All-round price decline permeates cotton business, US cotton selling under $1, spot rate, lint, seedcotton down on domestic market

The cotton trading remained subject to whimsicality, sliding prices at times and rejected adroitly, the spot rate until was down to Rs 5,500, lint prices at Rs 5,300-5,500and seed cotton rates fell to Rs 2,200-2,400. The domestic market is moving along with the trend world over.
WORLD SCENARIO
For weather or disturbed conditions China and India are expecting lower production. China is largest cotton producer with a global market share of 28.3 percent or 6.6 times India's share. India is the second largest producer as well as exporter. The situation will stick so, many keen watchers have begin to doubt. They view India may vie with China in procuring cotton. However, smart cotton traders see world scenario differently.
The great debt problem which countries are trying to level up is still out of grip. European bankers and people are mustering effort such as adopting austerity measures but ways other than that is likely to be debated in European summit anytime. The USA cotton production is clearly disappointing due to floods on the sides of Mississippi River and unprecedented drought in largest cotton growing Texas. Like European debt problem the world power is also faced with 3.27 billion dollar and is considered unmanageable. Many are crossing all limits to view another global economic recession may be ahead. Pakistan lint by deluge and floods is optimistic to grow cotton 15 million bales. The EU package and encouraging signs of trading with other friendly countries will offer enough orders for exports will government accede to ginners demand for inducting TCP cover to save from sustained downdraft, knowing well nervousness of the cotton ginners.
On Monday the US cotton futures finished at a nine-month low due to debt woes in the US and Europe as the historic rally in the market appears to be at an end. Cotton had posted its sixth straight weekly loss last week and the biggest single weekly decline since December 2008, as demand destruction from the market's run up to a record over $2 per lb hit fiber contracts. "The macro picture is lousy and there is no way to get around that," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures in Atlanta, Georgia. The key December cotton futures on ICE Futures US plunged 2.62 cents to end at 96.46 cents per lb, dealing from 94.46 cents to $1.0073. It was the lowest close for the second-position contract since early October 2010, Thomson Reuters data showed. Business was brisk. Total market volumes hit around 24,500 lots, more than a quarter above the 30-day norm.
On Tuesday the cotton futures settled higher on investor short-covering as the market rebounded from its fall in the previous session to a nine-month low although players are still fretting over the unresolved debt woes in the United States and Europe, analysts said. Fundamentally, the market is still wrestling with demand destruction after prices hit a record over $2 per lb this spring. The key December cotton futures on ICE Futures US gained the four-cent daily limit to end at $1.0084 per lb, with the session low at 97 cents. On Monday the contract finished at 96.46 cents in the lowest close for the second-position contract since early October 2010. Business was light after two consecutive sessions of heavy dealings. Total market volume hit around 10,200 lots, nearly 50 percent below the 30-day norm.
On Wednesday cotton futures settled fractionally on investor sales as the trade cautiously eyed attempts to resolve the debt crisis in the United States and Europe in the days ahead. The market is looking toward an EU summit on Thursday to ease the debt woes of Greece and is hopeful a compromise would avert a US debt default in August. The key December cotton futures on ICE Futures US slipped 0.09 cent to conclude at $1.0075 per lb, trading from 97.82 cents to $1.0213.
On Thursday the US cotton futures ended lower on investor sales as the prospect of a debt deal in the EU and the US failed to fire up market participants who feel the deals would just postpone solving urgent budget problems in both regions for another day, analysts said. Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said news on the deal in the EU and in the US looks like a "kick the can down the road" agreement which does not really solve the macro issues for both areas.
The key December cotton futures on ICE Futures US dropped 2.12 cents to finish at 98.63 cents per lb, trading from 96.75 cents to $1.015.
On Friday cotton futures ended slightly higher on investor buying in light trade as players appeared to be marking time ahead of Monday's USDA crop progress report. Benchmark December on ICE Futures US inched up 0.01 cent to close at 98.64 cents per lb, trading from 96.65 cents to $1.0018 which was virtually unchanged from Thursday's 96.75 cents to $1.015 trading band. For the week, cotton lost 0.82 percent. The contract finished at 96.46 cents last Monday, which marked the lowest close for the second-position contract since early October 2010, according to Thomson Reuters data. On Monday, the market will look toward the USDA's weekly crop progress report to gauge the condition of the US cotton crop. It will be released at 4 pm EDT (2000 GMT).
LOCAL TRADING:
Slight fall was marked in cotton trading on the week opening day when 2500 bales of cotton changed hands in price range of Rs 6100 and Rs 6250. Seedcotton rate in Sindh was firm at Rs 2850 and Rs 2900, while phutti rate was in Punjab at Rs 2600 and Rs 2800. Easy rate is owing to global rate keeping low. It may be recalled that cotton futures peaked at over $2.0 a pound. Currently grow more hype and deteriorating political conditions are balancing cotton rate.
On Tuesday spot rate lint prices dipped on cotton market as phutti maintained reaching ginneries. The spot rate was slashed by Rs 200 to Rs 6000, seedcotton in Sindh also dropped by Rs 100 to Rs 2700 and Rs 2800, while higher loss by Rs 200 was marked in Punjab to Rs 2400 and Rs 2600. The consumers lifted around 5000 bales of cotton in price range of Rs 5800 and Rs 6250. The cotton futures in global markets also are keeping low profile forcing sellers in Pakistan follow suite.
Spot rate on Wednesday was down along with lint prices as sellers found themselves under pressure owing to speedy seedcotton arrival besides reports globally are touching on easy condition ahead. As a result spot rate was further down by Rs 200 to Rs 5800 seed cotton in Sindh lost Rs 50 to Rs 100 to Rs 2650 and Rs 2700 while in Punjab ruled at Rs 2400 and Rs 2600. Around 7000 bales of cotton changed hands at Rs 5500 and Rs 5900. On Thursday spot rate, prices in ready sustained downdraft improving activity. The buyers of cotton lifted some 9000 bales in price range of Rs 5600 to Rs 6800 depending on quality. Seedcotton in Sindh and Punjab was almost unchanged at Rs 2600 and Rs 2700 and Rs 2400 and Rs 2600 respectively. The spot rate came under pressure of swift arrival and global cotton futures and lost further Rs 100 to Rs 5,700.
On Friday no respite was seen in the falling trend on the cotton market in process of lack of buying interest by mills and spinners. Official spot rate slashing continues, dropping by Rs 200 to Rs 5,500. Seedcotton rates in Sindh were down by Rs 100 to Rs 2500-2600 and in the Punjab, rates also dropped the same amount to Rs 2300-2500. In the ready business activity slowed down as above 4000 bales of cotton changed hands between Rs 5400-5700.
On Saturday hectic trading activity was seen as mills and spinners made purchasing on expectations of improvement in the rates in the coming days. The KCA official spot rate stayed put at Rs 5,500. Seedcotton rates in Sindh and the Punjab were down by Rs 200-300 to Rs 2200-2400. In the ready business, brisk activity was seen as above 10,000 bales of cotton changed hands between Rs 5300-5,500, dealers said.
GINNERS SAY SPINNERS NOT MAKING PAYMENT
The ginners and spinners cannot do without them, still they have problem such as non-payment on technical grounds. From Multan the PCGA executive body member Ehsanul Haq has given a distress call to the fellow travellers to clear payment and save ginners from economic stress. The background story of the distress call is that rising global cotton rate from around 60 cents a pound to two dollar and above. The spinners who are main suppliers of material to local as well as foreign buyers adopted stop buy attitude hoping things would not reach that passe. Cotton buyers restrain at times but they pounced on slightly falling rate. The sellers were however, world wide looked only forward communicating there was no going back until rate matched century old peak. In Pakistan the EU package offered to relieve Pakistani textile exporters of unprecedented flood havoc is awaiting clearance from the WTO.
The package had brought flood of relief and textile exporters were sleeves up to recover the loss had conferred on them. The spinners were as sturdily prepared to play their role, not alone they had in view local customers lent importers from abroad, sometime back they had taken qualified boast that such and such bales of cotton they had bought from the sellers. Today ginners are in hot soup complaining spinners have held up their due amount. How the spinners and ginners and possible textile ministry search out an acceptable solution needs time.
HANDLOOMS SECTORS' VOICE OF WOES
Raising voices once in a blue moon, two sectors suffering one or the other way, cotton and handlooms sectors have been calling for help to contribute maximum to economy and country. Not deterred by handwork and investment the sectors call for requisite help so that economy can stand on its feet. The handlooms sector out to do every possible sacrifice is constrained to seek authorities assistance to save it from cut-throat competition with regional competitors and downturn in the economies of developed countries. The chairman of all Pakistan Handloom and traditional manufacturers and exporters association with heavy heart said that hundreds of industrial units had so far been closed due to energy shortfall but he regretted the government was showing no interest to overcome the energy crisis. When authorities are given such call they are in a way admonished for ignoring their immediate attention as well as similar needs that will linger in future.
Pakistan has water but no reservoirs enough to hold back. The fact today is that they are simply ignored to go precious water running to the seas. He advised the government to consider the use of hydel resources by building water reservoirs and power generation units, ever known as the cheaper way to generate energy. The world has been experimenting new ways - solar energies, air power and other non-traditional ways. He however particularly mentioned Germany and India producing more than 21000MW and 7000 megawatt respectively.
US TEXTILE BUYERS NOT KEEN ON STRIKING DEALS
The value-added textile product exporters were constrained to say that unrest in the city is causing at least Rs 25 billion loss for halt in production frequently. As a result textile manufacturers and exporters of value added textile feel harassed whether they will be able to ship their products to foreign buyers particularly to the US markets. It is unfortunate, country's seaports continued to undergo violence causing enormous loss to local trading and exports to regular and friendly countries. It is but natural that importers keep an eye on peace wherefrom they are arranging imports.
Timely arrival of consignment is main concern of the importers whereas frequent outbreaks, deadly violence make importers double minded. The zonal chairman of Readymade Garments Manufacture and Exporters said at least 10 percent of industrial production is affected on daily basis, besides delay in shipments of foreign consignments by at least 15 to 20 days.
The chairman turning to value-added textile sector said it was already undergoing severe problems of power and gas shortages and the continued violence in Karachi and elsewhere were virtually inflicting unbearable loss. Chairman also complained that even presidents' orders were ignored and stressed that authorities should be mindful of the fact that the US is in deep economic recession resulting in loss of interest buying textile products, will it not be wise to set our own house in order so that our products are welcomed. We should dig deep into the reservations our buyers abhor and step into available market with ease and inconvenience. If authorities and exporters in this country try to look around more of our own shortcomings will surface than why buyers show reluctance on their parts.
SBP STOPS PAYMENT OF CLAIMS
The textile product exporters are always faced with liquidity crunch as following the exports they exhaust the reserve. After a gap when they manage some exportable they need money but its is not readily found. They thus start voicing for duty drawback and other dues against research and development. The process seems that Finance Ministry sanctions the amount and State Bank of Pakistan distributes the same. It, however, perhaps was fourth time that SBP stopped payment of drawback of local taxes and levies (DLDT) and research and development subsidy claims following fund exhaustion.
The Premier Bank sources were quoted that during the last fiscal year 2010-11 the Bank had reserved Rs 15.613 billion worth claims of draw back of local taxes and levies from textile sector. For reason unknown, the Ministry of Finance released only 25 percent of total claims for payment of DTLT during 2011. Against total claims received by the SBP, Finance Ministry released only Rs 4 billion for payment of DTLT to exporters.
According to sources the allocation was revised by the Finance Ministry asking the SBP to disburse Rs 3.815 billion out of allocated amount, while the rest Rs 185 billion was placed for other payments.
Before going into further details need is to probe the blight which stresses binding firm economy is the way out. The quest why SBP loses it's chief before term expiry.