Cotton trading began with better than normal buying amid fears about odds ahead and talk with authorities will or will not end in resolution of problems that threaten industry closure. Spot rate at Rs 3300 and phutti remaining unchanged mostly around Rs 1650 and Rs 1700. The buying was marked between Rs 3150/3400 per maund. However, spot rate ended the week unchanged at Rd 3300.
WORLD SCENARIO:
The cotton futures in New York trading were marked lower following closure on Monday for the Martin Luther King Jr as investment sales stepped in on opening day on Tuesday. The March contract declined 2.19 cents to 46.81 cents per pound, trading between 46.47 and 49.25 cents. The may contract lost 2.33 cents to 47.25 cents.
The traders commenting on setback said a major factor for cotton losing ground was sharply lower tone in Soybean futures in Chicago. They further said this was one of those days when beans will determine direction for cotton. The players now wait for US cotton plantings, which USDA put at 7.9 to 8.2 million bales from earlier 9.4 million in 2008.
On Wednesday futures settled steadier on investor buying plus supported by firmer financial exchanges and grains. The players noted positive behaviour of exchanges and grains, which pushed contracts higher. However, they continuously stressed that the jumps depended on grain and sharp gyrations in world equity markets.
The soya beans prices are being closely marked by the cotton traders because they assume farmers may opt for switching away from cotton to grains yielding higher return. Indeed they take nearly for granted that beans are better option. They believe cotton remains locked in a battle for acreage with soybeans in the US and weakness (or strength) one will make itself in the other, although soybean have the upper hand in that tug of war.
On Thursday cotton futures refused to be influenced by weakness in financial exchanges rather received support from technically inspired investor buying. Analysts keeping an eye on world development, saw some support for cotton as report from China indicated China, known to be biggest consumers may further reduce plantings in 2009. In the US most cotton traders stay watching soybeans futures in Chicago as many farmers seem bound to switch over to soybeans.
On Friday cotton futures had good leap upward - rising to 14-week high. The traders reported all round buying sparked by news that major merchant Cargil Cotton.
China was considered one place where from import orders were expected. Weekly export sales also signalled positively as rally in US sales mounted to 486,800 RBs and shipments hit 158,500 RBs. The March to jumped 1.71 cents to 50.64 cents while may reached 1.29 cents t 50.77 cents a pound.
LOCAL TRADING:
The fortnightly reports issued by the Pakistan cotton ginners Association (PCGA) are telling the cotton crop was expected higher than recorded during 2008 besides report about fair going. Only very lately rains created apprehension about likely damage, which remained vague until writing these sentences. However, despite consumers near protests that crop position makes no sense that prices should be on the higher side, and also because world rates were showing weakness, in Pakistan prices were hitting buyers, they hold.
But the buying of cotton remained fairly good on hinted hopes that some ways are being found to facilitate the textile exporters soon. When the "soon' will materialise yet to be seen. There is no respite in load-shedding or outages as far as domestic supplies were concerned, the opening day of the week saw good gig as spinners and millers lifted around 10,000 bales of cotton at prices between Rs 3140/1300 per maund, phutti prices were firm at Rs 1600 and Rs 1750. The PCGA report up to January 15, spoke of conditions favourable to consumers but, they said they were lifting low hoping tomorrow prices may correspond to the crop position.
On Tuesday slight rise was seen in cotton buying at ruling prices. The spot rate and phutti rates were unchanged while over 12000 bales of cotton were lifted. The textile millers claiming faced with unprecedented odds are making all out efforts to meet their target around $15 billion. They have, however, hurled great threat of likely closure of industry in view of the constraints they say only government can remove.
In the meantime they have indicated they favour TCP was out of market, as, sellers had asked authorities to indict TCP to stabilise prices. Rains have been lately causing apprehension, however, nothing worrisome has come to take feared danger.
On Wednesday rising cotton rates prompted consumers to lay hands of offers. The cotton exporters also joined the race besides needs, the gradual melting away of the quality cotton fast. Higher value of dollar too attracted buying, restraining ever ready to import. The ginners were mindful of this weakness of millers and sporadic rains too create apprehensions about the quality in days to come. The spot rate on Thursday was unchanged, phutti was ruling at Rs 1650 and Rs 1700 while quality factor lead cotton top at Rs 3450.
On Thursday TCP decision to switch over to ordinary cotton or like thing slowed buying process down to only nearly 10,000 bales against nearly 50,000 a day earlier. The spot rate and phutti rates in Sindh and Punjab stayed while asking prices ruled between Rs 3175 and Rs 3400. The growers and ginners reaction is awaited while miller's decision to lift less cotton was not understandable. Only thing comes to market sources that spinners and millers had bought enough to breathe before deciding further.
On Friday a positive shift was marked among spinners and millers during which buying went up considerably to nearly 15,000 bales. The asking prices ranged between Rs 3175 and Rs 3400 near seasons top. Spot rate and phutti prices remained stuck up at Rs 3300 and Rs 1600/1750, respectively. The ginners according to market sources, reconciled with the shift in TCP buying easing fears among cotton consumers of continued price hike.
On Saturday trade activity slowed down as ginners increased the asking prices due to strong demand. The official spot rate was maintained at overnight level at Rs 3,300. The phutti prices in both the Punjab and Sindh were at Rs 1600-1750. In the ready business the highest rate was at 3400.
Market sources said that bullish sentiments persisted as buyers from different quarters were active to cover the near-term amid rising anticipation about the rise in prices.
It is visible that the Trading Corporation of Pakistan (TCP)'s presence in the market is stabilising the prices and giving an impression that the rates may not come down sharply. The TCP to open its tender on January 27 to buy 100,000 ordinary cotton bales and another tender is likely to be opened on February 11.
According to the Federal Bureau of Statistics (FBS), in the month of December 2008, textile export recorded at 720 million dollars against the exports of 751 million dollars during the month of November.
In the meantime, on Friday, an international farm group said that it cut its forecast of the season-average world cotton price by 10 percent due to slumping demand brought on by the global recession and larger stockpiles in China.
In ready business volume was as low as 4300 bales only.
BT COTTON, ALAS:
The BT cotton technique was discovered in Minnesota USA, which had many time more potential to produce cotton. The technique was hurriedly brought to countries, which take away edge from Pak textile products and to some extend cause high cost of doing business. India and china who have set up textile manufacturing machine and produced chemicals and dyes making the two countries accessible to the US and EU markets. But what is generally heard is wide variety of facilities, which make their product acceptable in markets abroad, sources close to textile sector said.
In the country the few institutions involved in research and discovering have hardly produce effective cure for pests and viruses or gifted this country with trouble free cotton giving better production. It is now hoped that BT cotton proving productive in neighbouring country should be brought into this country to meet the cotton shortfall. Since people heard about Bt cotton sketchy reports often appeared saying its experiment proved sort of failure or that seed imported from abroad gave production much less than report used to come from places where their technology was adopted. Unfortunately imports, particularly imports of better variety cotton is preferred as importers of textile products would advise. The latest report is not clear that technology has been brought and experiments have started.
According to reports it will take three years to enjoy the fruit. If the Minnesota, USA technology is being experiment, God bless the scientists and agriculturists with success. Will it not be advisable to also set up textile manufacturing plants and dyes and chemicals units to avoid imports for use by textile producers and give tough time to competitors?
TEX SECTOR TO ACHIEVE TARGET:
The Trade Development Authority of Pakistan (TDAP) chief seems more optimistic than a realist for nearly claiming textile sector will achieve target despite problems. The exporters of textile products point out nearly half a dozen odds that lie in the way of achieving target. Who should be taken on face value?: Both have reasons to justify their claims.
The TDAP chief sees fears for the closure of textile industry as has been warned by the industry leaders who have empowered to talk with authorities and in case of failure to find any solution go ahead with suspending products. The TDAP spokesmen claiming the fears were baseless, problem being of temporary nature. He admitted besides local problem global problems were also gesturing but he was confident that despite problems textile sector will achieve its targets. The spokesman was also confident that bumper cotton crop will also benefit textile sector as favourable prices will help them.
Spokesman was confident, as his organisation had set up a facilitation division to help exporters to have an edge our rival exporters. The spokesman referred to average export target of textile products for current fiscal (2008-09) has been set at $11 billion, which he was confident, was achievable. To convince relevant people of their apprehension be recounted raw cotton export increased by $31.54 million to $48.94 million during July-November, cotton cloth rose by 65 million to $842 million, knitwear up by $14 million to $826 million towel exports by $57 to $292 million.
However, much will depend on the outcome of textile body chief's meeting with authorities in a day or two. If textile exports hit the mentioned target, the economy will be strong at a time when a lot of problems have bedecked the Pak textile exports.
IMPORTED COTTON VS LOCAL:
The trade deficit is endemic in Pakistan. The textile sector, according the sources allergic to consuming local cotton, machinery, dyes and chemicals and smatter stuff linked with production of textile products. The board calling for "Be Pakistani, buy Pakistani" hangs at the entrance of SAI area. Day in and day out authorities keep on the top of issues facing this bowl ever in hand country, but moves to end it is no where in sight.
The buying of cotton by TCP very recently to deliver grower their due is being criticised. The time mature for the authorities to study into the clamour to reach at things as they exist. If the grievance is true step can be taken to save critics from losses. But assessment should be authorities own and not as are being limited at. In a way, sources said, critics are preparing ground for duel gain - if authorities hurriedly take steps in the suggested way - the local cotton price will come under pressure, or else, the imports, which is always preferred, from abroad will be justified.
Country has always been in need to restrained government borrowing from SBP or printing of notes for the prupose and restricting imports of luxury goods and goods produced in the country and which is welcomed abroad. Payment of due income tax, duty and other revenue to the government is a practice that has no precedence ever being checked firmly. exemption and favouritism, they pointed out are at the root of weakness economy has ceaselessly suffered during the last several decades.
Cotton and textile exports earn for Pakistan nearly 60 percent of total exports of all sectors, employee maximum way warders but has not make economy and country took strong and standing on its own. Cotton and sugar sectors are where impartial look and the going need to be watched by authorities. There is no way out.