Sustained buying in cotton spilt into the week under review pushing prices upward when spot rate was raised to Rs 3400 and rates in ready were marked between Rs 3300-3500 during the week ended on February 14, 2009.
WORLD SCENARIO:
The futures on the New York cotton market were subject to investors buying and their liquidation and some important data that was expected during the week.
On Monday the contracts were impacted by investors buying as some data was ahead, which could give direction. Anyhow, most of the players do not expect major changes creating apprehension the coming data may surprise them. The reduction in cotton consumption and as a result rise in ending stocks will be worth taking note of.
On Tuesday cotton futures lost sharply by 3 cents to 47.95 cents. The supply/demand put cotton consumption at 112.63 millions bales (480 Lb) from previous 115.24 million bales. The world ending stocks jumped to 61.71 million bales from 59.4 million bales. The players observed report was bearish, but the focus of the market had shifted to report being released on Friday. Most believed US 2009 cotton plantings to range from around 8.0 to 9.0 million acres, down from 9.4 million bales.
On Wednesday futures extended loss on investor sales besides usual recession fear and USDA couple of reports shortly. Analysts said losses were likely trimmed at the lows in the market by some export business, but it seemed questionable if that would be enough to stem the tide of sales hitting cotton futures. Meanwhile, weekly export sales should keep low profile and shipments were no better than the previous week's. On Friday release by NCC is expected about annual plantings to range from around 8 to 9 million acres down from 9.4 million acres in 2008.
On Thursday cotton futures closed at an eight - week low on follow through investor sales, as a result of set backs seen beyond cotton market and of course the global recession worries. The weekly export sales rose while shipment showed shortfall. The market observers said market should now stabilise after losses in recent fibre trading. Now planting survey report was awaited to be released by National Cotton Council most traders believe plantings between 8 to 9 million acres.
On Friday futures sustained losses on follow through investors sales. The loss was however pared, Monday was a holiday. Meanwhile business has been picking with hope sticking up NCC report about potential planting survey any moment. The traders said most of us feel US 2009 cotton sowings will be bunched between 8.5 million and 9 million acres.
LOCAL TRADING:
The cotton consumers sustained buying despite high prices and likely depressed demand due to economic melt down - which amounted to more or less 100,000 during the week, spot rate was upped to Rs 3400, while in spot buying prices ranged between Rs 3300 and Rs 3500. The phutti prices in Punjab and Sindh were noted unchanged at RS 1650/1800. The consumers worry was that quality cotton was disappearing slowly. According to buyers they were under pressure to buy low quality at higher prices - a pretext they quote when they plan to import. The reports telling cotton growers falling to such crop fetching higher yield.
On Monday over 10,000 bales of cotton changed hands - prices ranging between Rs 3200 to Rs 3500. On Tuesday mills continued forward buying said to be in anticipation of further increase in cotton rates. The consumers sustained buying indicated they were planning more exports despite adverse reports being received. The rising prices and absence of quality cotton any day may prompt millers to switch over the imports. The millers see high local cost taking away edge and looking side-wards so that an edge over rivals may be maintained. Over 13000 bales of cotton were lifted as prices in Punjab and Sindh maintained previous level.
On Wednesday firmer conditions ruled as millers were engaged in forward buying under perception the rising trend will continue. The support was coming from manufacturers and exporters indicated that exports may show improvement this year compared with the last years. The exporters were hoping more incentives from government in the words of textile minister who said" government would provide more textile packages in due course". The gradual melting away of better quality of cotton is causing worry, which may be prompting buyers to switch over to imports. The spot rate, rates in read and phutti prices stayed put.
On Thursday cotton trading turned comparatively modest owing mainly to consumers perception that prices were on way to soften inline with world trend. Besides, the sellers are opting for putting on sales stocks of low quality cotton pulling prices down - in ready by Rs 50. The overall sales marked on the day was in the region of 10,000 bales in price range of Rs 3350 and Rs 3450. Phutti stayed stuck up at Rs 1650 and Rs 1800.
On Friday lint prices depicted soften trend owing primarily to world trend and consumers perception that prices were bound to fall. Spot rate was unchanged, so were the phutti rate. In ready off take nearly 5000 bales of cotton changed hand in price range to Rs 3225 and Rs 3400.
On Saturday business remained subdued as mills anticipated more decline in the rates. Spot rate was unchanged at Rs 3400. The phutti prices in both the Punjab and Sindh were lower at Rs 1600-1700. According to the market sources the overall outlook for economic growth of the country is not very encouraging, which is main concern for the investors and exporters, as well. Under the circumstances when nearly the whole world is facing recession like situation, the textile industry is also in crisis despite the expectations for rise in the export in the coming days.
Financial crisis is the basic problem now-a-days along with other gas and electricity issues for all the businessmen or investors. In the meantime, reports appeared that the cotton crop production is provisionally estimated at 12.1 million bales as against last season production of 11.6 million bales showing an increase of 4.3 percent. In ready business take off was as low as 3200 bales, rates at overnight levels.
CANCELLATION NOTICE:
In principal mistakes must be mended, but chances of mistakes coming all the way should be avoided as far as possible. At least once the TCP must have advertised it wanted to purchase 100,000 bales of cotton. But before the date a dispute of strange, according to sources and by and large questionable dispute was raised leading to cancellation notice about purchase of 100,000 bales of cotton by the TCP.
The objection was taken on face value without probing into report what was wrong and who was wrong. The TCP was not asked to explain. Whether allegation by cotton buyers had an ingredient of truth or some thing else was behind the allegation. The cotton buyers have every right to buy or refuse to if they see valid reason. But when the allegation was true or otherwise should have been probed and proved before placing the ECC, which okayed the plea.
The fact, however, is that authorities are hell bent to create a culture of unadulterated cotton in the country, which for reason or without causing loss of billions of dollar annually. The fact is that cotton consumers allege that growers and ginners supply dirty cotton unacceptable to importers of Pak cotton and textile products.
On this pretext they import billions worth annually. The growers and ginners however, had always been making efforts to cotton consumers through induction of lint clear or like things. But the investment made in making special efforts to supply clean cotton was refused on pretext that cotton was not clean. Last time, very hectic efforts were made growers and ginners in a meeting of all stakeholders were asked to supply cotton clean against payments. Once in the past also the TCP had obliged the ginners who were asked to supply neat cotton has supplied to the TCP. But later dispute over payment lingered on.
This time when TCP announced to buy clean cotton from ginners, was stopped by cotton buyers on plea ginners don't produce neat cotton. The country needs neat cotton culture at every cost sources said.
COTTON SCENARIO WARNING TO PAKISTAN:
In today's world when information travels in jets speed Pakistan cotton producers and consumers should remain over-cautious. There is no doubt a minute reports hang on face, but looking through it needs cunning and shrewdness. The reports today bases on two main facts and factors - one is that lower acreage is being exploited for cotton production meaning low production and recession making lower textile products exports - or demand will dip.
Under the facts stated above could one expected a reasonable return - specially when exporters continue to nag about high cost of doing business. The two major cotton producers and America bulk cotton exporters have announced heavy cut in production while China put it one at percent. African cotton producers have been disappointed since long back as their cotton fetched bad return.
Thus US and African cotton producers stand side by side in deciding to switching over to crops yielding more money - in Africa a lot of growers have been reported to have been stressing towards capital cities for any job ensuring their survival and their family's. However, Pakistan exporters are fortunate local cotton they get at favourable rates while their most of the needs are imported, the reason best known to them. It is time they must decide to encourage cotton growers because outside cotton, as are indicated by reports from all sides that production are bound to come down and prices to remain on the higher side.
The Pakistan textile millers must move judiciously to keep growers in humour for increased production has to be patronised until some knowledge based sector replaced cotton and textile sector, which has suffered for bad name given by no others but Pakistan themselves. The result is that cotton importers from abroad pay much less than cotton deserves dubbing it that a dirt free cotton culture has not developed so far.
END TO BLACK MARKETING DEMANDED:
The growers, be it of cotton or wheat or sugarcane, face one problem or the other and they have to shout at the top of their voices to reach their problem, up to relevant authorities to be able to sow seed. There is shortage of water, fertiliser or various inputs vanish in the tin air when they are needed. Instead of relevant people and authorities should invite attention of growers where and how to get required stuffs to produce is God gifted fertile land.
This never happens for what the sources close the businesses and trade calls it for obvious reason. While it is always that a fantastic or optimistic targets are fiscal for any crop without showing little concern whether that was possible.
Now the cotton is well on way to mills, whose targets had to be changed at least twice - last been 10.1 million bales, much below required quantity or as the mills show from imports of cotton draining out billions of dollar annually. Today wheat growers are expressing concern about rising cost of urea, which authorities claim is available as much as the growers need. But the desperate call coming from all sides more pronouncedly from four agriculturally fertile districts of Peshawar, Nowshera, Mardan and Charsadda demanding both from federal and provincial governments for curbing the black marketing of area to prevent shortfall of wheat in horribly food deficient province.
Many will remember how growers were waking sleeping squads of exports to ensure water when cotton-sowing time was ripe. Thank God, crop was unaffected by pests and viral attacks. The cotton sales are on and prices are hardly keeping pace with reality. According to market sources and observes normal lifting to feed mills do cause price hike. The cotton consumers have then to sideline forcing sellers to soften price.
This is how cotton nears end to availability of quality stuffs, necessitating consumers to pounce on ordering imports where even the prices suit what is called their psychological level. The local sales are continuing but imports are also marked at intervals on grounds of allegation that dirt free cotton is not and cannot be available in this unfortunate country. Unfortunate because if crop yield is little over needs, exports are considered necessary to earn foreign exchange, but soon authorities start imports to check rising price trend.
WORK DELAYED ON TEXTILE, GARMENT CITIES:
Earlier the textile and garment cities came into being, better as these are never to lose their utility - they are immunise to any season or weather. The Lahore and Faisalabad were also stations, where cities for textile and garment were planned. The progress pace of other destinations was also in low tone. The reason, according to cotton and textile sources seems the loud tone with which bad shape of existing textile industry is being voiced.
It has been observed that whenever new cities or Mohalls is created market is also given place. All the markets have shops of all types but for that new markets coming up are no dropped. Instead same nature of shops selling familiar stuffs flourish and prosper side by side.
It is strange that textile industry, which claims to be biggest sole forex earning and absorbing largest manpower has reservation for fresh units coming up. The authorities should look into the apprehensive and reservations of existing once. The new textile and garment cities should be given a hand to test whether they can fill up the government kitty. In the fresh opening new enthusiasts should be given opportunity who may not keep always nagging they cannot complete because of high cost of doing business.