Buying pace failed to match the falling prices of cotton during the violence struck week. Over all downtrend prevailed through week. On the last day prices, compared with previous week closure were: spot rate down Rs 600 at Rs6200, lint prices by almost Rs 700 from Rs 6800/7000 to Rs 6025/6300. Domestic market appears to be moving along the world market trend.
WORLD SCENARIO:
Higher cotton prices have attracted growers to go for grow more in the countries where machine and input cost had deterred them in African countries. Now reports say in Ivory Coast, where political upheavals, too, had been creating roadblocks expect to be above 200,000 tonnes. Similarly West Africa expect 400,000 tonnes yield. India hopes to harvest in 2011-12 around six million tonnes, China is the world's largest exporters of textiles with global 28.3 per market share, India is just below China, second biggest cotton exporter. Both fear futures is not in their grip, in view of the economists who are warning world leaders food crisis may overtake already shaky countries who may not go for cotton India is kept ahead of all. In a couple of years or so this country is seen turning net importer. China is trying to keep imports under control and inflation under check.
Pakistan is a bit aloof from above countries, which stocks to grow 15/16 million bales and enhance textile exports. The hurdle is there - gas and power besides other inputs are either not available or available at higher costs. Bangladesh is proudly speaking about record $22.92 billion apparel sales owing to cheap labour. They are also showing apprehension about gas and power likely to go up holding exports too much lower level.
On Monday the NY cotton futures ended down and near a nine-month low on investor liquidation on a stronger dollar and jitters over the effects the euro zone debt crisis will have on economic growth and fibre demand. The key December cotton futures on ICE Futures US fell its five-cent daily limit to end at $1.0888 per lb, with the session top at $1.138. It was the lowest close for the second position cotton contract since mid-October 2010, Thomson Reuters data showed. Volume traded stood almost 9,000 lots, over 50 percent below the 30-day norm, Thomson Reuters preliminary data showed.
On Tuesday the US Cotton futures closed at a new nine-month low for a second day running due to investor sales, and weak demand coupled with jitters over the euro zone crisis could hit values further. The key December futures on ICE Futures US fell 4.49 cents, or 4.12 percent, to end at $1.0439 per lb, dealing from $1.0388 to $1.0679. It was the lowest close for the second-position contract since early October 2010, Thomson Reuters data showed. The market last traded below the psychological $1 mark also in October 2010. Volume traded was almost 21,500 lots, nearly 10 percent above the 30-day norm.
On Wednesday the NY cotton futures closed higher on investor short-covering as the market recovered from a fall to a nine-month low after US Federal Reserve Chairman Ben Bernanke raised the possibility of more stimulus which alleviated for now worries of a flagging global economy.
Cotton had tracked losses in other commodity markets due to fear the euro zone debt crisis would spread like a disease and damage economic growth, which would then have a knock-on effect in depressing cotton demand. Stocks, commodities and the euro rose after Bernanke said the Fed could provide more stimulus if recovery stalls. The key December cotton futures on ICE Futures US rose 4.07 cents or 3.90 percent to finish at $1.0846 per lb, dealing from $1.0444 to $1.0885.
On Tuesday the contract ended at $1.0439 per lb, the lowest close for the second position cotton contract since early October 2010. Volume traded was almost 15,000 lots, almost a quarter below the 30-day norm.
On Thursday the NY cotton futures settled lower on investor sales as the inability of the market to build on the gains of the previous session prompted players to dump fibre contracts. The key December cotton futures on ICE Futures US fell four cents or by 3.69 percent to finish at the session low of $1.0446 per lb, with the day's top trade at $1.087. Volume traded was over 12,100 lots, more than a third below the 30-day norm. Independent cotton analyst Mike Stevens in Louisiana said the market filled a gap left over from Tuesday in the December contract of $1.0888 to $1.0679 and this should have opened the door for a test of $1.11 to $1.13.
On Friday the NY cotton futures closed down their five-cent limit, hit by a massive wave of investor liquidation in the December/March spread which kept fiber values pinned at nine-month lows. It was the sixth straight weekly loss for cotton and the biggest single weekly decline since December 2008, as demand repercussions from the market's brief historic spike above the $2 per lb level in May continued to unfold, leading the market lower in search of its fair value. The key December cotton futures on ICE Futures US plummeted to its five-cent downside limit, to end at 99.46 cents per lb. The session high was $1.0345 per lb. It was the lowest close for the second-position contract since early October 2010. Certificated cotton stocks deliverable against the ICE No 2 cotton futures contract as of July 14, totalled 51,261 (480-lb) bales, up from 44,477 the previous session. Open interest in the December contract fell by 1,234 lots as of July 15, while interest in March eased 450 lots. Total market volumes picked up as the sell-off took hold on Friday, with 26,700 lots traded, more than a third above the 30-day norm, Thomson Reuters preliminary data showed.
LOCAL TRADING:
Spot rate stayed firm on the opening day as buyers thought prices may rise considering textile products will earn better on exports. However, nearly 3200 bales of cotton changed hands in price range of Rs 7000 to Rs 7100 depending on the quality of the lint. Phutti too was firmer as falling streak had to come to an end. That production may reach 15 million bales proved too much for the sellers.
On Tuesday strong buying was marked during which about 7000 bales of cotton was lifted. The prices at which buying was seen was between Rs 6500 and Rs 7000 depending on the quality. Seed cotton in Sindh was sold at Rs 2700 and Rs 2800 down Rs 200 while in Punjab phutti was down by Rs 100 to Rs 200 to Rs 2500 and Rs 2800. Spot rate was down Rs 100 to Rs 6700.
On Wednesday cotton prices nose dived alluring all buyers particularly exporters watching developments from sidelines. The spot rate was reduced by another Rs 500 to Rs 6,200 seed cotton prices in Sindh lost yet another Rs 100 to Rs 2600 and Rs 2700, in Punjab phutti was down by Rs 100 to Rs 300 quoted at Rs 2400 and Rs 2500. Nearly 800 bales of cotton were lifted in price range of Rs 6000 and Rs 7350. Phutti pace of arrival continued to rise ensuring further downward drift in cotton rate.
On Thursday Karachi was hit by violence marring the trading activity. Spot rate was unchanged, seed cotton in Sindh was higher by Rs 200 to Rs 2300 to Rs 2900 and Rs 3000, and in Punjab phutti was higher by Rs 300 to Rs 2700 and Rs 2800. The traders were not interested in sales and buying activity.
On Friday prices were firm following the disruption in phutti arrivals to the ginneries KCA official spot rate was unchanged at Rs 6,200. Seedcotton rates in Sindh did not show any change at Rs 2900-3000, prices in Punjab followed, depicting no variation in the overnight rates at Rs 2700-2800. In the ready business nearly 5000 bales changed hands between Rs 6,200-6,500.
On Saturday bearish trend was witnessed at the weekend, as local prices tracked the global market direction KCA official spot was unchanged at Rs 6,200 Seedcotton rates in Sindh were down by Rs 100 to Rs 2800-2900, prices in Punjab were on the same way, showing sharp decline of Rs 400 to Rs 2300-2600, they said.
In the ready business, nearly 4000 bales changed hands between Rs 6,025-6,300. In the Punjab, cotton belt areas are receiving sporadic rains, which are beneficial for the crop and this factor may help in achieving the current year target of 16 million bales.
SWEDEN MAKING ALL OUT EFFORTS FOR GSP PLUS:
Almost a year back, when devastating floods ravaged Sindh and Punjab, members of "Global Village" consciously rushed with relief. The old hand in trade the European Union prepared a package with an eye on the flood hit dragged to death people but the Union preferred to take route to do it through WTO. A year down the line WTO humanitarian body failed to okay the so urgent package which could have saved deaths, but voices, a couple of them opposed the philanthropic move. All individual EU members, parliament has said "ya", but the few who proved heavier of all.
Now Sweden stepped forward struggling to put in its best to help Pakistan get GSP plus status in the EU. Propounding the effects Swedish envoy said "We are very much pushing for help, as we believe that Pakistan has a huge untapped potential". India whose voice dominates seemed adamant despite approach Pakistan made to soften tone so that now a year old Package is given green signal.
The Pak exporters of textile products are told the issue will be raised with other issues towards peace and understanding a couple of months. India not alone is indifferent, Pakistan has been inimical of its own for quite mindfully accepting this country as markets for supplier countries. There are quite a few countries who resume journey about 60, 40 or 35 years back and left behind others such as China and even India. Pakistan remains moving along bumpy roads, facing jerks and collecting dirt with begging bowl and talking about breaking it.
PAKISTAN PAYS HIGH, STILL MORE BUT GETS:
Garment exporters of Pakistan, discouraged by attitude of importers, finally decided to set up their businesses in Bangladesh. Like China, Bangladesh was inviting garment exporters to set up firms there, for taking advantage international textile buyers have offered to Bangladesh. Some delay on the part of Pakistanis was one belief that the EU duty free package was in their pocket lent that was not so. The friendly countries who were constantly been approached are also seems in double mind to offer this country duty free access; GSP plus and opportunity zones. The exporters have perhaps found surrounded by tough and even impossible conditions.
The authorities relevant to textile industry and exporters tightened belt to show praise worthy achievements in textile exports. It will be in their best interest to live under trying conditions rather than looking around with a begging-bowl. Investment in Bangladesh and whatever returns out of that reaches back Pakistan will add to kitty.
The textile products exporters may have to watch behaviour of the monsoon, which changes its course and impact, besides needs of the hour such as food grains-rice, wheat, pulses, sugarcane cotton and cotton products demand reached century old peak in the region of $2 and more but human weakness has once again led to economic drawdown and economists forecast that demand for cotton and cotton products will contract. If textile exporters are BD-bound, they should be congratulated for diversification.
EU'S PLAN FOR VOCATIONAL TRAINING FOR YOUTHS:
Before above plan is discussed in detail it is imperative to make Pakistanis believe that Pak products access into EU market has been under process. Besides, Indo-Pak peace talks in coming months will also address package WTO is taking care since over six months. The EU is all for package be granted to flood hit people of Pakistan. But, nevertheless, to compensate the interim loss, the EU planned to import vocational training for a period of five years. In a way training of youths who knock doors of industries but are turned out or engaged on very low wages. The time period - five years if the training proves fruitful time period could be stretched. The Jica the Japanese institution is also engaged in similar efforts.
The local firms engaged in exports of textile goods, sports or surgical goods have training plans so that efficiency could be improved. But initiative so far has been limited to firms in big towns and cities. Even Jica has restricted its activity to cities. The EU plans to reach to such distant places as Fata and tribal areas where youths have no prospect to learn and supplement efforts in improving the lot of the people with limited scope.
Such plan was originally floated by America some five years back. The scheme so far remained dream unfulfilled. In a small scale the EU plans and hope to achieve it aims at.
WTO CALLS ON EU TO PHASE OUT STATE AID:
Pakistan's EU package to free access to markets has been held up on strong belief that some hostile voices impacted holding back package to flood ravaged Pakistan. It was predicated to this so called "nay" which, whether will be taken up as has reported during two countries foreign minister talks on topics dealing with peace and durable relation.
In the meantime WTO deemed to appropriate to impress upon the EU to phase out crisis state aid forthwith. The condition linked with - very vivid - it is important to persevere with ongoing initiative at the EU level to phase out crisis support once the economic recovery has taken hold, the WTO said.
The perception behind the nice advice is no doubt to keep practice of calling for aid, every now and then by countries which indeed is to caution aid seekers to rid from calling aid for as and when desired. WTO says once "the economic recovery has taken hold" that has shaken most parts of the world. May be Pakistan would have given a call to friendly countries following unprecedented floods that took away crops in fields, roads, bridges and habitations rendering people to take shelter on mounds and highways under open skies. The mercy who gives feeling to address philanthropic activities is different thing. The fact remains that the man approaching first may get but even the most needy may suffer.