Trading activity outlook was in low profile during the week as market operators waited for yarn exports issue to be solved, while cotton consumers went looking for favourable turn in prices. The spot rate opened at Rs 5450.
WORLD SCENARIO:
The world cotton consumption was perceived at large level supported by gradually world economic recovery. Analysts widely believed US cotton farmers would sow more than 10 million acres as planting recover sharply from the 25-year low of 9.054 million acres. The session opening day saw key May contract rose by 0.31 cent to 82.49 cents lb. Major players, however, foresee rising steam losing. The trading has been dull without showing signs of betterment. Unless solid trading pattern was evident, buying activity will remain subject to price consolidation.
As expected strong fundamental factors missing. Futures by mid-week dived down in queue with soya, wheat, corn and plam oil etc. They were affected, as they were dollar denominated. Besides this the stockholders found the lurch as risky and preferred not altogether unmindful but were hurt as cotton futures gave way to sharp decline, which they do not like to witness. The things to come they dreaded most how long the trend will persist? In a few days time the crop condition will be clearer and players will have a direction may be a positive one.
On Tuesday the NY cotton futures posted moderate gains, as it traded near the upper end of its recent trading range. Benchmark May cotton contract was up 0.40 cent, settling at 82.89 cents per lb in a slightly higher range of 82.00 to 82.96 cents. May contract volume was a tepid 4,168 lots. July cotton futures ended 0.35 cent higher at 83.68 cents. New-crop December moved up 0.42 cent to close at 75.38 cents.
On Wednesday the NY cotton futures finished with steep losses, driven down along with most other commodities, as the dollar surged and investors sold off investments perceived, as risky with credit concerns mounting in Europe. The benchmark May cotton contract slid 1.48 cents, or 1.79 percent, to finish at 81.41 cents per lb. The range extended down to 80.90 cents a lb, a one-week low, from a high at 82.96 cents a lb. May contract volume jumped to 8,497 lots. July cotton futures closed 1.42 cents lower, a 1.70 percent decline, at 82.26 cents. New-crop December lost 0.81 cent to end at 74.57 cents.
On Thursday the NY cotton futures closed sharply lower after euro fell to a 10-month low against dollar and cotton broke below a tight range that held for much of the session. Benchmark May cotton contract tumbled 1.23 cents, or 1.51 percent, to close at 80.18 cents per lb. The range extended down to 80.11 cents a lb, matching the low of March 16, from an 81.94 cent high. May contract volume came to 9,818 lots. July cotton futures lost 0.99 cents to end at 81.27 cents. New-crop December rose 0.41 cent, settling at 74.98 cents a lb.
On Friday the NY cotton futures ended with only modest losses, after reaching down to two-week lows early in the session, but support remained intact as mills were seen price dips. Benchmark May cotton contract finished 0.49 cent lower at 79.69 cents a lb. It traded in a range between 79.27 and 80.73 cents. May contract volume added up to 10,486 lots. July cotton futures closed 0.31 cent lower at 80.96 cents. New-crop December fell 0.32 cent, to end at 74.66 cents a lb.
LOCAL TRADING:
Early two days trading on cotton market was nil on account of March 23rd celebration. On Wednesday, however, some activity was marked on the cotton market when nearly 5000 bales of cotton were sold in very big lots. This size of purchase showed some consumers were looking for an opportunity to buy in bulk to keep mills not only running but escaping high prices that could follow the meeting likely to take decision on yarn exports. The sources who have watched the tussle through decades wondered how could the resort to fight to this extend.
Not only that both are suffering, country is also suffering, while economy is additional sufferer on this count. Country is facing huge problems though aid is being assured but this country's people wait some friends allowed Pak products duty free access in their countries.
On Thursday trading considerably improved, as spot rate stayed at Rs 5450. The spinners and millers disappointed to see any favourable change in prices preferred to buy at existing prices. The sellers and buyers both kept waiting for benefit following the expected decision after meetings between authorities and textile exporters. The issue, the sources wondered, took long time which should not have taken so much time. Silence over the decision is likely to take further toll. They were also surprised, as to why there was no news about sowing of Bt cotton - as it has started in Sindh and Punjab.
On Friday the Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 5450. In the ready business, activity came down, as nearly 700 bales of cotton changed hands between Rs 5425-5550. Phutti prices in both the Punjab and Sindh were at Rs 2100-2200.
On Saturday the Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 5450. In the ready business activity remained low as nearly 1500 bales of cotton changed hands between Rs 5400-5500. Phutti prices in both the Punjab and Sindh were at Rs 2100-2200.
WHERE STRIKE MID-DAY BREAK WILL LEAD TO?
The authorities waited till the breaking point to search for a likely solution - whether free market mechanism should prevail or a solution found without worsening the exports of apparel, as the leaders of the sector claim. Weeks have already been lost in futile wait, which led to strike call and strike, which had to be forgone mid-way. The ill will thus has taken a degree of firm root before fresh efforts have been announced.
The initial topic on Monday to be thrashed out would likely be the lost balance charged by the spinners who claimed they suffered. Besides charge that minister was absent when talks were held between spinners earlier while minister was to be present in the meeting between the Punjab Governor and the representative of apparel sector on Monday. May be Monday meeting with the apparel sector leaders of the governor transpires without the minister, to a great relief to the spinners.
And, in any case whatever the meeting takes a decision all must pray, delivers some lasting solution. Neither the two sectors locking horns nor the economy and country are in a sound position to give way to loss of established export markets. Unfortunately mutual row in this country takes too long to cool down when loss remains to be lamented. The begging bowl is often aired to have been broken, but in fact world community should have made it its habit to keep permanent fund to be released through leading donor agencies.
Additionally unfortunate that the donor countries have never honoured Pak leaders call to favour them with "Trade". The issue is serious enough to take out a few ministers to ponder over. The world is for its own gains and interest wary to be our friends in need. Whereas within country, individuals are at loggerheads, accusing each other for harming the other. The yarn exporters claim orders if not dispatch will lose ready market, while textile exporters talk of rivals who will trade on our yarn and block exports of textile products, which is the highest forex earners!
APPAREL SECTOR PERFORMING POORLY:
May be the a renowned study such as International Benchmark Study had for some reason had not come openly to signal that the apparel sector in this country is performing poorly. It has singled out even the areas like organisation of production, working methods, labour production, middle management and quality control efficiencies. It sounds strange that majority of the unclear workflow, as it said work places are not organised properly. Lines are not adapted to the styles, bundle system is not correctly implemented and too many people including helpers, checkers and transporters are performing unnecessary activities there. Earlier local companies had pin pointed weakness in the apparel sector but indifference has impacted the sector.
The world level Werner International has four levels of its benchmark value to determine that state of affairs in apparel sector of particular country. The benchmark value ranges between one to 10. Pak apparel sector unfortunately is measured in between one to six or from poor performance to medium low performance on the Werner benchmark value, barring few.
However, Aptma only meets with world class manufacturing standard. There are, according to reports, constraints on several counts, primarily it has been faced with non-availability or shortfall in yarn. The above are cause of high cost of doing business besides unhealthy competition with the rivals. The rival exporters are made available at doorsteps like utility and things exporters need like yarn. The yarn exported from this country is a boon. However, export of ready-made from this country will improve when everything else will.
COTTON SOWING SEASON:
The yarn export has meddled with cotton buying activity on the market - fortunately the left over stock is to last somehow until the new crop will be in the market. The new sowing has begun in both Sindh and southern edge of Punjab. The recent rains were sufficient to sow the seed but because of dams and canals and rivers present desert look, early break in monsoons will eagerly be awaited. The perception that increased consumption is likely, the cotton producers, except in Africa, even in America/higher sowing being taken for granted because conviction that 2008 depression is gradually on the downside.
In Pakistan during current season crop at 13 million bales were considered much less than required. The statement could be exaggerated because a good quantity has been exported also. About imports, textile exporters are in a habit to import on pretext they import cotton of world quality or their products are rejected. Whatever be the case, cotton growers when asked to grow cotton to such and such level, they had in the past occasion to burn on roadside because the consumers refused to buy on quality ground. The observers who have watched closely this attitude are sure that the attitude will have to be changed or a time is not far when cotton growers will cut size of cotton crop to save themselves from deliberate loss.
The signs of good days are in sight, with that self being gradually replaced by collective good of the country. The country is made a matter of fun, as it has hardly been run without stretching begging bowl whose look Pakistanis still fail to recognise. The sowing of cotton crop has started with that after a lapse of some time guesswork will start and with that rise and fall in cotton prices, which has circled above Rs 5000 a maund.