490 yuan at 31,235 yuan per tonne.
LOCAL TRADING:
The lint prices turned firmer despite low off take on the cotton market where nearly 27,000 bales of cotton changed hands in price range of Rs8100 and Rs8475. Spot rate stayed put at Rs8200. Seed cotton prices in Sindh and Punjab ruled firmer at Rs3750 and Rs3900. Market sources expressed surprise at the inclination to buy available lots despite constraint in gas and power shortage the spinners and textile millers both went full length so that escape from higher rate.
On Tuesday speculative buying led to price hike but it eroded to just 26000 bales in price range of Rs8300 to Rs8700. The spot rate surged by Rs100 to Rs8300, while seed cotton in Sindh and Punjab was selling higher by Rs50 to Rs100 to Rs3800 and Rs4000. In the meanwhile speculators were felt around who indulged in smarting job to make buyers believe: hurry up or you pay more. The local harvest is curtailed by floods and world rates have been on the sky high.
On Wednesday lint prices hit record Rs9000 per maund mark owing to tight offers. The spot rate was boosted by Rs200 to Rs8500 less than sale price in ready. Seed cotton prices in Sindh and Punjab ruled up Rs100 to Rs3900 and Rs4100 due to high demand in the absence of normal flow. However, the situation in Pakistan alone is not pressuring consumers but world rate hitting new record top every season.
On Thursday the PCGA fortnightly report up to October 31, 2010 showed production around 6,071,644 bales down from previous year 7,363,929 bales. Meanwhile spot rate soared in local trading, which surged by Rs200 to Rs8,700. In ready more than 50,000 bales of cotton sold in price range of Rs8800 and Rs9000. Seed cotton prices in Sindh and Punjab were noted at Rs3900 and Rs4100. Some experts viewed the abnormal surge in the overseas markets following the sharp setback in dollar value leading to panic buying in foreign markets. The textile millers were genuinely interested as they hope orders in hand from EU and elsewhere On Friday. No respite was seen in the cotton prices surge amid strong mills and exporters demand. The Karachi Cotton Association (KCA) continued official spot rate rise for the fifth day in a row, picking up Rs 200 to Rs 8,900. In the ready business over 46,000 bales of cotton changed hands between Rs 8,800-9,200. Seed-cotton prices in Sindh and Punjab went up by Rs 100 t0 Rs 4000-4200. Market sources said that exporters and mills were running after the cotton and seed-cotton as if they don't buy right now, they will not be able to purchase in future or they will lose the golden chance.
On Saturday the Karachi Cotton Association (KCA) did not issue daily market report, as its staff could not reach the destination as vehicles were off the roads for security reason. Seeds cotton prices in Sindh and Punjab were at Rs 4100-4200, they said. It appeared that businessmen and traders prefer to close their shops and market due to law and order situation in the city. Same attitude was adopted by transporters, as they kept their vehicles off the roads.
In the meantime, nearly 40,000 bales of cotton changed hands in the other stations, some of them are about 5000 bales from Tando Adam, Shahdadpur, Mirpurkhas and Nawabshah at Rs 9200 and 200 bales from Khairpur changed hands at Rs 9200-9300.
AT LAST INDUSTRIALISTS, TRADE STAGE PROTEST RALLY:
Whatever may be the authorities perception for sources, who keep exchequer ballooning or other wise go their way with banners and buntings around, is their vague outlook but where the protests will ultimately lead to is leaving nation aghast. The traders and exporters have been agitating for months but except here and there bulk of disgruntled have totally ignored.
A turn back to let authorities refresh the protesters while addressing the meeting at the FCCI complex in Faisalabad demanded that the gas shedding should be observed across the board and each segment and sector should share benefits and losses equally. Usual bad dream was shown by the agitators who said that not only the national exports and production would nose dive but the graph of unemployment would go up as large number of industrial units would be left with no other option but to close down their operation, if gas suspension plan is not shelved.
The protest should be weighed by authorities but the sufferers should rather join together to make struggle effective.
Quite obviously most of the men on roads belonged to textile sectors. These sectors are at odds with high cost of doing business every where. How can these be kept at a distance, knowledgeable sources advised. They said the crisis the nation is facing, particularly the exports and exporters need deeper thinking and compassion so that the struggle gets meaning and may possible succeed.
CROSS SUBSIDY AGITATED:
Many wonder as to why cross subsidy to the fertiliser and so called domestic sectors were considered, which has stood in the way of competitive production losing export prospect in the face of Chinese and Indian products. The subsidy in whatever ways allowed is affecting the smooth flow of exports.
The subsidy is abhorred by the WTO, which stand in the way for exports of products. The EU has no objection in allowing Indian and Chinese as also of the Sri Lankan and Bangladesh goods duty free under GSP plus arrangement. All the developed countries and today fast developing are bound by WTO term to avoid protectionist measures and keep away from throttling human rights to ensure free flow of goods globally.
This facility was dubbed as most undesirable in view of an alternative existing. The textile agitators who have been hard up and find their best of products readily acceptable in foreign markets without hassle. However, while strongly agitating cross subsidisation as their exports suffer in the face of rivals, China and India coming in the way. Thus the suggested that the policy of cross subsidisation should be addressed in a rational and prudent manner, otherwise subsidy amount would be ballooning and would totally suffocate the industrial sector.
The textile ministry has also come up with a suggestion that subsidy being given to domestic and fertiliser sectors may be picked up by the government through budgetary provision and not through current dispensation.
TEXTILE EXPORTERS STOP BUYING LOCAL YARN?
Is this true? Can anybody in the thick of textile chain site any example happening in any other country? The exporters, however, have confirmed that the all important meeting of textile groups and sectors were determined to get supplies from abroad or, else will close down business.
What will next be in anybody's guess. But what is clear and above board that the problem value-added sectors face which is not new, and the crisis is worth a solution provided authorities realise how import and textile sector is to economy. Authorities have known for years, even before late Dr Mahbob-ul-Haq propounded the importance of exporting made-ups rather than cotton yarn, only slightly better than exporting cotton. Unfortunately corruption is a word that has pervaded through life time of our economy, commented sources close to cotton and textiles sector adding that no wonder it earns merely $6 to 8 billion since years.
The optimists are now posting target around $25 billion but the movement is too lethargic, it may consume this millennium. Right somebody weighed and considered free market economy is the only way to allow every sector to do business in freedom. But if two nearly inter-related sectors collide for interest what authorities are to do, let the things go from bad to worse. Has not things come to such a pass that made-up sector will import yarn, and if will lose edge under the circumstances will close down business. There is no other sector to replace if textile industries collapsed.
ACCORD FOR ONE MILLION COTTON SEEMS UNLIKELY:
Shortage for commodities is not any bottleneck in supply of that particular item but if price-ever hiking turns out to be road-block honouring accord needs great courage, the first time Pakistan knocked at India's door, Indian suppliers showed readiness that had neighbour's feeling and compassion. Cotton growers and exporters in that country must have been among the foremost to learn about the losses caused by ravaging flood swept away some four million bales of cotton that was being offering growers until the flood freak raced through fields.
However, in all likelihood floods brought in their wake opportunities too. The EU, which was disinclined to allow Pak products particularly textile products for the time being, in the wake of damages, gave a second thinking and some sort of positive indication has been in the process. The duty free access into 27 EU states has been agreed liking Pak exporters worry about availability of cotton. Some, unspecified quantity of cotton import had been in the process when the unforeseen monster eroded the enthusiasm.
One million is still likely if the stuck up cotton harvest India perhaps had made authorities to abandon fresh licenses for seeing the exports from there through. Naturally, Pakistan could now look towards the US worth surplus cotton the hitch about the freight plus ever rising prices of cotton will remain. But if the EU access materialises exporters will have to pull courage for honouring accord if not for profit.