Growers are reporting bumper production with generally favourable conditions ruling buy scenario may change. Spot rate was down by Rs 150 to Rs 5850 at the end of the week on July 24.
WORLD SCENARIO
Cotton futures were seen down on the opening day of the outgoing week but players saw the level attractive. Cotton has practically lost fundamentals and depending on outside spill such as grain, gasoline prices. The dollar has not been practically fluctuating infrequently and if so gains pull cotton prices down.
The presidential change over in America was hoped to bring a better change in the global economic scenario but hopes have neither lived nor viewed as some world renowned economists speak in vague language - recovery is possible but in slow pace. The others in whispers though say of double dip but hasten to add it will be restrained with Europe taking recourse to shape their deficits in order.
The USDA frequent reports that recovery in recession had prompted demand for cotton was likely to rise including America's from some 16 million plus to 18 million bales plus. Some growers had abandoned cotton harvest but since prices are lurking 75 cents a pound which many see encouraging with recovery seen coming have returned to cotton field such as in Africa. China largest grower and consumer has found road block earlier in the season due to severe cold and lately with worst floods. India seems to be in a comfortable position with Bt cotton making it net exporters. Pakistan is likely to harvest over 14 million bales but interests seem to make textile exports difficult.
On Monday the NY cotton futures ended lower, after an early test and failure at the 75-cent level attracted sellers and kept the market locked in a familiar range. The key December cotton contract shed 0.34 cent to settle at 73.62 cents per lb, after dealing between 73.25 and 74.98 cents. Volume traded in the December contract stood at 8,465 lots.
On Tuesday the NY cotton futures finished at a 5-1/2 month low on investor sales as a large US crop and uncertainty over the state of global economic recovery kept fiber contracts on the defensive. The December cotton contract fell 0.61 cent to settle at 73.01 cents per lb, after dealing between 72.96 and 74.29 cents. It was the lowest close for the second-position cotton contract since February 9, according to Thomson Reuters data. Volume traded in the December contract stood at 11,827 lots.
On Wednesday the NY cotton futures finished firmer on investor and trade buying as the market rebounded from Tuesday's 5-1/2 month low and follow-through interest may nudge fibre contracts higher this week. The December cotton contract increased 0.92 cent to end at 73.93 cents per lb, moving from 73.24 to 74.48 cents. Volume traded in the December contract stood at 10,872 lots.
On Thursday the NY cotton futures ended higher on investor buying as tight deliverable supplies gave nearby months a boost although players were still fretting over the fragile state of global economic recovery. The December cotton contract increased by 0.78 cent to end at 74.71 cents per lb, moving from 73.58 to 74.74 cents. The spot October cotton contract gained 0.80 cent to finish at 79.57 cents. Volume traded in the December contract stood at 12,651 lots.
On Friday the NY cotton futures finished at a two-week high on follow-through buying as scant deliverable cotton supplies boosted nearby contracts and the advance may spill over into next week. The December cotton contract increased 0.63 cent to end at 75.34 cents per lb, moving from 74.51 to 75.54 cents. It was the loftiest close for the second position contract since July 8, according to Thomson Reuters data. On the week, the contract was up 1.86 percent from last Friday's close of 73.96 cents. The spot October cotton contract gained 0.75 cent to finish at 80.32 cents. October enjoys a 4.98 cents premium over key December, up from the previous session's premium of 4.86 cents. Volume traded in the December contract stood at 12,028 lots.
LOCAL TRADING
On Monday God was merciful to cotton consumers as drastic cut was effected in spot rate - down by Rs 200 to Rs 5800 leading to buying up by 7000 bales. The prices ranged in the range of Rs 5300 to Rs 6200. However, phutti prices were unchanged in both Sindh and Punjab at Rs 2600 and Rs 2700. Meanwhile, the relevant quarters waited for the resolution of the year and value-added sector following stakeholders meeting.
On Tuesday mills demand persisted following hold up in decision over the export of yarn. The official spot rate was higher by Rs 200 to Rs 6000. Sales experience was good nearly 3000 bales of cotton changed hands. Market operators were mum over behaviour of the trading and price but were optimistic that cotton production may beat target unless some miracle happened.
On Wednesday the sales lacked undue panic, as a result, prices stayed firm, spot rate at previous Rs 6000, phutti in Sindh ruled at Rs 6225 per maund. Undue delay in decision by authorities over the reigning issue of regulatory duty on yarn exports is holding usual buying activity. However, silence by authorities seems have some meaning which will surprise both the sectors at loggerheads.
On Thursday growers maintained harvesting cotton despite threat of rains leading market to relax prices. The inevitable has been reported - as the phutti flow gains pace, viral or pest attack consumes some space in newspapers. The relevant people should wait for the price line next - spot rate was unchanged, while phutti rates in Sindh and Punjab registered slight fall.
On Friday modest trading was seen as ginners showed some hesitance in selling below their psychological levels. Spot rate was slashed by Rs 150 to at Rs 5,850. Some 5,800 bales of cotton changed hands between Rs 5600-6090. After the rains in the country, phutti prices in Sindh were at Rs 2600-2650 and in Punjab the rates were higher by Rs 200 to Rs 2800-2850.
On Saturday firmness prevailed, as the ginners were not ready to sell below their psychological level as rains in the Punjab continued and may cause stoppage in phutti arrival. Spot rate maintained overnight rate at Rs 5,850. In the ready business more than 4,600 bales of cotton changed hands between Rs 5800-6100. Cotton circle is waiting for the decision over the export of cotton yarn, instead of taking interest in daily business.
RESOLVE, PROVIDED
The world having some link with manufacturing and exports of textile made up must have wondered why necessarily yarn export is preferred. In fact, invitees during ten decades belonging to cotton, textile and made up exports, have wondered why Pakistan's stress on exports of cotton and yarn instead of textile value-added products, which according to knowledgeable sectors earn six to seven times more. The authorities who oversee exports in cotton, yarn and value-added sectors are perplexed, and in fact a failure to reach the depth of problem. In other words, they take cover under certain policy (free market economy or supply and demand volume) without facing how in practice principles are working. Unfortunately, in this country, which is said to have been created in the name of Islam is preserved only in books.
Where economic principles have failed, perhaps 2008 great recession can be quoted has come to be realised that it was failure of imperialistic practices. If supply and demand in principle is strictly taken for granted then "hoarding" should be acceptable. But this seems not so. Authorities, in recent days had sugar hoarders. Why necessarily, authorities, despite textile ministry in existence, have failed to find a meeting point for the yarn exporters and exporters of value-added products. The textile ministry must swing and honestly calculate the quantity of yarn consumed by the textile made up exporters and ask the yarn makers to deliver entire quantity at its door where from the made up exporters collect worth their needs.
DO TEXTILE PRODUCTS SELL WITH BRANDS?
What psychology is behind insistence not to produce various products with brand name? For years confident made up producers have been asked by foreigners to do the branding so that the textile products particularly sold in foreign markets. China and India and others have a tag hung to particular country's brand, making easier for the products to inroad into foreign markets proudly known as Pakistan's. Some decades back warm cloth produced in "now" Faisalabad was proudly branded as Pak made in countries like Japan and even India. What befell in coming days that only foreign multinational products are allowed and encouraged by government, which certainly hurt the penetration by Pak products. Only very recently it was prominently reported that Pak textile preponderant share was marked shrinking. If it was really so, it pained the hearts of Pakistanis. If may not primarily be so due to brand name alone, but high cost of doing business.
The once friendly countries are observing prejudice against the products also. The Americans and European Union don't allow free access to Pak products. The gradually shrinking textile market products had constrained some to call louder for knowledge-based products - IT (information technology) for example which product is as good as any such as India. But authorities know for themselves they are applying misery in this regard. A recent report datelined Islamabad was aggressive asking government to encourage branding process in Pakistan. Similarly textile products and various products produced in Sialkot may be encouraged, if not so far, to sell abroad with branded name.
GREATER ACCESS TOP US MARKETS AGAIN
Encouraged by some fresh deal, Pakistani businessmen and exporters spring up to call for greater market access in the US (the EU). Harbouring in subconscious that war against terror will one day prove gainful for the world at large - step in to ask for something such as greater access to markets of friendly countries. This hope has been expressed at all levels - top leadership to textile exporters particularly.
But one can recall such demand going back to years has politely been deferred for some proper time decided by Friends of Democratic Pakistan or even closer ones. When the moment will really come, and particularly textile exporters will enjoy so sought greater access is hoping against hope. Disappointed to win even GSP-plus so far from the European Union, the so-called rotting ROZs are proposed for establishments that would help create employment opportunities in the less developed areas of the country.
Utmost what Pak exporters at long intervals are told that ROZs are being processed by legislators. This Pak exporters have seen a transit facilities to Afghanistan has been talked as authorities deny it has been given any concrete shape. Nobody knows when recently talked trade matter will take legal shape and hence some top exporters have taken a chance to remind liberal investment in this country, FTA and what not, but a wait caan show if they materialised.
SOME SUGGESTIONS TO SET COTTON TRADING RIGHT
When all is upset on trading from particularly affecting exports managing foreign exchange should be pondered by authorities, who are assigned to the job - textile ministry since it has an existence. If any victim comes forward it can be presumed time span has been consumed to undesirable limits. The yarn exports and how value-added sector is getting hurt - in fact - the national economy offers all to ponder.
The front page story in 'leading newspaper datelined Islamabad that some spinners have been manipulating cotton prices. The ministry officials assumingly belong one or the other way from cotton and textile trade. They must know without involving their own feeling and interest who are indulging in practices that are hound to naturally affect one cotton and textile sector or the other. The value-added sector with back to the wall calling loud or accusing some spinners of manipulating cotton prices by hoarding stocks of cotton and operating as traders in raw cotton. This was contained in a letter addressed to president of Pakistan.
The letter pleads for putting a halt to such unethical practices by the spinners. Letter says government should strictly regulate stocks of cotton being kept by them. Their monthly requirements be fixed and ensure that only two months stock of cotton is maintained by the spinners. The VATF hopes that suggested step will drastically reduce hoarding by a cartel of some spinners. The letter extends figures how prices are manipulated.
It said world price of cotton is ruling around 80 cents and on forward trading 72-75 cents. The price of cotton in Pakistan is above 100 cents repeat above 100 cents that is a great irony, the letter said. Letter contains more suggestions but authorities will not need service if they succeed in injecting ethics in traders.