The sowing of Bt cotton increased production despite deluge and sellers seem to be in trouble for not getting good return - spot rate was reduced bt Rs 400 down at Rs 4900 during the week ended on December 17,2011.
WORLD SCENARIO
Global recession fear and weak outside markets coupled with fundamentals nearly absence took the toll. Meanwhile China imported 378,200 tonnes, a rise of 199.6 percent from a year earlier. After short break China is likely to start buying when cheap cotton will be available - from April. The US cotton prices are on move - both ways-up sometimes or down-but gradual declines has continued.
Pakistan suffered deluge, but production may be higher that being seen, Pakistan hopes to export one million bales cheapest available today. But it will have to purchase 500,000 bales from abroad, Pakistan annually imports long staple cotton to meet its export needs. Bt cotton sown this year, which saved Pakistan from imports.
India reported cotton production lower than last years. But is silent whether imports will be required or can save to export. Report from Brazil, CIS, Australia, Egypt have been hazy, but all these prefer to export cotton rather than use internally. So countries suffering shortfall could take advantage and can import to their hearts content.
On Monday the NY cotton futures finished at a 16-month low on follow-through investor sales, as recession fears from the euro zone debt crisis and a bearish crop report kept the market on the defensive. Key March cotton futures slid 3.27 cents or 3.6 percent to close at 87.16 cents per lb, after dealing between 87.06 to 90.84 cents. It was the lowest settlement for cotton's spot contract since late August 2010, which was when the market began a historic rally that lifted it to record levels above $2 a lb earlier in the year. Volume traded on Monday stood at around 16,800 lots, around a quarter under the 30-day average, Thomson Reuters data showed.
On Tuesday the US cotton futures ended with small gains after falling for a second consecutive day to a 16-month low, where buyers found value. The sell-off this week followed Friday's monthly supply/demand report from the US Department of Agriculture that portrayed a large reduction in demand. The selling "was still a hangover reaction from the USDA report last Friday, especially the huge cut in world consumption," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana. Benchmark March cotton futures rose 0.15 cent to finish at 87.31 cents, after falling earlier to a low at 86.63, which dates back to August 2010 on a continuation chart.
On Wednesday the NY cotton futures finished at a 16-month low, as week outside markets coupled with poor fundamentals took their toll, and further losses could occur in coming days. The benchmark March cotton futures fell 2.19 cents or by 2.5 percent to finish at 85.12 cents per lb, trading from 84.35 to 87.42 cents. On the spot continuation charts, it was the lowest level traded since the middle of August 2010. Cotton prices began rallying in August 2010 due to tight supplies and robust demand, eventually hoisting cotton futures to their highest since the US Civil War in the 19th century. Prices peaked at $2.27 in March before starting a sharp decline. Volume traded on Wednesday reached almost 13,100 lots, nearly 40 percent under the 30-day norm, Thomson Reuters preliminary data showed.
On Thursday the NY cotton futures finished with moderate gains, but prices could soon resume their downside trek, with little fundamental or technical news to keep them bolstered. On Wednesday, cotton dipped to a 16-month low, it's third in as many days. Though the selling was staunch on Thursday, and prices could continue to rise for a few days, they will likely unravel again. Benchmark March cotton futures closed 1.17 cents higher, up 1.37 percent, at 86.29 cents per lb. The contract set an inside day, trading at a lower high of 86.71 and a higher low at 85.0 cents. Generally, after an inside day whichever direction prices head next dictates their near-term outlook. Volume traded in the March futures came to 6,610 lots.
On Friday the US cotton futures finished flat, after two straight days of price swings, as investors reacted to developments from outside markets amid weak fundamentals for the fibre. Benchmark cotton for March delivery on ICE Futures US settled at 86.29 cents per lb, unchanged from Thursday. The contract had risen 1.3 percent in the previous session, after falling 2.5 percent on Wednesday - reaching the lowest traded levels since the middle of August 2010 on spot continuation charts.
LOCAL TRADING
Further steep fall was restrained by interest shown by the exporters and textile sectors bought cumulatively 15,000 bales. The prices ranged between Rs 4700 and Rs 5300. The buying could have been more but sellers were not happy with the return. The growers were not satisfied with what were getting, but won't hold in expectation of better harvest. Spot rate was unchanged at Rs 5300, cottonseed gave in Rs 100 to Rs 1700, while better type doing at Rs 2300. In Punjab phutti shed Rs 200 to Rs 1800 and Rs 2500.
On Tuesday market sources were openly saying nobody could stop prices from going down. The ginners linked hope with NA standing committee on textile industry and have earned requisite backing. It is a matter of time. However market report apart, spot rate was unchanged at Rs 5300, in Sindh and Punjab seedcotton prices, respectively were at Rs 1700 and Rs 2300, and Rs 1800 and Rs 2500. Buying was considerably up - 24000 bales priced at Rs 3500 and Rs 5400.
On Wednesday official spot rate was slashed by Rs 100 to Rs 5200. Phutti in Sindh shed Rs 200 and Rs 100 - to Rs 1500, 2200 and in Punjab phutti conceded same amount to Rs 1600 and Rs 2400. Nearly 22,000 bales of cotton changed hands in price range of Rs 3600 and Rs 5200.
On Thursday further Rs 100 was slashed leaving spot rate Rs 5100, phutti prices were unchanged in Sindh at Rs 1500 - Rs 2200, in Punjab phutti ruled at Rs 1600 and Rs 2300. Nearly 23000 bales of cotton changed hands at Rs 4100 - 5150. Price stayed under pressure owing to continued supply. However, move is on to induct TCP to get prices stabilised.
On Friday KCA official spot rate slashing was extended, lowered by Rs 100 to Rs 5,000. Prices of seed-cotton in Sindh were unchanged at Rs 1500-2200 and in the Punjab prices followed the same pattern, retaining overnight levels at Rs 1600-2300. In ready dealings approximately 28,000 bales of cotton changed hands at Rs 3,125-5,000.
On Saturday lack of buying interest among mills and spinners pushed the rates down further. KCA official spot rate was declined further, by Rs 100 to Rs 4,900. Thus, spot rate lost Rs 400 during the week and if the government does not take interest in the matter, rate could go down further in the coming week. Prices of seedcotton in Sindh were unchanged at Rs 1500-2200 and in Punjab prices followed the same pattern, retaining overnight levels at Rs 1600-2300, they said. In ready dealings, approximately 8,000 bales of cotton changed hands at Rs 4200-4,900, they added.
SPECTRE OF MFN STATUS TO INDIA
The Pakistan Economy Watch expressed MFN status to India will damage local value added sector. This sector is contributing to economy maximum singly and hence needs protection. Against this PEW chief Dr Murtaza Mughal said that instead of moving forward with the value additions country is going backwards by exporting more of the raw materials. He highlighted the fact that this country ranked lowest in the region as far as profit per cotton bale is concerned.
He stressed the need for joint ventures with foreign apparel manufacturers and technology up-graduation. He demanded proper regulatory policy for cotton and yarn exports can save one of the most important scale industries from losing its share to Bangladesh, Sri Lanka, China, Vietnam and India. Dr Murtaza propounded that his suggestion could help healthy survival of the industries and worse of all bankruptcies.
However, like most industrialists and businesses see the grant of MFN to India will harm all way resulting in job losses to millions and contributing more than any sector to the export earnings. Granting facilities under MFN are taken in wider context the gains will accrue to the country. Wars should be avoided, which was not possible in the past. Dr Murtaza has called for several facilities, which are OK. The immediate release of local levies, drawback amounts amounting to around Rs 25 billion held for two years. This and other such facilities authorities should arrange so that cost of doing business stayed low while exports enjoyed edge over rivals.
PCGA FEELS RELIEVED AFTER NA PANEL SUPPORT
The PCGA in seemingly hot - soup for weeks failing to get favourable return from cotton sales, felt pretty in form, as they qualified for support from NA standing committee on textile industry who wasted no time in recommending unanimously to the government to intervene in the market to stabilse falling prices of cotton. It may be interesting to note members are largely representing the growers.
However, NA panel only can recommend rather than take action instantly. It is a matter of one million bales of cotton. Then finance will have to be arranged which too will not come as and when TCP will ask for billions will have to be looked around to give dream a shape.
The NA panel recommendation will have travel to textile ministry's table to be picked up by the textile minister who will then seek Federal Cabinet's approval in the upcoming meeting. This is a practice, which has also hardly worked, or, at least taken too long space to leave behind utility was desired. The latest effort in this case be watched and prayed. Not that TCP has been asked to do the sought job but does the work without leaving behind a cause to nag.
TEX POLICY 2009-14 AT STAKE UNLESS
The PCGA was vocal for sometime in calling authorities to ensure profit for the cotton growers. They were earnest in induction of TCP, but until December 12, authorities kept mum, the debate when phutti buying was to be stymied. In the meantime the NA panel strongly recommended that it was incumbent on the authorities to direct the TCP to immediately start buying cotton at the prescribed rates. Since NA panel has intervened the finance is likely to reach ministry. The TCP will be given money to buy and make immediate payment to ginners who in turn will pay of to the growers, until date, such actively was not reported but sufferers has not lost hope.
It may be reminded here that callers for the step have warned for voting against unless obliged. The panel meeting held under the chairmanship of Haji M. Akram Ansari asked the government to immediately ask the TCP to procure one million cotton bales to arrest declining trend of cotton prices in local market that touches Rs 2200 per bales.
The price phenomenon is global today with the cotton. In March futures soared to $2.27 per pound, which now, has come down to 90/89 cents, while market players are openly predicting rates will further lose around 30 cents or around. What has now particularly to be taken seriously is that powers who matter today should hold on the strength and help weaker ones to stand up firmly.
THREAT TO SUSPEND PHUTTI PROCUREMENT
Over a fortnight demand or more to induct Trading Corporation of Pak (TCP) so that price pressure eased on cotton seems to have been still being discussed. The TCP is pressed to procure fertiliser farmer is under pressure on that count, nevertheless.
Meanwhile textile sector as a whole, along with cotton is hand-tight-too. The ginners who sympathise with the growers, as they routinely claim are confronting authorities and SBP without substantial response. In fact, hopes on both forms appear cool. The ginners who have lately tightened their belt to resolve issues were expecting to sit across table with the authorities but do not find conditions as genuine for them. The sources who are head on plunged in cotton and textile sector looking constantly for some solution of lasting value, should try to re-evaluate entire aching spot.
In the process they may as well get shock to find they may not be approaching the willing sources. The sources may have been in tight corner themselves. Today KESC is to open eye cause for keeping the city of lights Karachi not as KESC is not well off itself for the yawning gap what it says are payables and receivables.
The case of the problem is huge and complex. If ginners get interview with relevant authorities, and are gifted with they really were looking for they are lucky. The country abounds with insoluble dents and what responsible people are pointing at is that wait until conditions changed to deliver.