Cotton buying interest remained low in early trading in view of forthcoming Eid-ul-Azha straining transport ( movement of sacrificial cattle squeezing out cotton loading) nudging spinners to sidelines during the week ended January 31, 2004.
The cotton prices stayed unchanged whole week at the opening level ie Rs 3250.
WORLD SCENARIO: The China factor has caused flurries in cotton trading in New York during the past week.
Opening session closed bearish on grower, trade and speculative sales which aborted an attempt to pierce a technical barrier in the market, analysts said. Later speculative buying hoisted cotton to its highs, with the key March contract racing past the 76 cent obstacles to touch off some modest automatic buying orders, brokers said.
Analysts said cotton futures would likely retain present strength since most players anticipate a renewed round of buying by China.
Chinese players were sidelined in the market because of the Lunar New Year festivities.
On Tuesday futures settled sharply lower on speculative long liquidation although some scale-down trade buying trimmed losses.
The market looked toward the weekly USDA export sales. The third session futures closed near six-week low amid speculative liquidation as funds began pruning back their hefty long position.
On Thursday futures finished down as speculative long liquidation shook the market, but robust trade and suspected Chinese buying pruned the losses.
Dealers said there was rampant talk that the Chinese, who have not been seen in the market since the start of Lunar New Year festivities last week, were heavy buyers.
Closing sessions ended a three-day losing streak by rallying a strong close on heavy trade and suspected Chinese buying with operators looking for more gains going into next week.
Traders recalled when Chinese left for their holidays cotton price was around 75-76 cents basis March; when they came back it was at 67-68 cents.
LOCAL TRADING: The trading came under negative impact mainly on two counts - pre-Eid transportation problem and drastic decline in New York futures.
The spinners fully enjoyed the fall in world prices but held back due to long Eid holidays.
Buying was restrained because mills were not to run as usual. The spot rate was scaled up by Rs 25 to Rs 2350.
Some modest buying was visibly done to please sellers, but when at the end of the session, in the hope of Chinese return for shopping, prices surged, spinners again sidelined to measure the price line before resuming buying.
The first days trading in New York signalled spinners to be cautious and wait for future scenario to emerge.
However, to show things are moving, one deal was reported. Spot rate was unchanged at Rs 3250.
Needy spinners returned to market and lifted cotton (around 4000 bales) to keep wheels running.
Price range was Rs 3140 to Rs 3350. Third day's trading turned morbid but for a wait whether spinners or ginners would gain from the variations in prices. NY scenario continued to impact.
Three deals were struck on Thursday but NY cotton futures losses cast gloom on the trading in Pakistan. Spot rate maintained its overnight level, though in ready, prices were fluctuating both ways.
Until Friday buyers restrained buying hoping for sure downturn in prices. They could do nothing but stay away in sidelines. Nil trading was reported. Not to forget prices were not as much the cause of reservation, but the quality was also on the wane.
Spinners have invested huge amounts, in view of the year 2005 beyond which global trade will be open for all who could offer quality products and at competitive prices.
The awareness in seen not only in the major players but authorities are also showing additional interest in growing more cotton or above 12 million bales to meet the growing needs of the mills. Special stress is being laid on producing dirt free cotton to meet world standard.
SATURDAYS: The Kashmir day inclusive, some 8 days holidays held spinners from buying. The heavy transport cost also was behind spinners decision to wait until holidays end.
The ginners fortnightly statement about arrival is also expected to be delayed. However, trading in cotton will resume after about a week. By that time relevant sources were hopeful prices would have been settled and spinners would have tightened their belt.
GOVERNMENT's CARE SOUGHT: A television interview of leading exporters showed reservations against the government for doing less than what was required to boost textile trade and foreign exchange earnings.
Most of them thought authorities were probably unaware of the industry needs, experts who watched the TV interview said.
They thought govt should guide exporters to boost much needed foreign exchange earnings. The experts, however, had reservations that only govt should set up textile institute to produce skilled workers.
How rich govt is or how fat the exchequer remains, should be in the knowledge of all who are duty bound to pay taxes.
The word is not loud, but Adamjee and Dawoods did make some contribution, while nationalisation mired the more such institutions in offing. If government for any reason cannot serve the purpose, today industrialists have the resources to pour into building schools, colleges, institutes and universities.
Waiting mainly for the govt to come forward means a long hiatus, and during this period billions would be lost.
One such example is that for several years export earning has remained stuck at $8 billion or so. Had network of training schools been set up skilled workers would not only have catered to the needs of local industries but would have served abroad and contributed huge earnings.
Time is up, serious thinking is needed that infra-structure, institutes and colleges are built up and improved so that mills are not left starving for govt or the private sector fails to attend to the immediate and gainful projects.
COTTON POLICY: Thank God hope has been expressed that a non-conventional cotton policy is being announced next month. One can safely hope that will shed the recurring weakness and stale odour.
One of the recurring unwanted phenomena is the release of cotton estimate by every interest. In America all players have freedom to pronounce but the USDA's figures are by and large accepted.
In Pakistan knowledgeable circles said they witness a skirmish like episode right from the sowing of cotton crop till the last scratch has been disposed off.
Unless individual interests are sacrificed for the sake of sagging economy and country, $8 billion will continue to be the export earning ceiling. The efforts were on to convince related people about cotton production at 8.5 million bales against official estimate of nearly 11 million bales.
The pressure built up; the official estimate has been scaled down to 10 million bales and authorities were firm further cut in the target was certainly not possible.
The sellers are now making up the production saying it was now expected 9.2 to 9.5 million bales.
REASON: Second sowing has matured. Whenever there is a vast difference between private and official estimate, there is always discrepancy, sources said, created in standard weight of 170 kg repacked arbitrarily at 165.5 or even less weight.
A recent report hinted that sales tax collectorate has come up with clear indication that this way, Rs 20 billion sales tax has been evaded.
The new policy, it is hoped, will tackle such problems effectively along with making a firm bid to give a strong message for creating a culture of contamination free cotton by growers, and ginners and buyers must pay a reasonable price.
And of course, rampant policy change should be a matter of past to see things on an even keel.
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