Mills buying keeps market moving though prices remain range-bound; spot rate raised to Rs 8,600 after three weeks

Cotton trading in the beginning of the week slowed as both sellers and buyers developed perception to gain, but the former won't come under pressure. Cotton consumers had an eye over opportunity and have laid hands of cotton, they found dearer. The entry of the new crop cotton did not affect the ruling price range. The spot rate sustained at Rs 8500, for third week running until Friday when it was raised by Rs 100 to Rs 8600.
WORLD SCENARIO:
The drought and floods in the US have taken heavy toll of standing crop, reports say. Texas being the largest growing state has reported that 44pc of its cotton was in poor to very poor condition. Similarly second largest growing state Georgia said some 34pc or one third of the US cotton crop was in poor to very poor condition. The futures rate will depend on the size of demand.
China, which had also seen cotton damaged due to weather conditions but was meeting local needs with home grown cotton, has in a latest communication indicated rise in imports on textile exports on the cautious side. China sees more orders for imports will be placed. However, China, owing to rising cotton rates tightens belt to use its own production and stocks. So far China has imported 2.9 million tonnes in first nine months. However consumption was made very cautiously for obvious reasons.
The announcement by India to export one million bales is still awaited. Pakistan will be delivered the quantity is also not clear. Since the USA has no scope for any export, Indian cotton may find way out to this needy country. Any way Pakistan is expecting delivery of one million bales from Uzbekistan. Meanwhile, new cotton flow from fields has also started. The consumers are keenly watching price movement and lifts where it is feasible. Big acres to EU without duty is support coming from behind.
On Monday the US cotton futures closed mixed with late investor sales pressuring new-crop contracts, while tight deliverable supplies boosted the spot contract. The key December cotton contract on ICE Futures US lost 2.07 cents to close at $1.3158 per lb, dealing from $1.3017 to $1.3496. The spot July contract climbed 0.92 cent to settle at $1.5095 per lb. Total volume traded on Thursday reached nearly 25,000 lots at 2:42 pm EDT (1842 GMT), some 40 percent above the 30-day norm, Thomson Reuters preliminary data showed.
Texas cotton farmers said some showers fell over the weekend, but they were not enough to provide even some relief from one of the worst dry spells in Texas over the last century.
On Tuesday the US cotton futures settled higher on commercial and investor buying, with spot July boosted by the perception there will be a receiver for the contract when it goes into delivery this month. The key December cotton contract on ICE Futures US rose 0.20 cent to finish at $1.3178 per lb, dealing from $1.2852 to $1.3208. The spot July contract climbed 4.59 cents or by 3.0 percent to settle at $1.5554 per lb. Total volume traded on Tuesday reached more than 18,300 lots at 3:20 pm EDT (1920 GMT), over 10 percent above the 30-day norm.
On Wednesday the US cotton futures settled lower on investors liquidation, as a commodity-wide sell-off spilled into the market. Fundamentally, cotton is still looking at one of the worst droughts in a century damaging cotton crop in Texas, the top growing state in the country. The key December cotton contract on ICE Futures US fell 5.98 cents to finish at $1.258 per lb, ranging from $1.3224 to down the six cent daily limit at $1.2578. The spot July contract dropped 3.58 cents to settle at $1.5196 per lb.
On Thursday the US cotton futures settled near a three-week low on investment fund sales inspired by a sell-off triggered by fears of the Greek debt crisis. On a fundamental basis, cotton is still looking at one of the worst droughts in a century badly harming cotton crops in Texas, the leading cotton-growing state in the United States. The key December cotton contract on ICE Futures US fell 5.62 cents to finish at $1.2018 per lb, ranging from $1.268 to down the six cent daily limit at $1.198. The spot July contract dropped the six cent limit to conclude at $1.4596 per lb. Total volume traded on Thursday reached nearly 22,500 lots at 3 pm EDT (1900 GMT), about a fifth above the 30-day norm, Thomson Reuters preliminary data showed.
On Friday the US cotton futures finished higher, recovering from a three-week low on short-covering stemming from worries about one of the worst droughts in the history of growing areas of Texas. The market shrugged off a two-day selling spree sparked by fears of a Greek default in the euro zone, as players were wary of going home short in cotton with the weekend coming up. The key December cotton contract on ICE Futures US rose 3.59 cents to finish at $1.2377 per lb, ranging from $1.1787 to $1.2462. On Thursday, the contract closed at $1.2018 in the lowest finish for the third position cotton contract in nearly three weeks. On the week, the market was down 7.39 percent. Total volume traded on Thursday reached nearly 11,100 lots at 2:50 pm EDT (1850 GMT), some 40 percent below the 30-day norm.
LOCAL TRADING:
Cotton consumers opted for restrain on hope that new phutti arrivals were bound to press ginners to lower the rate but that proved hopes against hope. Only 1300 bales of cotton changed hands between Rs 7950 and Rs 9000. The spot rate opened unchanged at Rs 8500 exposing sellers attitude looking for slight pretext to raise rate. But world trend and Indian announcement to set aside fresh one million bales for exports in quest of higher return. The apprehensive growers took a sight of relief the rains were good for the crop.
On Tuesday as was evident on the opening day sellers were not ready to slash prices, again failed to ease prices despite they resorted to panic selling. Nearly 6000 bales of cotton were sold in prices ranging between Rs 8500 and Rs 9000. Spot rate and phutti held to previous levels. The exporters with orders in hand were eager to buy but the sellers were not offering for obvious reasons. Sellers could do better business if signal from New York was clear. But weather all over the world, besides uncertain condition in Africa and ME are not providing clear picture.
On Wednesday consumers continued cautions buying and lifted another 6000 bales in prices ranging between Rs 7700 and Rs 9000, spot rate and cottonseed rates stayed almost unchanged. However, world witnessed international cotton contract tending higher. The sellers in Pakistan have not reacted, as they do. How prices move onwards will be watched by both sellers and buyers.
On Thursday ginners hard pressed by regular flow of new crop put on sales all types of cotton but were firm on price line, spot rate was unchanged, new crop phutti rate was higher in Sindh at Rs 3650 and Rs 3700, old crop phutti in Sindh and Punjab low type was quoted at Rs 2500 and Rs 3000, same as previous days. Sellers have sign of relief, as they won't have to pay 3.5 percent tax if they buy from growers, while they come under obligation if buy from mills or exporters.
On Friday spot rate was raised by Rs 100 to Rs 8,600. In Sindh prices of new crop phutti were higher at Rs 3650-3700 and old crop phutti in Sindh and Punjab, the rates were of low type at Rs 2500 and that of superior type at Rs 3000. In ready business, trading activity was good, as nearly 5000 bales of cotton changed hands between Rs 8200-9000.
On Saturday firmness prevailed as no fall was seen in the mills demand in process of trading. KCA official spot rate was unmoved at Rs 8,600. In Sindh prices of new crop phutti were at Rs 3650-3700 and old crop phutti in Sindh and Punjab, the rates were of low type at Rs 2500 and that of superior type at Rs 3000. In ready business, approximately, 4000 bales of cotton changed hands between Rs 8400-9000.
CAN DEFAULTERS BE TRACED, CHASTISED?
Mishandling of sugar took its price to Rs 125-130 in some place causing lakhs in this country to give up use at all. And now much hyped cotton production rise is said to be possibly impossible to attain. A headline speaks cotton, rice production targets may be missed. The textile products attained zenith by earning around $14 billion. The knowledgeable circles when asked were not authorities boasting on target achieved 2011-12 season?. Were others watching from definite safe distance planning to repeat sugar story.
The nation is always poured news that surplus sugar is produced but soon calls are heard from quarters sugar should be imported, sugar import some how delayed and people were make to suffer-only the other day and suffering yet.
The authorities planned and asked growers to grow 15 million bales that would have meant reasonable but rate irrespective of trend prevailing elsewhere. Thank God it is about urea, which will not reach before August telling on the Kharif Crops - mainly rice and cotton by 15-20 percent. Urea turned an issue for authorities when any layman in the street could surmise the end result is directed towards irrelevant and undeserving somebody.
The sources watching the situation however, looked changing scenario with optimism saying in whispers days are not too far to rob people as easily. It is urea now being talked, which if authorities failed to reach the bottom of design next unfortunately would be the water proving the last word. God bless, whimsical thinking foiled by six decades of suppressed yearning this full of potential country will smash the begging bowl.
HOSIERY SECTORS'S SCREAM BUT AUDIBLE ENOUGH
The chairman Pak Hosiery Manufacturers and Exporters Association (PHMA) North Zone found Federal Budget 2011-12 utterly disappointing for, according to him, pleasing the International Monetary Fund (IMF). This sector has been late and less "offensive" unlike other value-added sectors but tone and tenor are as effective as any value-added sector.
Out of disgust he draws attention of the relevant authorities saying industrialists were expecting a practicable and result-oriented budget by extending necessary incentives for the textile sector offering maximum forex earning and employing bulk of country's work force. He took the occasion to warn that closure of industry would not only open the floodgates of unemployment but would also deprive the government much needed revenues.
Terming hosiery sector along with other value added is the backbone of national economy, which he pointed out is facing deep crisis for the last many years and needed budget makers created scope to give it oxygen to turn a viable contributor. Instead of this gory background he choose to refer subsidies up to Rs 290 billion have been withdrawn leading to adjustment from direct taxes, thus putting entire burden on the people already groaning under heavy taxation.
The chairman referred to relentless and seemingly no end to the load shedding of gas and electricity, which practically crippled the entire textile sector. The high rate of 18 to 20 percent has further aggravated this situation leading to industry on the verge of collapse. The authorities are invited to look into the matter and set things right to possible extent.
TAX MIN MAY OVERSEE SUP/DEM APPLICATION
Undue interference is what always is abhorred, but sometime topsy-turvy application may yield desirable spin off. In cotton trading latest trend is firmly based on awarding maximum return. The trend may be originating in New York, India or any where cotton is harvested and not necessarily in Pakistan. For some days past, cotton consumers developed optimism regular flow of seedcotton from fields may press sellers to slash rate, but sellers were keeping an eye on New York cotton futures where cotton was under pressure of bad weather both drought and floods were adding to lint value.
It is here that authorities manning textile ministry may politely intervene justifying or otherwise price level. The principle of supply and demand minus ethics may evoke the sellers to snatch as much as possible. Hoarding and shortfall are two different things - the former is ill intentioned to rob and snatch without imparting minimum of compassion, while the other is production missing the mark for natural or man made reasons and the holder takes for granted he may as well encounter similar situation. Thus umpiring is the need for the hour to spare needy from undue pangs.
The textile ministry, when it had not been in existence, cotton and textile sectors were like orphans. The textile leaders begged from rulers a ministry that already existed in neighbouring countries. Today one textile ministry exists it must move grudgingly watchful how to streamline from cotton production to yarn making and textile exports without relentless nagging from one or the other sector. Will it be proper here to express regret on report tax ministry's demands were ignored.
ADVICE TO TEXTILE INDUSTRY AGAIN
Such advice as "gifted" by the joint study of the World Bank and State Bank of Pakistan was offered to textile leaders umpteen times by the world renowned experts during the lapsed decades. Those foreign experts, who were invited to address textile conference work shops etc. At the first instance would plead for switching over to value-addition. But value addition meant here production of semi-raw materials, which were exported without let or hindrance, which facilitated textile exporters of countries who produced not a scratch of cotton, basis raw material in their countries, leading among them are S Korea, Bangladesh, Singapore, Malaysia etc.
S Korea, many will remember would express intelligibly Pakistan's Late Dr Mehbubul Haq had greatly obliged us by showing the road to developed skill for textile exports. In Pakistan was shown Dr Saheb cutting the branch of a tree he was sitting for switching over to value-addition. Such simple advice failed to appeal Pakistanis. Lately China has been offering help to boost textile exports but indeed! The textile experts and World Bank advice is extended in far more difficult term "to shape up by investment in technology and skill development." The manufacturers of textile products would establish "workshops" to cater to their needs. But the demand WB and SBP has sounded that only country without strong engineering base is Pakistan and our dependence upon outside engineering industry keeps our cost of production higher with low engineering skills. The same message was tried to pass on in these lines in the words of knowledgeable circles have any one calculated the cost of imports on chemicals and dyes and textile machinery from Japan, Switzerland, Germany, China and Belgium - NEVER SIR, NEVER.
In last over six decades Government of Pakistan's kitty very much depended on forex earned through the exports of textile products, but investment in technology and skill development never attracted. The textile ministries in India, China and Bangladesh since long was never thought necessary until 2007. The first textile minister has been out to be replaced by new minister. Sources prayed textile industry is given due importance.