Week passed without spectacular event, lint prices ease; spot rate reduced to Rs 5,600

There was nothing spectacular about cotton trading where fluctuations were not frequent during the week ended on February 18, 2012. Spot rate lost Rs 100 on the opening day to Rs 5600, which closed.
WORLD SCENARIO
The American cotton planting figures for 2012 are not final. Some relevant people putting planting at 13.242 million hectares. Change is contemplated, as foul weather can't be denied in view of the La Nina lingering around. Futures prices are looking up which stay around 90-92 cents a pound. Open interest rose by 2489 lots to 188,727 lots indicating investor interest. China's robust imports for 326,500 tonnes came from India, cotton prices in India are expected to fall this week on lower demand from needy countries.
Pakistan in a way is happy to have comfortable supplies and favourable prices. However, this scenario is pestering mind of growers and ginners who claim they are not getting their investment worth. The sufferers have continued to press authorities to introduce some third buyer preferably the TCP. However, the third option seems to have been busy in tackling sugar and urea issues.
On Monday, the US cotton futures ended stronger, pulled up by other commodities, global equities and the euro, as investors raised their risk profiles after the Greek parliament voted to adopt austerity measures to handle the country's debt crisis. Two separate cotton planting estimates released on Saturday and Monday contributed to price gains, but analysts said both were regarded more as a starting reference for the fiber's crop season than a substantive indication of eventual output. As such, most cotton observers took note, but did not necessarily take positions based on either report. "The NCC report was a helpful number and was behind the rally to some degree, but I think the Greek parliament voting on the austerity plan was really what pushed commodities up across the board," said Sharon Johnson, senior cotton analyst at Penson Futures in Atlanta. Benchmark March cotton on ICE Futures US finished with 0.91 cent, or 1.0 percent, gains at 91.54 cents per lb, after trading between 90.62 to 93.05 cents a lb.
On Tuesday, trend was firm in the NY cotton market as the benchmark US cotton futures closed higher, as mills grabbed cotton while prices remain in the lower end of their recent trading range, but later-dated contracts slipped as a tepid US retail sales report dampened the outlook for demand. Benchmark March cotton on ICE Futures US settled at 92.25 cents per lb, up 0.73 cent, after keeping to a modest trading range between 91 and 92.34. The contract set an inside day on price charts, meaning a higher low and lower high. Volume in the March contract came to 11,053 lots shortly after the exchange close.
On Wednsday the US cotton futures finished with moderate gains, driven up as export buyers continued to show interest after a recent steep price decline and mills rushed to fix prices ahead of next week's deliveries. Benchmark March cotton on ICE Futures US ended at 92.50 cents per lb, a 0.25 cent increase, after a session that earlier lead prices up about 3.25 percent to their highest level in a week. The range spanned 92.15 to 94.37 a lb. The March tally rose to 11,698 lots shortly after exchange trading finished. Small speculators continued to roll long March positions into May or July contracts ahead of the February 23 delivery date. May futures which now hold the largest open interest of any cotton contract on the board at nearly twice March, finished at 93.48 per lb, up 0.64 cents. May volume stood at 14,023 in late business.
On Thursday US cotton futures ended mildly mixed, as participants kept rolling March positions into later-dated contracts, especially May, now the benchmark. March cotton on ICE Futures US closed at 92.45 cents per lb, a 0.05 cent decline, and set a small range of 91.80 to 92.80 a lb. March volume came to a paltry 5,685 lots by the close of the exchange session. Small participants were rolling out of long March positions into May, July or December contracts before the February 23 delivery date. New benchmark May futures settled at 93.71 per lb, a 0.23 cent gain. The range ran from 92.65 to 94, also tiny, and set a double bottom with the previous session low. May's volume was robust at 11,581 lots just after the close. May's open interest is now highest and about double that of March contracts. On Wednesday, open interest in March futures fell by 9,166 lots, while May contracts rose by 3,662 lots, July by 1,246 and December by 725 lots.
On Friday, the US cotton futures finished with more than one percent declines, but brokers said the selling was primarily profit taking ahead of a long holiday weekend. The US cotton market, along with other commodity and financial markets, will be closed on Monday for the US President's Day holiday. The nearby March contract also lost ground to players exiting their positions as the February 23 delivery date approaches. March cotton on ICE Futures US lost a penny, or 1.08 percent, to stand at 91.45 cents per lb at the close. Prices spanned 91.31 to 93.27, and fell to their lowest since Tuesday. March volume came to 6,797 lots as more players exited their positions ahead of the delivery period for the contract. New benchmark May futures finished at 92.65 per lb, a 1.06 cent, 1.13 percent, loss. The range extended from 92.39 to 94.29, but the low held within the parameters of an uptrend line that began at the December 15 low. May volume came to a healthy 13,205 lots just after the exchange session ended. On Thursday, open interest in March futures slid by 7,136 to 21,215 lots. But, open positions in May futures jumped by 3,589 to 83,316 lots.
LOCAL TRADING
On Monday leading spinners and textile millers took a respite as a result only 3600 bales of cotton changed hands. Official spot rate was reduced by Rs 100 to Rs 5600. Seedcotton in Sindh ruled at Rs 1800 and Rs 2000 while in Punjab phutti was bought at price ranging Rs 2200 and Rs 2650. Falling cotton rates prompted ginners to ask govt to induct any third party nearing the TCP. The sale in ready was marked at Rs 5200 and Rs 5900. If authorities agree to ask TCP, volume of price was expected fixed between Rs 500 / Rs 1000.
On Tuesday uncertainty led to watch and wait by both sellers and buyers local as well as global trend. Sellers may pick up jump in world rate after several sessions. However, spot rate was left unchanged, seedcotton prices in Sindh were quoted at Rs 1800 and Rs 2300 while in Punjab they ruled at Rs 2200 and Rs 2650. Buying improved seen at 6000 bales at Rs 4100 and Rs 5800. Unlike commodities ending firmer and offering support to cotton futures sellers and consumers preferred to development.
On Wednesday moderate buying was marked as leading buyers stayed away owing to unfavourable prices. In ready nearly 7000 bales of cotton changed hands at Rs 4100 and Rs 5800. Official spot rate was put at Rs 5600, phutti was selling at Rs 1800 and Rs 2300 in Sindh while in Punjab they ruled at Rs 2200 and Rs 2650. Market operators expressed concern over deteriorating global economy. The fact may lead to low cotton buying, such as from China, being the largest importer.
On Thursday, spot rate was unchanged at Rs 5600, seed cotton in Sindh ruled at Rs1800 and Rs 2300 in Punjab phutti sale price was Rs 2200 and Rs 2650. Buying was seen around 8000 bales at Rs 3950 and Rs 5800. Market sources said buying was low as buyers waited for PCGA report that may bring good news about prices.
On Friday the official spot rate was unchanged at Rs 5,600. Prices of seedcotton in Sindh were at Rs 1800-2300 and in the Punjab at Rs 2200-2650. In ready dealings, approximately 4000 bales of cotton changed hands at Rs 4050-5700. According to the market sources volume of business declined due to higher-than-expected phutti arrival figure, the spinners were in a relaxed mood, assuming prices would fall in the coming days.
On Saturday modest business was seen as exporters took interest in purchasing of low quality cotton, in the meantime, mills and spinners kept on the sidelines to see fresh development after the release of Pakistan Cotton Ginners Association (PCGA) weekly data.The official spot rate was unchanged at Rs 5,600. Prices of seedcotton in Sindh were at Rs 1800-2300 and in the Punjab at Rs 2200-2650. In ready dealings, over 5000 bales of cotton changed hands at Rs 2800-5800.
TWO ZONE POLICY FOR PUNJAB
The move that authorities have announced for Punjab textile from early next month shows they are not sitting unmindful. But the industry will be taken aback, increased gas supply industry enjoyed during February 2012, will certainly nearly shock them. The SNGPL MD, however, consoled consumers would revert to two zones policy against four zones as at present for Punjab industry.
Since weather has persisted cold gas supply has not been adequate and manufacturers and exporters apprehend shortfall in forex earning at a time when export opportunity was high, beside normal business, the EU waiver package called for export product volume to be boosted. The reluctance on the part MD should be overcome as early as possible.
Depending on friendly countries like Qatar and Iran under compulsion can be considered but God has been merciful and given resources of our own to exploit and end deprivation that has protracted for decades. The question the knowledgeable circles pose as to why arrangements for imports were made all along. The quoted countries above can supply us gas, no doubt, but will they when we need - imports are no answer unless desired stuff is not at all available. It is hoped some permanent clue is found. Who knows after EU package US package is also in line!
BODY FOR ESTIMATION OF COST OF CROP
Though very late, Sindh Agri Chamber has reminded authorities need of the estimating cost or the investment farmers have to make in growing various crops. The procurement price that is fixed by authorities for crop is a whimsical practice. The rate thus fixed might be covering some cost and yielding profit, but often missed the satisfactory return, knowledgeable circles said.
The farmers in a recent report appealed to government to help them in securing a fair return. In these few words they have adequately made their feeling of deprivation. Lately scope of textile exports are likely to grow manifold with, after some months or year, GSP plus as already indicated by Europe and whispers are also heard about the United States.
The authorities will harm industry if they ignore the need of the hour. Very recently ginners gave a call growers should get better return. They had threatened to go on strike. Ginners urged government to induct TCP to procure that was supposed to have stabilised prices. This is a different story.
Coming back to Sindh chamber call for a commission, which must have growers representative also. Chamber pinpointed the fact that manifold rise diesel, pesticides and fertilisers besides their labour and investment. Before harvest start and crops, in this case cotton picking starts, entire cost on them be determined. Textile products are main forex earning and as is being heard the EU has big programme for this country authorities need to keep in view growers needs. Growers have never disappointed millers or authorities but they often are let down.
TEXTILE MINISRY CONCERNED OVER UNDUE HASTE
Cotton and textile contribution to this country's economy and progress is agreed on all hands. This is also well known to relevant people how the industry is struggling merely to survive. The privileges India has been awarded in the name of bettering trade relations with that country. India stands erect as the fastest growing nation after China.
As compared to this Pakistan tried to console itself with grown around three to four percent and is considered just above poorest nations. The concern of textile ministry is understandable. Pakistan stood ever for better ties with India believing it will help improve ties with Pakistan.
Against this that country has restrained all bids preferring trade over even core issue of Kashmir. But the sudden change in the dynamics of the two countries from 80 percent ban on imports to almost zero rates imports on more then 80 percent of items within a time frame of a few months appear to be an extreme measure, ministry sources said. They said tax value chain consists of 10 industrial sub-sectors which are highly integrated and independents. The final product of one sub-sector is the basic raw material for the other sub-sector.
The textile ministry and people engaged in textile business have been disturbed. The ministry took the liberty to express the view that opening of land route will hit hard inter Pakistan trade dynamics as well. The whispers that Afghanistan will be given trade opportunity through land route will have clean sweep over the little scope we enjoy at the moment. Ministry has discussed its own position, and watched businessmen and traders voicing in similar ways and suggested other option such as to have a PTA with that country and abolish Appendix "G". Authorities should take into consideration the hint given.