Following hitch about imports from India, local cotton market banged with activity though cautious buying started late. Spot rate stayed put and rates in ready ruled between Rs 3200 and Rs 3400/ or near about.
WORLD SCENARIO:
The futures in cotton trading on the NYCE moved somewhat cautiously following Beltwide cotton conference message that bad days were ahead and cotton prices were bound to leap higher. The Chinese currency proved too much for dollar, and confirmed effect led Fed to a record low. Cotton has been left also and other crops like, wheat, maize and soyabeans which are claiming high return.
Anyway, when the market opened on Monday, big downward drift was despatched from New York and received here on Tuesday. The March contract lost 1.19 cents to 70.73 cents and May lost 1.13 to 72.52 cents a pound. The fund buying as well as sales are in an anxious wait for the 2008 plantings in some four weeks time.
The second session depicted no better scenario as depressing condition persisted leading to March slip by 0.90 cents to 69.83 and May scaled down by 0.91 cents to 71.61 cents a pound. The exports sales boosted a hit but not as much, the wait for annual plantings had damaging effect on the major players who are in doldrums.
On Wednesday the downward drift continued showing futures down near five weeks low. The players said that liquidation was caused by outside market such as grain market's fall with a thud in Chicago. The March was down 3 cents to 66.83 cents and May shed same amount to 68.61. The NYCE was likely to show more hair-raising spectacles.
On Thursday the correction was writ large in cotton trading where futures turned corner by sitting higher owing to speculative buying. The players said they knew it was too much and time had reached for a bounce back. They saw rise every where in corn and other grains, even in precious metals, so it was impossible cotton could escape a boost.
On Friday NY cotton futures were sharply up as the ICE Futures' open-outcry March cotton contract rose 1.56 cents to conclude at 68.39 cents per lb, moving from 67.05 to 68.50 cents. May cotton added 1.54 to 70.15 cents and the new-crop December cotton contract went up 1.77 to 76.62 cents. ICE March electronic cotton futures increased 1.37 cents to 68.20 cents at 2:57 pm EST (1957 GMT), moving from 67.05 to 68.55 cents.
On Saturday market reported the NY cotton futures on Friday gave up overnight firmness, losing modestly as the ICE Futures' open-outcry March cotton contract shed 0.50 cent to close at 67.89 cents per lb, moving from 67.60 to 68.90 cents.
May cotton eased by 0.45 to 69.70 cents and the new-crop December cotton contract dropped 0.74 to 75.88 cents. ICE March electronic cotton futures lost 0.39 cent to 68 cents at 2:54 pm EST (1954 GMT), moving from 67.56 to 68.87 cents.
In the local market, some deals were finalised as 800 bales from Dadu sold at Rs 3200 and 400 bales from Khanpur sold at Rs 3350.
LOCAL TRADING:
Against hope that after series of holidays, and world cotton prices had been going a higher, consumers will return with hefty purchase plan, the operators were utterly disappointed to sell merely 1400 or so bales at Rs 3250. Spot rate was put at Rs 3200 while phutti rates in both Sindh and Punjab ruled unchanged at Rs 1500 and Rs 1625.
The operators and textile millers had shown respect to locally available lint and nearly mopped up available lots without any reservation following upward push in world cotton rates and continued hitch shown by Indian exporters. But the opening session of the outgoing session disappointed sellers.
The second day's trading was a follow up of the Monday's trend with sales about 4000 to 5000 bales. The market operators however saw a little improvement in the interest of buyers. They expect the days ahead will bring more satisfaction. The fate of Indian cotton exports to Pakistan seemed dormant for the time being if not dead.
The prices at which spinners bought lint were between around Rs 3150 and Rs 3350, while spot rate stayed put at Rs 3200. Imports from any quarter being unloaded are not market knowledge. They however noted that slight fall was lately witnessed in world cotton rates.
On Wednesday hopes that cotton consumers will return with gusto were belied as now more than a couple of deals were finalised. Spot rate was unchanged. Rates in ready were nearly same as prices have been ruling lately such as Rs 3330 and Rs 3350. The phutti prices too ruled unchanged at Rs 1500 and Rs 1625 in both major cotton price Sindh and Punjab.
On Thursday cotton buyers were back on the market lifting choice lint which this week leaped by some 14000 bales. The spot rate held back to Rs 3200 level while ready off take showed slightly higher as prices quoted were between Rs 2350 and Rs 3400, Phutti stayed unchanged. On Friday quality factor pushed the prices slightly up on the cotton market despite the falling trend in the world market.
Spot rate was unchanged at Rs 3200. In the ready trade, most of the businesses reported between Rs 3250-Rs 3350.
Phutti prices were unchanged at Rs 1500-1625 in both Sindh and Punjab. Subdued business was seen on the cotton market on Saturday as mills preferred to be on sidelines in anticipation of smooth supply in days to come.
The Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 3200. In the ready trade, most of the businesses reported between Rs 3200-Rs 3350, they said. Phutti prices also maintained their overnight levels at Rs 1500-1625 in both Sindh and Punjab, they said.
The mills were interested in purchasing cotton from Indians as they are ready to sell their stuff after the fall in the world prices. It appears that the ginners may lower the prices, but fine quality of cotton will fetch better prices, which are short in quantity.
SHOULD WTO BE LISTENED?
Growers, ginners and spinners and textile exporters have never found themselves out of the particular problem which today has surfaced as high cost of doing business. What we are nearly deliberately forgetting are governments who also followed steps of those who began from cotton, sixty years back. Whether, besides cotton there was anything to spin yarn has never been candidly talked about. The mirror give a slight clearer view since General Ziaul Haq's time when Japan had supplied some machines to produce yarn for them. The excess may have gone to some other countries like South Korea. That country has been given pointed reference because it was then also not a cotton growing country and is still the same, but earns billions of dollars through exports of imported cotton or yarn.
Foreign experts in cotton and textile products, came to Pakistan on invitation to attend a conference or workshop. They were shocked that value-addition was unknown to Pakistanis then and even today they are stuck in producing low or medium quality yarns.
Thinking themselves beyond yarn and grey cloth or by provoking others they were hit by high cost of doing business and failed to match with their competitors. The history is replete with stories of failures in turning table and achieving what neighbouring countries have achieved.
When any sympathisers asked spinners to turn to value-addition investment was probably a hurdle. As the foreign visitors would stress for switching on to value addition, the government never even hinted the textile sector to turn to garment, towel, a hosiery manufacturing to fetch the country 10 times more foreign exchange and their absolute ignorance that training for unskilled workers was necessary.
Machinery for textiles manufacture was imported frequently at the cost of exchequer, which never received back even the principal it advanced. The visits abroad of dyes and chemical importers every year to secure tonnes of material for textile sector is telling heavily on exchequer. It has never been clarified whether absence of textile machinery, dyes and chemicals add to high cost of business or not? If yes, have relevant people including government done anything to rescue the sector. In good English WTO has advised this country to diversify exports away from textiles.
US ATTACHE CUTS FORECAST:
The attache has noted causes for shortfall in cotton crop hit by bad weather and pest resistant mealy bugs besides lower than targeted harvest. The attache forecast report on output about four to five weeks back was not as disappointing that 10.4 million bales were likely. The local authorities had been putting the crop around that time around 14.1 million bales.
The sowing of illegal Bt cotton varieties not designed for Pakistan's climate, crop disease and market conditions, attache said, also affected the production and quality of cotton this year. The size of cotton crop has been scaled back from 2.265 MMT to 1.904 MMT. The attache sees it was due to bad weather.
The attache points out that for last couple of years was facing growing invasion of mealy bugs, though it seems, little was done to deter, rather eliminate the threat once for all.
The US attache quoted regretfully the bugs caused devastation 12 percent while during 2007 its harm reached an alarming 30/35 percent level. The mealy bug is easy to be tackled unless taken care of in time. The experts feel like any viral attacks concentrated on cotton crop, mealy bug has larger horizon - it has lust for soft parts of many other crops and invites more care to scare bugs away.
The attache mentions leaf curl virus (CLCV) as seemingly harder to tackle. Thus it has become endemic in Pakistan affecting over 70 percent of NY cotton crop. The US attache report that circles close to cotton and textile seemed to be surprised. They said it was not an official USDA report and offered no insight about what it wanted to communicate to Pak authorities and spinners.
Their surprise give one insight that Pakistanis should search in their own heart whether they have experts to run a couple of research institute and work on ever springing challenges, and/or they do really provide enough funds enabling the experts manning the institutes to do the wonder. Quite often reports appearing about new varieties have been withdrawn, while new varieties are being released for sowing.
Growers believed the words given to them, but they have never flourish for want of better seeds. The shortfall has become endemic and they learnt to live with that and with a hiccough addicted economy. However, attache's latest estimate is yet more lower at 8.75 million bales against Minfal's recently announced estimated' cotton achieved by country at 11.6 million bales.
YARN EXPORTS DOWN:
The export of cotton yarn has not lagged behind in experiencing downturn particularly during the last month. In another report, cotton exports have also been reported surprisingly down. The value-added products such as garments, towels, hometextiles etc have been down for obvious reason exporters can't manufacture locally produced products at competitive price as well as quality wise.
In this, the exporters feel unable to fight the odds alone, and, the authorities that should come, as in India Bangladesh and China way for all out help, have been tentative lately. The government have been encouraged by its performance, as it quotes domestic growth at 6 to 7 percent, a reason for encountering the various odds, primarily inflation and value of currency which has been going down for sometime past.
The exports are one potential that government wants to exploit, while it has such problems as water and gas going out of hand. Under the circumstances decline in value added products is understandable but why yarn dropped by 30 percent during December is surprising. Cotton too seems not welcome by countries, that have stake in textile exports.
Not too long back, the few exporters of value-added products had constant complaints of cotton yarn shortfall. The governments of those days were pestered to intervene and check unbridled exports of yarn. The exporters who claimed to earn far more than yarn exporters, would point out that the county was losing in two ways clearly. Yarn exports used to hurt local producers of value-added products in their preparation and secondly unbridled yarn exports to competitors meant keener competition. But today the value-added product exporters seem to have been one in lamenting about the decline.
SEEMS COTTON VS GASOLINE?
The latest is that spinners and textile millers need four million bales import to meet their entire needs. According to cotton market sources, the ginneries have stocks of 1.8 million bales in Pakistan. It is understood that cheap lint from India is on hold, owing to surge in cotton prices worldwide. But market sources have been applying their past experience that any higher price report puts certain breaks, and that can be expected.
Any how, it is also experienced that consumers wait watching where the prices are favourable and they make no delay in immediately entering into contract followed by lint landing at Pak sea ports. According to reports about half a dozen countries like India, S Africa and other cotton growing countries and Central Asian countries can be exploited provided the total met the textile millers requirements. This is a question, not an advice, that Pak cotton production remaining lower than millers entire need, what is the need to create a private sector of exporters, in other words why exports.
A section of buyers should feel relieved to hear exports of local lint should be banned. But it will in ultimate analysis prove that growers and ginners will turn apprehensive alone how and where they would get the outlet? It is the job of the authorities. Thank God, cotton has been released from the clutches of the commerce and finance ministries. There should be an ethical rule to think and act in a manner to serve the interest of all stakeholders rather than the limited sphere they come from.
If for example, textile ministry is manned by people from textile sector, certainly no harm, if they harbour interest of the country uppermost. Can all those who have served cotton field in any capacity, answer why the countries who import cotton and yarn from this country stand in rows of "tigers"? The cotton growing countries and textile exporters should zealously retrieve the full woth of crops or metal.
TAIL PIECE: Tail piece has some headlines of the outgoing week for readers to peruse. "The world economic situation is serious." "Bush asked to slash aid, if polls not fair." Forex reserves show over $1 billion decline after emergency, "President briefs big firms' CEO (in Davos) Pakistan is a promising destination for investors. Some large units not e-filing tax returns" "Help us don't criticise US?"