Cotton sales and prices improved on met predictions that abnormal rains are expected both in southern Punjab and Sindh cotton belts during the week ended on September 17, 2005. In fact warning has been issued that rains may continue until the end of the running month. Spot rate, as a result was raised early on Monday by Rs 25 to Rs 2150 which continued until Saturday.
WORLD SCENARIO:
Cotton futures maintained low profile in NYCE trading as fundamental pressure did not relent to see October contract down on the week opening day at 49.60 and December at 51.20 cents a pound. The players kept eyeing Chinese orders forthcoming for a change in direction. On the opening day futures finished lower after a govt report sparked selling by trade and small speculators, with market expected further slide.
The USDA monthly supply/demand report for September showed US cotton crop at 22.28 million bales (480 lbs) during 2005-06 season. World ending stocks amounted to 51.20 million bales. Meanwhile, market saw situation near ideal which has given a powerful boost to the US cotton crop. Increase in world ending stocks increasingly surprised trade hence further weighed on the bearish sentiment.
However traders look a sigh of relief as they noted Hurricane Katrina had inflicted only minor damage in Mississippi and Alabama. On Tuesday decline continued amid a barrage of spec sales and on the onset of good harvest.
Analysts said the market was likely to come under increasing pressure in the days ahead as speculators opt to liquidate their long positions in the market. Fundamentally, American farmers were about to harvest another massive cotton crop. Meanwhile, players took note of the cotton harvest in the US delta was about to get under way in the coming weeks.
The third days session settled little different and firmer on speculators buying as most players waited cotton harvest in the US. Analysts observed that cotton prices had come under pressure over the last few days as size of the US crop hits home.
Meanwhile traders also said that market was looking towards the US weekly export sales report due in the week. They said the trade will be paying close attention to cotton sales for China. Last week sales to China hit 348,400 RBs. On Thursday futures closed with losses on speculative sales and expected huge cotton crop yield is to press on the futures further in days to come. Meanwhile the USDA weekly export sales report was given a muted reaction by market players. The report said US cotton sales amounted to 130,500 RBs (500 lbs) below trade belief.
Traders said the market could be in trouble if demand the spiral in crude prices dents consumer demand of cotton. On Friday sales by speculators sent futures down with most operators saying, coming harvest will eventually pressure prices. The October contract was seen down at 47.99 and December at 49.77 cents a pound.
LOCAL TRADING:
Prudent use of ginners to dispose of cotton stocks bit by bit but at good returns could not stand by them but reports telling 10-15 and/or 20-30 PC losses made consumers wiser and who lifted cotton to spare themselves from bigger loss. The week that ended on September 17, saw improved trading when, of course, prices mattered little.
The September month was expecting above normal rains though rest of the days, prompted ginners to push spot rate higher with a message to buyers that coming 15 days were uncertain. The rise was Rs 25 which took the spot rate to Rs 2150. On the week opening day steady trend was observed as heavy rains in Sindh and Punjab warned spinners and the textile millers days ahead will not be costly in terms of price but won't be available as smoothly.
Phutti prices improved by Rs 10-15 to Rs 900 and Rs 925 and in Punjab it went up to Rs 1000 to Rs 1015. Over 3000 bales of cotton changed hands, and consumers tightened their belt for buy more as supplies gradually became scarcer.
On Tuesday further adverse reports made buyers apprehensive and pounced on available cotton at any quoted price. Over 5000 bales were lifted as buyers perception changed to supplies would go as low in days to come.
Besides rains and pest attack perception, the announcement that TCP would step in as soon as prices gave way down to Rs 975.
For the third consecutive day, cotton held to firm level on Wednesday. But the mill demand continued to build up undeterred by fears of price increases. The phutti supplies turned lower but prices rose by Rs 10 or like amount to sell in Sindh at Rs 900-930 and in Punjab at Rs 1000 to Rs 1035 and cotton in Sindh was selling at Rs 2150-2175 and in Punjab at Rs 2225-2250.
On Thursday session saw upward trend as spinners continued buying on fears of further increase in the prices. Uncertain reports apart ginners have most of the situation on liquidity well over prices they were offered only days back. Nearly 3000 bales were sold between Rs 2160 and Rs 2250 depending on quality. On Friday prices consolidated as uncertainty over crop position failed to allow change in scenario. However, in order to avoid bigger loss spinners and textile millers continued to lift cotton in modest size. As spot rate stayed firm at RS 2150, nearly 1500 bales of cotton changed hands at prices ranging between Rs 2165 and Rs 2240 depending on the quality.
On Saturday, cotton prices shed Rs 25 to 2125-2150 in Sindh and in Punjab at Rs 2225 and 2250, phutti, however gained modestly at Rs 900-960 in Sindh and it was trading at Rs 1025-1050 in Punjab.
RAINS, YET TO COME?
In one newspaper, three stories same day, on rain havoc speaks something very serious is imminent. In the past years when rains nearly drenched safest corners of palatial buildings, in Karachi every mouth cursed Met office to have allowed such devastation to take place with full fury. In Sindh, met has warned abnormal rains during the rest of September including Karachi, Hyderabad, Mirpurkhas, Badin and Southern Punjab areas.
How devastating or historic the rest of September is going to happen or not to, yet warning particularly to the growers of crops including cotton is very important, or the setback in much trumpeted national growth. How smart the efforts are going to save the losses of the citizens, time will tell. But advance knowledge will certainly help greatly all citizens to protect themselves and their kith and kins.
Today when almost every grower has to know of the likely threat (one hopes it will not be the size of Katrina), every person will be ready to stall the big loss.
In Sindh picking has started, safely stored cotton will not be hit. Meanwhile Sindh Agri extension has cautioned mainly about the threat: one that matured cotton should be picked up stored in a safely covered space, wet crop should not be ventured to continue picking rather wait until water has gone and water should be immediately drained out before it does the mischief.
The weather experts have observed that a well marked low pressure area monsoon currents were continuously penetrating in the Eastern parts of Pakistan and was expected to hit Punjab, Sindh and Kashmir for next three/four days.
In Karachi rain emergency has been enforced, besides warning has also been issued to be alert. However, while appreciating knowledge and expertise of met people for advance warning it would be too much to look with doubt met pundits if nothing as damaging happens.
The rains have not come in the as damaging way was forecast by the met officials but operators have not been clear on the direction. These lines are about prediction up to three/four days where by and large situation remained under control. However, forecast was about the month of September. The growers and other players should wait and pray nothing goes wrong.
TCP ROLE OBLIGATORY:
Cotton is in media report much more then any other crop like wheat and sugar, because it fetches highest amount of foreign exchange - 67 percent. Besides to contribution to employment is also very significant. It is kept in watch and hence the talk of the market, field and media.
Resultantly in order to information upto date almost every alternate day is in report, quite often contradictory negating thus the objective. And thus the need of TCP is felt obligatory quote often by one or the other front ranking players. Not many years back but only during 2004-05 season TCP services were recalled despite authorities initially shown big reluctance, wheat and sugar not sparing the corporation from responsibility.
It was going quite well that one Liverpool based international organisation preferred to bar TCP from carrying on export trade for being illegal. However, the TCP must have been taking stock of the business it had done or service rendered, when monsoon rains prompted cotton crop observers to keep informed relevant cotton people on the effects of rains, floods and pest attacks etc, this time authorities on their own asked TCP to continue with cotton purchases.
The lint prices were going gradually down with only spinners and textile millers to buy initially 100,000 bales.
TCP had around four lakh bales left when it was forbidden to cease services. It is probably on way to sell and bracing the loss of its chairman when fresh call was given. In dental all the above was considered necessary because before review could be submitted on Saturday, September 10, a recent report conveying some worries appeared in newspapers about Sindh. It reminded that 18 cotton growing districts remained under sucking pest attacks of which 11 were also infested by spotted bollworm. Such events are quite natural during monsoon and sudden fluctuation in weather fervour.
Any way same report also had mention of substandard cottonseeds supplies affecting per acre yield. The fact should be probed. As, growers were not accepting the fact and refused to blame agri extension report misleading. The growers do not want so much is given time and energy on speculative things and TCP should be invited when it can help the growers and the trade. The knowledgeable circles have often felt the need to suggest that pen is lifted if that will serve the best of interest of the country and economy!
FREE GLOBAL TRADE:
China is emerging as a hope that one day it will prove a beacon light for the third world countries. India and Brazil are no doubt giving on various fora a good fight, but China with it road blocks littered with patience and courage. It is not always that it wins but finds way out. The most recent instance of road block was in the shape of "capping, ceiling or such things on imports from China despite loud claim (WTO) that global trade has become free after January 1, 2005. Perhaps China would not be so much hard pressed by US, and EU powers for merely textile exports. Politics and business was mixed up and decade old tussle brought forward for proving WTO rule breakers. The US particularly had on two counts or more was snubbed by the reconciliation committee but it continued to talk rule and justice when others went slightly wayward. Before making textile imports an issue, China was visited by high officials and experts pressing it to desist from keeping renmenbi (yuan) afloat rather at fixed value, $8.2 for a dollar. The US was being hit by deficit and dollar value was barring US export move. China on July 21, revalued its currency by 2.1 pc but earlier saying it was not in its interest desisted up to a fix point of time. China was in the meantime had continued to talk with both big powers US and the EU, while latter showed some business line, the US continued to show China tough line. The manufacturers of textile and law makers in US started calling for revaluing yuan, open banks, markets, human rights etc or face dumping duty or such thing up to 27.5 pc on Chinese textile imports. China surrounded by problems said these kinds of noises cannot change the various fundamental conditions and sequencing of China exchange reforms process. It adopts a responsible attitude. We did not wish to cause fluctuations in financial markets due to any pro-active change in policy. Pressured thus, China saw a market in India with over one billion population and a trade route now under repair and building will probably open early October 2, 2005. The work on smoothening up work for WTO December talks in Hong Kong has begun is Geneva. It may cover up shortfall that Doha Round suffered in 2001, rather nearly collapsed. The rich nations are not very clear or probably they are clear December meeting is not going to have smooth going and anybody will be able save that from total collapse. Brazil and India two front line fighters have announced they won't open up their market for richest unless HK round clears that Agriculture subsidies have been a matter past and import tariffs are lowered to satisfy the leaders fighting for the cause of third world farmers and business community.
TEXTILE EXPORTS TO INDIA:
India is perhaps taking out of the way step to allow market access to Pakistan textile goods at favourable specific duty rate. The Indian prime minister's Trade and Economic Relations Committee has asked textile and commerce ministries to prepare a roadmap for replacing specific duty 15 pc flat rate. Apparently it appears that should there be no confusion India would ask for reciprocity. This is besides the question if Pakistani exporters prepare some other road map to give India a reciprocity.
Very recently India and China have been something like charity begins at home. A few days back a report had said China and India were set to open direct trade link only after a fortnight October 2, 2005.
Thank God, Pakistan has already such a deal for quite sometime with China. Anyway textile and other relevant ministries are likely to say "aye." The ball then will be in Pak Court.