Cotton price has been soaring on the market owing to damage by flood and in hope that world economy is fast coming up. China's consumers are looking for more yet, Pakistan textile exporters were relaxed when reports came from India that country will open talks for exports.
WORLD SCENARIO:
The cotton futures sustained rise for some weeks will lose heat or otherwise major players had no meeting ground and differed. As it is apparently China's emerging role in keeping cotton unwavering seemed to many. China showed a global recovery. How long was the question as this country stood adamantly to safeguard sanctity of its currency. Grains from outside markets offered support. Japan's economic growth, along China will propel prospect due to persisting demand, analysts were firm in their belief.
The US stimulus plan to buy 600 billion treasury bonds was aimed at supporting oil demand. The past week its cotton subsidies a planned action to isolate the US and providing hope for optimistic and calculated return to grow cotton was seen to build up stand to linger on. The reference is regarding African poorest countries like Benin, Burkina Faso, Chad and Mali produce cheapest cotton for exports nearly four percent. India's latest stiffness and open talk with Pakistan to release cotton at agreed price was heartening. But on domestic front Pakistan textile exporters are gradually surrendering and talking bulk of export orders will go waste.
On Monday the US cotton futures finished marginally higher to end a three-day losing streak as trade and suspected mill buying wiped out initial losses.
The US cotton market rallied last week to an all-time high, but the threat of monetary tightening by No 1 consumer China deflated fibre contracts on Thursday and Friday. Benchmark March cotton on ICE Futures US rose 0.02 cent to $1.342 per lb on Monday, having moved from $1.3499 to $1.2838 - the lowest for the second-position contract in 12 days. Volume traded in US cotton reached almost 45,400 lots, about a quarter above the 30-day average of 34,200 lots, preliminary Thomson Reuter's data showed.
On Tuesday the US cotton futures fell on speculative sales and switch pressure after an early boost provided by firm cotton values in No 1 consumer China petered. The market remained wary of any hint that China may tighten monetary policy, as prices appear to be consolidating following their correction from an all-time high hit last week. The benchmark March cotton contract on ICE Futures US fell 2.04 cents to trade at $1.3216 per lb, moving from $1.3043 to $1.3820. Spot December lost 2.14 to $1.3661. The December cotton contract goes into delivery next week.
In China, the Zhengzhou Commodity Exchange's May cotton contract last traded Tuesday at 28,330 yuan per tonne, up 440 yuan on the day.
On Wednesday the US cotton futures ended near a 3-week low on investor sales sparked by news No 1 consumer China said it would fight what it calls illegal price increases in markets like cotton. Cotton prices surged to their loftiest since the US Civil War in the 19th century, but has since lost nearly 20 percent in value in a sell-off in the commodity sector. The benchmark March cotton contract on ICE Futures US fell 5.05 cents to close at $1.2415 per lb, its lowest settlement in almost three weeks. Volume traded was at 36,119 lots at 2:33 pm EST (1919 GMT), just under 2 percent below the 30-day average at 36,808 lots, Thomson Reuters preliminary data showed.
On Thursday the US cotton futures rebounded after sinking previously to a 3-week low on speculative buying as news of a deal for debt-wracked Ireland weakened the dollar and gave the market a boost, brokers said.
Prices of cotton were hit hard by fears China may take stern action to curb inflation running at a 25-month high by increasing interest rates or capping domestic prices with measures that would crimp commodity demand or drain liquidity from domestic markets.
The benchmark March cotton contract on ICE Futures US rose 4.85 cents to trade at $1.29 per lb, near the top of its $1.2338 to $1.2915 band.
On Friday the US cotton futures ended down by their daily limit on Friday after another move by China to slow its economy led to further liquidation before the weekend, brokers said. The benchmark March cotton contract on ICE Futures US closed down 6.00 cents, or 4.65 percent, at $1.2315 per lb.
TEX UNITS REMAIN CLOSED:
The textile processing and printing mills, sizing units and foundries meaning the entire process involved in producing exportable textile products had to be closed down. The admonishment could have less severe if as agreed by federal minister for one-day gas shedding for industries across the board.
Besides the outright closure declared by the government, the sufferers alleged that the low gas pressure is damaging the imported state of art valuable machinery of textile processing industry, which has created plethora of problems for industrialists, while textile industry, which is major contributor to the exchequer is gradually sinking.
The crisis this major sector of the country going down the drains beams signal for local and foreign investors to hold back. The result is evident: local money saved by neglecting taxes and other obligations is being deposited with foreign banks or residential places are bought, said knowledgeable circles adding that the constraint could be made less severe provided it would not be for passing on responsibility on someone else. Will authorities ponder for a moment and leave behind when they go every thing spick-and-span. The manifesto has to be done through for taking country out of donors' clutch.
FINNISH EXPORTS ARE FOUR TIMES HIGHER THAN PAK:
The write up main lines just above infuses in sensitive people across the world to ponder for making up any shortfall in country they live in. The headline seems just out of context. But it is. It penetrates deep into thinking Pakistanis whether potential God has blessed them with could have placed ahead of many like Finnish despite its miniature size. How aggressive it sounds as Osmo Lippomen, the Finnish envoy to Pakistan said with a mix of genuine pride that Finnish exports are four times higher than Pakistan although population of Pakistan is 25 times higher. Agriculture produce could feed the entire 18 million and produce wears for the people. But cotton and wheat and sugar Pakistanis have to import.
It is never given as to what amount is thus saved. Budget deficit is perennial, trade deficit is unending and IFCs are found missing hardly for a few months. The total exports stay around $8 billion or in close proximity while South Korea earns five times more from imported cotton, cotton yarn from Pakistan.
The envoy speaking about the major accomplishments of his country said Finland has been at the forefront of drafting international water and sea laws besides contributing towards resolution of environmental and human rights issues within the domain of European Union. The envoy said above in plane words without dwelling on what has dragged Pakistan to dire strait is corruption and absence of governance. Will indirect advice be of any use.
HIGH COST OF DOING BUSINESS PLUS:
That cost of doing business was hurting the exporters, particularly textile value-added products, who kept knocking doors of every relevant ministry and high ups to do away with the problem so that Pak goods entered foreign markets with acceptable edge. But except half hearted back up nothing concrete surfaced.
In the meantime with exception of an auspices opening that EU agreed to allow duty free imports from this country, power, gas and cash crunch plus law and order situation moved in the sector to add further constraint. There are problems, which need not necessarily money but supreme quality of give and take, not seen in efforts to dig out a possible solution of cotton yarn exports.
Even cotton cost under pressure of galloping price hike across borders was left over to the developing spectre. That growers of cotton should be paid to survive in a better way than they have been treated so far. Since growers differ from mere employed to grow on land of bigger landowners. Authorities should treat differently.
Small landholders and mere labourers need particular care to increase their standard of living. The fact, however, stands affirmed that country's place is nowhere in the comity of nations.
Coming back to subject, the expenses are too high - exporters need cash flow - but where it has to come from? Once some funds take shape, though supposed, to be returned are utilised somewhere against norms, is glaring practice!
GREATER ACCESS INTO US MARKETS:
May be with not that force being asked in this country since leadership here decided to extend hand of friendship towards the US adherents to democracy. The option was open, Soviet Union had already moved forward to extend helping hand to newly carved God gifted land called Pakistan. The history however, had to write developments differently. Just a mention of India, which shook hand with USSR stands proudly at the threshold of fast emerging country and Pakistan one is constrained to hear though in whispers is a failed state.
Today a US independent think tank with former Dy. Secy. of State and former national security advisor as chairman concluded that millions of Pakistanis could benefit from greater access to US markets for textile goods. For years Pak leadership has been calling for FTA, bilateral investment and trade not aid but nothing is in immediate view. The EU realised, late though and has been talking to allow Pakistan greater access shortly. But it is still shy of extending GSP-plus, available to all rivals of Pak exporters, probably there are some WTO related matter. The WTO has a number of objections more serious being subsidies to agriculture in the US and EU. But it is weaker country like Pakistan where world rules hold fast.
LOCAL TRADING:
The rising tempo, less for local, mainly because of foreign (China) influence China has been leading the cotton show. However, week under review saw spot rate slashed hugely by Rs 200 to Rs 8,300. As a matter of fact the knowledgeable circles in look out commented that world cotton rate is coming in the way which is unethical. Nearly 11000 bales of cotton changed hands, low lifting as usually buying is stretched upward.
The low quantity showed they have stocks enough to wait until they can press sellers to lower rate. The cotton changed hand was priced at Rs 8800 to Rs 9200. The phutti in Sindh and Punjab rose in line with lint value by Rs 500 to Rs 600 to Rs 4000 and Rs 4300. However, low sales also reflected non-availability of truck to carry bought cotton to mills' godowns.
On Tuesday the spot rate regained lost value Rs 200 only on Monday. The spot thus was noted at Rs 8500. If taken major world players in cotton the futures were soon to fluctuate either way with tone remaining firm. China is the largest producer of cotton and buys also millions of bales, particularly from India and America, being a major driver. The post-flood harvest of cotton in this country is being criticised, as wheat sowing is said to be delayed as a result.
On Saturday the Karachi Cotton Association left the spot rate unchanged at Rs 8500. In the meantime, seeds cotton prices in Sindh and Punjab were at Rs 3900-4000, they said. In ready business above 8000 bales changed hands at Rs 9000. According to the market sources, despite the slow arrival of phutti, there was buying interest from spinners indicating that prices may show firmness or go up in the coming days.