The prospect of good cotton production has brightened but market is stunned why prices are being raised more frequently than they said is needed. The spot rate started the week with a rise of Rs 25 at Rs 3,750 and end at Rs 3,875, Rs 150 gain.
WORLD SCENARIO:
The price futures group expressed many in the market continued to worry about yield and quality losses to crops in the US Delta and Southeast. The forecast for the most of the cotton belt the outgoing week was for the drier and cool weather and it was possible that some of these concerns will start to ease. The harvest pace remained very slow for a few days until the ground could support the equipment and until the cotton returned to more harvestable condition.
However, cotton futures on Monday saw December contract end flat at 67.64 per pound, while March rose 0.20 cent to end at 71.09 cents a pound. It may be necessary to point out that largest cotton growing area in the US, Texas, had suffered from hail and poor weather. Earlier in spring cotton plantings in the US had reached in 2009 about 9.05 million acres, Texas accounted for about half of that acreage. It was assumed by cotton players prices had to be firm as a result. The market major players differ, some behaving speculative fund accounts will pile into cotton because they hold the perception that fibre contracts are under valued. In support they said nearly 74 percent rise in open interest in the cotton market since the second quarter of 2009, as it now stands at 188,235 lots.
There are others who hold opposite view that huge enough supplies resultantly high prices would drive potential buyers to the sidelines. Towards the close of the week players experienced technical aspect leading December and March contract to rise prompting them to presume trend for the rest of the week will be experiencing further technical trading. But slight hope of downward trend was expected, as December was seen resistance at around 68.04 cents and 69.35 cents will support at 67.50 and 66.65 cents.
The world with depleting cotton production will hear that Pakistan is likely to produce record 17 million bales. India has also more scope for exports to needy. China has been quiet with short crop but will be available for it.
On Thursday, the NY cotton futures closed lower on investor liquidation, as the market stayed in a wide trading band, with market players looking toward release of a key government report next week, brokers said.
The December cotton contract retreated 0.70 cent to settle at 67.41 cents per lb, trading from 67.21 to 68.41 cents. December contract volume reached 7,479 lots at 2:43 pm EST (1943 GMT). March cotton fell 0.56 cent to close at 70.99 cents, trading between 70.66 and 71.80 cents.
On Friday New York cotton futures closed lower on investors sales and spread trade as most players were sidelined waiting for release of a government crop report and options expiration next week.
The December cotton contract retreated 0.87 cent to settle at 66.54 cents per lb, trading from 66.47 to 67.82 cents. December contract volume reached 14,314 lots at 2:48 pm EST (1948 GMT).
March cotton fell 0.66 cent to close at 70.33 cents, trading between 70.25 and 71.49 cents.
"We're still in the middle of a range we've been in since the middle of October," said Mike Stevens, an analyst for brokers SFS Futures in the Mandeville, Louisiana. He said most players would be content to monitor the rolling of positions out of the December contract and into the March contract.
The market would also be waiting for options expiration in December at the end of next week.
On Tuesday, the market will be digesting the monthly supply/demand report from the US Agriculture Department.
LOCAL TRADING:
The cotton trading improved on the market following exporters relentless buying and spinner and textile millers leaving note behind thinking they may miss the bus. The trend backed claim by the yarn exporters they cannot bring down prices. Phutti prices rose, supply being light. The phutti prices in Sindh and Punjab rules higher at Rs 1875 and Rs 1950, being perhaps highest so far. The spot rate was also raised by Rs 25 to Rs 3750. Nearly 3200 bales of cotton were lifted in price range of Rs 3725 and Rs 3825. The millers' buying has added to hope that textile exports will go up, higher than last year.
On Tuesday cotton buying ran parallel to rising prices and mopping up by consumers and exporters of cotton. Thus spot rate was again raised by usual Rs 25 to Rs 3775. It was stated that 45,000 bales of cotton were sold on the day in price range of Rs 3750 and Rs 3775. Phutti prices were higher both in Sindh and Punjab showing at Rs 1900 and Rs 1950. The cotton price may come down, as PCGA latest phutti arrivals figure up to October 31, shows. The raw cotton arrived around 7.364 million bales. But presence of exporters of cotton was unlike to happen so.
On Wednesday the buyers got little relief, rather prices were sent surging - spot rate rose sharply by Rs 50 to Rs 3825, while 42,000 bales of cotton changed hands in price range of Rs 3775 and Rs 4000 - a record. The phutti reached at Rs 1950 and Rs 2000. The PCGA report arrived at larger size, but cotton price surge surprised buyers who commented something was some where.
On Thursday spot rate was further raised by Rs 50 to Rs 3875. The cotton bales changed hands numbered 45000 in price range of Rs 3800 and Rs 4000. Phutti ruled in Punjab and Sindh at RS 1950 and Rs 2100, highest ever. Relentless buying by cotton exporters and spinners plus the textile product exporters have boosted price. But the market sources were surprised at the rising trend as 17 million bales record cotton production was expected.
On Friday marginal fall in the rates was seen as mills preferred the sidelines following the speculations that the Pakistan may ban export of cotton soon. The official spot rate was unchanged at Rs 3875. In the ready business more than 25,000 bales of cotton changed hands between Rs 3825-4000. Phutti prices fell modestly in Sindh and the Punjab at Rs 1925-2000.
Most of the mills stopped buying of cotton on expectations that prices may fall due to expected ban on cotton and cotton yarn export.
On Saturday trading activity fell as buyers are still under pressure owing the expected ban on cotton export. The official spot rate was unchanged at Rs 3875. In the ready business activity fell slightly as nearly 23,000 bales of cotton changed hands between Rs 3775-3950. Phutti prices fell modestly in Sindh and the Punjab at Rs 1900-1925, they said.
TEXT EXPORTS MAY RISE:
Amid a lot of hue and cry about the high cost of doing business and non-availability or short availability of raw materials leading to worse. The good news is given that textile exports during 2009-10 will rise to $11.5 billion with an increase of 15 percent, as compared to last year. The estimate is based on firm record as given by textile industry secretary. However, such revelations do not always stand at the end of the year. The resounding voices as to what is available and what are missing facts that are hiding behind vagueness.
Right at the moment in the voices what could be made out is that textile sector is the maximum exporter, forex earner but helpless and hapless altogether and could do nothing if government cannot come forward with helping hand.
How replete stays the kitty of the government is well known where from help can pour in. Subsidies are being discouraged as far as possible, opposed both by the IMF the WTO, if government is able to do so. The recent five-year textile policy, with one or two voices against all the big shots in the textile sector has been widely welcomed. The condition, however, is if all assured by the policy is implemented word by word. This is one thing that is almost unheard of in Pakistan, according to the sources close to cotton and textile sectors.
Since authorities never come with correction or opposition to what the export sectors charge, the sectors try in their own way to keep the economy and country somehow going. About four months have passed when policy on textile came with a bang, but how much they have given and export sectors have received is a voice, which is heard not even in whispers. If the exports of textile products earn at the end of 2009-10, as per estimate of the secretary there will enough ground to celebrate.
CALLERS SHOULD BE RESPONDED:
It is well known free trade was advanced as policy only some years back as growers were left in lurch. The cotton consumers would buy cotton only when they thought was suited to them. Many will remember how disgruntled growers would burn cotton on roads and perhaps in front of Hyderabad Press Club, sources close to trade said, even lint cleaned as far as humanly possible used to be turned down for additional money spent on lint-cleaning, they said.
Once again call is being given to stop cotton and cotton yarn export, which greatly help growers to get reasonable return. If the exports of cotton and yarn are stopped, which government seems to have been trying to hold on good reasons.
However, the cotton consumers, spinners and textile millers have for some time been calling relentlessly to stop exports of cotton and cotton yarn. The fact, however, remains that every pound of cotton and cotton yarn tells on the exports of textile products. Other factors such as gas and electricity were being in short supply or not available at all were causing high cost of doing business and costlier cotton and cotton yarn was going to add to textile exports' difficulties. The silence of government is understandable on the issue but its hand seems tight.
Growers of cotton, rice, wheat or sugarcane have lately been openly refused a better turn while government is not in a position to pour subsidy. In fact the WTO rule comes in the way as violation has been objected and protested. The WTO deal has been hold-up for so long for the simple reason rules have not been accepted by the big and small nations both.
BD DIVERSIFIES TEX EXPORTS:
On top of a BD report regarding more exports to Japan, is a photo of a man protesting against the police in Tongi supposed to have killed his relatives, demanding back pay. The story is replete with hope to raise value of textile exports to Japan by billion dollars over the next two years.
It may at the very beginning seems necessary to give the readers on ready-made garments accounted for 80 percent of the total or dollar 11 billion. Now it plans to exports 13 percent more that is dollar 17.6 billion. Pakistan exports maximum around BD exports of garment alone. The condition is Pakistan has been so lousy that comparison can only be joke.
The BD has the game of being declared as the poorest country and facilitated by all importers to receive there without import duty. Pakistan has long been denied duty free access besides cost of production it too costly to compete in the absence of free trade agreement or like accords. The Indians have reportedly stealthily have mixed up and helping Bangladesh exporters. The report, similar to Indian, says also about Pak exporters who are not happy with the ever rising cost of utilities and raw materials. But the rumour has not gone beyond it. Pakistan was part of that wing and hence exchanges of textile leaders have continued or may have been up for obvious reasons.
The current report, however, gives clear hint that efforts should be on to diversify and never get tired in searching for new markets. The BD exporters are reaping dollar one billion from Japan, and now they plan to enhance volume after a recent visit. However, the investment on travel seems raising the high cost already and coming of bulk of importers here for signing contract is impossible for obvious reasons.
FTA TALKS IN FEBRUARY:
The Pakistani exporters of mainstay textile products who are under heavy pressure from local as well as world tight conditions won't welcome that EU has agreed to hold talks on Free Trade Agreement (FTA): Reason: Why time dragged up to February 2010. The closest rivals, China, India, BD, Sri Lanka and others have been enjoying a couple of facilities like plus, which ensure easier access of their products. Only slightly less than STA. Anyway, Pakistan has greater claim to have more trade to keep Pakistan strong and stable to stay as the number one ally in US and EU fight against so called terrorism.
Several top leaderships of this country failed to spark idea of greater help beyond Reconstruction Opportunity Zone, which remain humping on one or the other grounds. If compared with what the US has offered to India. Earlier USSR loaded it with needle to engine and fighter-craft and technologies. Pakistan for 60 years has seen lack of steadfast leadership with economy never looking up. Pakistanis want to beg and insist they can also be closer. The struggle is on right at the moment.
Democracy is said to have been "installed" but is this democracy by the people and for the people? Their vast majority wants to locate the claim in the thin air around. Had Pakistan been a strong economy and a strong ally of the EU should have questioned why FTA, being sought for months and years will be talked in February 2010? This country is in need of help from any country, which can instantly grant it free access for its textile products and other exportables.