Cotton

May 09, 2008
Biography

New York cotton futures regained the week’s lost ground on the heels of Thursday’s export sales report. However, USDA’s release of its May supply demand report brought caution to the market on Friday as both U.S. and world ending stocks estimates were significantly higher than the prior month. That report, coupled with the ballooning level of certificated stocks, will keep the market on its heels until the end of the U.S. planting season. The sideways path is best for now. The old crop July should find support in the 68-70 cent level while the new crop December futures contract should be supported at 74 cents.

After consecutive weeks of lower prices, mills appear to be backing off the large purchases made the past three weeks. However any trade below 70 cents will again stir their interest. Yet, with certificated stocks now kissing 1.5 million bales, there will be little room for upward price movement. Yet, high quality cotton will continue to attract a premium as international mills attempt to improve yarn quality.

Today’s USDA May supply demand report was expected to show higher ending stocks compared to the prior month. World carryover was increased near 1.9 million bales and is now estimated at 61.55 million bales. However, this increase resulted from adjustments of prior year estimates which increased the level of beginning stocks for the current marketing season the same 1.9 million bales. Thus, the changes in 2007-08 world production and world consumption estimates were little changed from the April report.

USDA did increase its estimate of U.S. ending stocks to 9.9 million bales, up 200,000 bales. Domestic usage was lowered 100,000 bales, to 4.6 million. Exports were lowered 300,000 bales and are now estimated at 14.2 million. While exports could slip as much as another 200,000 bales, it is the increasing level of carryover that is worrisome to the market.

Nevertheless, early estimates for 2008-09 suggest U.S. production will fall to 14.5 million bales (I think lower) and exports will rebound to 14.5 million. While 2008-08 domestic use is expected to slip another 300,000 bless, down to 4.3 million, this would drop 2008-09 carryover to 5.6 million bales at the same time world carryover was falling to 55.5 million bales. Therefore, the supply demand balance sheet will only grow tighter.

Bullish export sales resulted during the week ending May1, 2008 and net sales totaled 586,100 RB. Upland sales totaled 563,900 RB as China made second consecutive weekly large purchases of Upland. Pima sales were 22,200 RB. China (311,000 RB); Turkey and Indonesia were the primary buyers of Upland; the same top three as last week. China (13,100 RB); India and Germany were the primary buyers of Pima. Export shipments continue to lag the pace necessary to meet USDA’s export estimate of 14.2 million bales, an estimate that was lowered in the USDA supply demand report. However, weekly exports were significantly better than the prior week, totaling 291,800 RB with Upland accounting for shipments of 269,700 RB. Pima shipments were
22,100 RB. Primary destinations for Upland were China (101,400 RB); Turkey and Mexico. The primary destinations for Pima shipments were China (7,400 RB); India and South Korea.

The coming weeks, while continuing to see some volatile trading sessions, will continue to gyrate around the 69-73 cent level, basis July and the 73-79 cent level, basis December.

nybot this week

New York Close (vs. previous week)
Jly08 71.55 +199 Mch08 84.57 +243
Oct08 77.15 +263 May09 85.96 +242
Dec08 80.23 +239 Jly09 87.16 +256

Cotlook 07/08 A (FE)
74.25 +135
U.S. Exports Net Sales
Accumulative 13,352,800
Weekly 586,100
China 324,100
Turkey 53,000
Indonesia 39,300
Wkly Shipments 291,800
NYK Open Interest
248,842 +103
Net Speculators’ Position
Long 11.6% +1.3%
NYK Certificated Stocks
1,335,293 121,747
Awaiting review 118,254

Cotton lint jumps in west India
10 May 2008 3:21 pm

Mumbai - Spot cotton lint priced gained slightly after remaining weak for last few days at the markets across western India Saturday.

At Kadi in Gujarat, cotton lint S-6 A-grade was quoted between Rs 22,400-Rs 22,800/candy while average-grade traded at Rs 21,800-Rs 22,300/candy. Kapas got offered at Rs 530-Rs 615/maund. The State recorded arrivals of 15,000 bales today.

In Vidarbha region of Maharashtra, the 28-mm cotton lint traded at Rs 21,300-Rs 21,800/candy; 29-mm cotton lint traded at Rs 21,900-Rs 22,500/candy. Around 8,000 bales arrived in the State today.

At Sendhwa market in Madhya Pradesh, the 28-mm cotton lint traded at Rs 21,800-Rs 22,000/candy; 29-mm cotton lint traded at Rs 22,200-Rs 22,700/candy; and 30/31-mm cotton lint at Rs 22,800-Rs 23,000/candy.

Firm trend in moderate trading on cotton market

KARACHI (May 11 2008): Moderate trading was seen on cotton market on Saturday as prices were firm in process of trading, dealers said. The Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 3375. Some spinners were active to make purchases to meet the urgent needs and it is expected that the ginners will not finalise any deal below their psychological level, they said.

On Friday, cotton futures settled firmer on investor buying sparked by a charge in crude to new record highs, but profit-taking pared gains and analysts feel the market may gradually consolidate its gains into next week. ICE Futures' July cotton contract gained 0.70 cent to close at 71.55 cents per lb, trading from 70.54 to 72.25 cents.

The new-crop December cotton contract added 0.88 cent to 80.23 cents, dealing from 79.20 to 80.73 cents. Volume traded in the July contract at 3:03 pm (1903 GMT) was 6,061 lots while December's tally was 1,835 lots.

The following deals were reported as some 183 bales of cotton from Mirpurkhas sold at Rs 3475, 250 bales from Petohro sold at the same rate, some 4800 bales from Liaquatpur at R 3425 and 1000 bales from Rahim Yar Khan at Rs 3400, dealers said.

================================================== =========
The KCA Official Spot Rate for Local Dealings in Pak Rupees
-----------------------------------------------------------
FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"
MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL
================================================== =========
Rate Ex-Gin Upcountry Spot Rate Ex-Karachi
for Price Sales Tax @ 15%
================================================== =========
37.32 Kgs 3375.00 50 3425.00
Equivalent-------------------------------------------------
40 Kgs 3617.00 50 3667.00
================================================== =========

Cotton prices maintain high posture but range bound
KARACHI (May 12 2008): The rising dollar has been pushing cotton prices up, however, the solace is local currency with sliding downward, which will go a long way to boost textile products. The spot rate was raised by Rs 25 to Rs 3375 while lint prices ruled between Rs 3150 and Rs 3600 with exception of few, which quoted at Rs 3700-3800per maund (new crop).

WORLD SCENARIO:

Players indebted to fluctuation on grain markets in Chicago, gasoline and even beyond to metals value, decide to sell or buy cotton affecting the futures down-July down 0.27 cent to 69.29 and new crop December shed 0.33 cent to 71.51 cents a pound. The players were looking for weekly export sales and report on cotton crop condition for determining a direction to act positively.

On the second session investors who indulged in selling on the opening day decided to buy on signal from record run in crude prices, leading future, to recover rather substantially. The major operators took que from outside markets, which were showing strength across the board.

Nevertheless, they considered finish below 71.80 cents would make any advance suspect. They started count down on supply/demand USDA report on Friday. The data will be first estimate of supply condition in 2008-09 (Aug/July).

On Wednesday futures moved both ways with out grip on any direction. The players were tightening bely to adjust position ahead of a USDA report about supply/demand, the first estimate for 2008-09. In the US sowing at 25 year low, the traders have focussed on how much cotton land in top consumer China and India is going to be fixed. They hoped exact sowing and size of the land will be decided and world will know shortly.

On Thursday the futures rose on short covering by investors plus steadier commodities report from Chicago and elsewhere. The wait ends in hours to determine futures trading patterns as supply/demand report will be out on Friday. The analysts are convinced cotton sowing in the US will sink to a 25-year low 2008-09 as farmers run in search of gainful corn soyabean etc the worry is also hovering whether China and India too will fall on other crops instead of cotton.

On Friday futures ended higher pulled by the record oil futures prices despite setback caused by profit taking. The players are eyeing coming gains in coming week as USDA estimate say should give cotton futures a boost. It put cotton production at 118 million bales (480 Lbs) against 120.47 million in 2007-08. The surge in futures swing players into dancing with slogans 'cotton turned a corner'. Anyway July cotract rose 0.70 cent to 71.55 while December rose by 0.88 to 8023 cents a pound.

LOCAL TRADING:

Perhaps the last of the PCGA arrival report eagerly awaited which gave nothing extraordinary except that the target had to be missed by 250,000 bales. The report boiled no one, neither sellers nor buyers.. Sellers with nearly 500,000 bales left with them they felt was manageable. Both these, of course, concerned about the size of price level, ginners how to extract maximum and their customer were thinking the existing stocks could be exploited to gains.

However, the buying had gradually contracted to level of a few thousand bales around Rs 3400 to Rs 3700 per maund. The spot rate was cunningly preserved at reasonably higher level unchanged at Rs 3350. On Monday, the day when PCGA report was released merely two deals could materialise between Rs 3400 and Rs 3600. While striking advance deal the quoted price was considered by many buyers widely manipulated to keep running lint price firm. However only 2000 bales in two lots were seen changed hands.

On Tuesday buying remained restricted to more or less 6000 bales, one deal fetched Rs 3700, the highest so far. Spot stayed put. Rising dollar caused worry among consumers as price hike was expected. Simultaneously, manufacturers and textile products particularly rejoiced expecting falling PKR value may attract importers towards Pakistan.

On Wednesday no trend change was marked as millers avoided to show buying interest and sellers refused to budge. The result was firmer trend and low buying - restricted to only more or less only 1000 bales. Spot rate was firm at Rs 3350. The two deals changed hands were priced at Rs 3150 and Rs 3375 depending on quality. The international trend with no positive direction has lost its impact on the main trading centres of the world.

On Thursday the ginners decided to raise spot rate by Rs 25 to Rs 3375 but buying support remained restricted to 5000 bales sold between Rs 3500 to Rs 3550 depending on quality. The restricted buying usually tell on prices but the sellers explained the slight rise in prices was owing to gradual erosion of PKR versus US dollar.

The Friday session saw few bales lifted some with delivery during August. The setback was obvious because worries lingered on about crop and rising oil prices. The spot rate stayed put at Rs 3375, while advanced sales for delivery in August was priced at Rs 3700 and Rs 3800 which many commented is cosmetic and too bulky. However, growers have their own problem of short supply of Irrigation water in the beginning and shortfall and high input costs. Now is the time to show who is end winner the seller or buyers?.

On Saturday, the following deals were reported as some 183 bales from Mirpurkhas sold at Rs 3475, 250 bales from Pethoro sold at the same rate, some 4800 bales from Liaquatpur at R 3425 and 1000 bales from Rahim Yar Khan at Rs 3400.

BANGLADESH TEXTILE WORKERS GET SUBSIDISED FOOD:

The BD textile workers learnt very recently how defenders of the right in Chicago were favoured with their demand. The BD workers in textile industry contributing handsomely to the economy the other day noted in textile hub Dhaka demanding relief from soaring prices and better day. Not the bystanders but rioters themselves would be surprised the employers decided to offer them subsidised rice. Out of a total 250,000 textile workers, two lakh workers will benefit.

According to the president Bangladesh Knitwear Manufactures and Exporters Association Fazul Haq, BD's garment industry is leading forex earner, in fact like nerve for the economy and country. He was sure had not a quick decision come for the relief, it would have been nearly impossible to deliver as per prescribed time. However, under the scheme a worker will collect four kilo (8.8 pounds) of rice (staple food) a week from hurriedly arranged subsidised outlets in the nations main garment hub, Dhaka. Appreciating the surging prices in quick succession world over Fazul Haq said he knew how much poor earners of huge forex for the country had been hit without any salary raise.

Owners outlets, be informed will sell at rice at least 30 percent less than market price. The cheap food is part of the initiative to help backbone of the economy.

This religiosity surfaced when BD Finance Minister had urged company owners to spend some of their profit on subsidy of food for their poor workers, as he advised that existing corporate culture should be changed for the welfare of the deprived.

The textile workers plight in Pakistan could be well imagined, where all round slum is apparent, sources said, adding that government announced per month at Rs 6000 wages for textile workers seems in dear doldrums.

BT COTTON HITCH STRETCHED TOO LONG:

The two new varieties CEMB-X CIM-482 Bt and CEMB-X MNH 93 Bt have kind consent of Minfal to be introduced during coming season. The varieties were tested by the PCCC for one year, through national co-ordinated variety trials (NCVT). The experts not without reason seemed to be reluctant to get the two above varieties approved by provincial seed council and understandably okayed for sowing smaller land holding so that in case the varieties do not show promise, losses will be low. Anyway despite a bit of confidence, the experts advised Minfal not to take risk as the varieties introduced by (NIGBE) had not been cleared. In fact efforts to grow (cultivate) these two in an area of about 5000 acres in Sindh and Punjab during last Kharif season had met with total failure.

Authorities in Pakistan seem and quite naturally to hurry up and catch up with regional rivals like India China and even Indonesia have already harvested well and nearly doubled their usual cotton yield size. The report from India said Bt cotton contributed significantly to the yield from 308 Kg but per hectare in 2001-02 to 450 Kg lint per hectare in 2005-06.

So far "failure" has been reported in case of Pakistan but details lack. The Bt cotton which has been said to the failure in Pakistan, and authorities are far from confident the large yield giving Bt will ever succeed in this country where thus far cotton is required to save mills here from going inoperative. The country's well-wishers pray the Bt varieties show promising results in Pakistan where cotton along with other input, causing products uncompetitive.

Unfortunately our researchers and experts have not proved match to couple of deadly known diseases like mealy-bug and CLCV, something should be done to raise cotton output which authorities weigh mills needs in a couple of years will be more or less 20 million bales of 177 kg. In the meantime better care should be applied in case of emerging diseases to minimise the losses. The insecticides and pesticides or such should be prepared within the country. And, in the meantime Minfal should ponder sending some farmers to America, China or India to get a closure look how farmers there tackle to get desired yield of Bt cotton in Pakistan on return.

WATER MUST FOR COTTON TIMELY SOWING, YIELD AND QUALITY:

The haphazard action picture painted by the Sindh Abadgar Board, if correct can only be regretted though losses as alleged in billion could not be recovered. But what is possible that the story is not repeated once again to perpetuate losses to Sindh farmers and province. The spirit of unity that apparently seems to have been generated any action, which tantamount to weakening Pakistan should be discouraged. Opportunity available now calls for taking full advantage to give effect that 2008 polls have offered after six decades.

Cotton has been backbone of the economy, as agriculture is said to be. That cannot be side-tracked for minor gains here and there. Cotton besides being exported as pure raw material knitwear, garments, fabrics, bedwear, towels when added value turns out to be single largest forex earners in Pakistan. No wouder why the textile exporters have been trying to convince the present government rather loudly how it has to come up with help to let stand it on strong feet.

How strange it sounds if the allegation is near any truth that rice and cotton sowing had to be delayed for two months. All know late sowing and harvest neither yields bumper quantity nor offers good quality. But according to Sindh Abadgar Board it happened last season. The report said that growers body meeting called upon the high ups to possible probe what led to the saga. It alleged that Wapda's action of releasing water from Tarbela Dam for power generation, neglecting the decision of Issa and agriculture expediency.

This meeting, harassed by negligence of authorities, cautioned that past experience of rivers indicated that the current dry spell could last for years. Hence, the authorities must plan in advance to tackle spell on war footings. That could help facilitate availability of water for irrigation if cotton production is desired to meet the entire needs. And also facilitate production of other crops such as wheat and rice which most likely wont be available from abroad. Authorities would do good to ensure that whatever surplus crop, be it cotton, wheat, or rice possible be in surplus are judicially used to save people or mills from starving.

KNITWEAR PROSPECT:

A jump in exports of knitwear from 50 million dollars to one billion dollars is quite appreciable and encouraging, that too, in 10-12 years. The latest position today is entirely discouraging as for some adverse situation the rivals have taken over the traditional US, European and even North American markets. In business and exports such rise and fall is always probable, but it is for the businessmen and exporters to lay hands on wrongs that could be mended primarily by themselves and then to approach government for doing its part to make export products competitive.

But the manufacturers and exporters while available whatever is from government they should know the basic requirements and move government in helping them to meet needs as far as practicable.

Taking report in print media on May 2, in which former chairman Pakistan Readymade Garments Manufacturers and Exporters Association has regrettably spoken about knitwear industry in this country is facing worst ever crisis and sodly gradually losing share in the world markets mainly due to abolition of quota.

As a matter of fact when quota abolition is brought in entire textile sector falls in the category of the knitwear. The country, which greatly had been depending on the forex earned by exports of textile products are constantly being reported on decline.

So struggling merely for the knitwear cause to keep it going and going well, invites that cause fought for should be the entire sector including fabrics, garments bedwear, towels etc. The former PRGMEA chairman who had the privilege of being President Lahore Chamber of Commerce and Industry has store of experience said be felt rather without hesitation to admit that Pak exporters solely depended on quota and did not prepare for the post quota regime. He suggested the need to improve labour and management skills which he considered vital to improve production ability.

He indeed has gone quite far in admitting inherent shortfall. But the chairman while enumerating causes of drawback such as Pak input cost on account of high electricity and gas tariffs as well as unprecedented gas and power load-shedding is much higher as compared to China, India, BD etc, thus exporters fail to compete in the world markets. The sources close to cotton textile business while agreeing with the chairman desired to know whether Pak exporters fell sure every thing they need are available locally or have to import draining out billion of dollars.

PAYMENT REMAINS PENDING:

It was expected nearly two dozen of Pak exporters of home textile products would have received the payment of $30 million US based. But it proved to be like day dreaming for nearly same period textile exporters had been constantly making noise that high cost of doing business was likely taking on their liquidity owing to keen competition with well equipped and self sufficient in almost all their needs rivals. Perhaps the exporters had been confident that their labour and hard-earned money will easily be paid in due course. But while the fresh export products getting tough time, not only for the scarce resources but also occasional constraints in delivery on time.

Naturally the story is very sad as $30 million remain stuck up for over four months which could have provided liquidity and would have helped double forex earning by addition at export products. One or two things however remain mind boggling why such big consignment by over two dozen exporters at any stage sensed rat smelling and particularly that US was nearly surrounded by variety of economic and exports problem.

The reports are quiet on subject whether during pestering four months party was approached and his/ their response. May be as sources close to trade and exports, on guesswork traced the election time had space only for one thing whether to find a way out to tackle through govt help the high cost of doing business or to approach battered Indian importers based in America. And now as they have been out of election jungle focussed on their products worth million tying probably uncared at American ports.

Most lilely any agreement on export/import was not in writing rather on mere understanding. Any reply regarding such thing could highlight the fact and real cause for neither unloading the consignment nor making a single penny against $30 million accord. The pretext, as is given by the exporters from Pakistan that importers have filed with court bankruptcy and as exporters are confident US government was likely to help the importers in every possible ways including financially. So the exporters as an alternative have demanded that their home textile products should either be sent back to Pakistan or should effect payment immediately. Oh, the ports demurrage?

Cotton sector under scan in India
Commodity Online
NEW DELHI: 10-5-2008 The government of India is attempting to bring down the inflation by cutting imports duties and imposing some restrictions to food items.

Food items were curbed because its exports as well as prices were increasing. This scenario is also found in cotton sector. The fibre crop prices also surging and Indian mills complained of a sharp spike in cotton prices due to speculative hoarding and exports.

Global cotton prices have doubled in the past one year with punters pouring money into ICE futures. Indian cotton is in heavy demand overseas as it is the cheapest available right now. Sensing a good opportunity, most of the world’s largest cotton trading companies has become active in the Indian market.

Despite the record production of 31 million bales in 2008, the local prices have continued to surge due to the heavy demand from exporters. In one hand, the soaring prices have meant a very profitable deal for farmers, in another hand it is ginners and weaving mills, who are worrying in this deal.

The ginners and weaving mills have asked the government to step in to make sure cotton remain affordable for them. The finance ministry is in favour of a 5 percent export tax on cotton. However, the Cabinet Committee on Prices, which met on Monday, has put the decision on hold.

They have suggested imposing measures to prevent speculative hoarding, which distorts the supply chain and prices, along with registration of export contracts so that cotton trade can be monitored.

The CCP, however, took a view that since there is still a surplus in the domestic market, this may not be the right time to impose export restrictions.

Cotton lint rises on millers' demand

12 May 2008 4:07 pm

Mumbai - Spot cotton lint prices were called higher at the markets across western India Monday amid support from consistent demand from south Indian millers and declining stocks in the region.

At Kadi in Gujarat, cotton lint S-6 A-grade was quoted between Rs 22,500-Rs 23,100/candy while average-grade traded at Rs 22,000-Rs 22,500/candy. Kapas got offered at Rs 535-Rs 615/maund. The State recorded arrivals of 13,000 bales today.

In Vidarbha region of Maharashtra, the 28-mm cotton lint traded at Rs 21,600-Rs 22,000/candy; 29-mm cotton lint traded at Rs 22,300-Rs 22,800/candy. Around 7,000 bales arrived in the State today.

At Sendhwa market in Madhya Pradesh, the 28-mm cotton lint traded at Rs 22,000-Rs 22,500/candy; 29-mm cotton lint traded at Rs 22,500-Rs 23,000/candy; and 30+ mm cotton lint at Rs 23,500/candy.

Lacklustre trading on cotton market

KARACHI (May 13 2008): Sluggish trading seen on the cotton market on Monday as the present political uncertainties kept the buyers on the sidelines, dealers said. The Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 3375.

Both mills and ginners were on the sidelines to analyse the developing situation on the political front and the impacts of these factors on the economic sector as well, some analysts said.

The changing situation on day to day basis is making the people from all walk of life sick and tired. The settlement is necessary to restore the confidence of local and foreign investors. It is a must for the country that the concerned authorities take required measures to remove uncertainties among the masses, they said adding the country is already facing hardship as a result of rising unemployment, poverty, sky-rocketing prices of essential items and deteriorating law and order situation.

Commenting on the increasing value of dollar they said that cotton business is facing several difficulties due to higher cost of production as payments are in dollars. The following deal was reported as some 640 bales of cotton from Rohri sold at Rs 3475, dealers said.

================================================== =========
The KCA Official Spot Rate for Local Dealings in Pak Rupees
-----------------------------------------------------------
FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"
MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL
================================================== =========
Rate Ex-Gin Upcountry Spot Rate Ex-Karachi
for Price Sales Tax @ 15%
================================================== =========
37.32 Kgs 3375.00 50 3425.00
-----------------------------------------------------------
Equivalent
-----------------------------------------------------------
40 Kgs 3617.00 50 3667.00
================================================== =========

US ports demand $2 million demurrage from textile exporters

ISLAMABAD (May 13 2008): The US port authorities have claimed $2 million demurrage, to be paid by Pakistan textile exporters, before release of the export consignments of any company, except 'Dean River' who have been released foreign exchange for clearance of the consignments paying $20,000 for each design, sources told Business Recorder here on Saturday.

The textile exports worth $30 million have not been released by the importing company in the USA because it has been declared 'bankrupt'. These consignments mostly included bed sheets and towels packed in 400 containers. "The case has been registered by the port authorities and we have already arranged a lawyer for initiating court proceedings and have paid $50,000 in this regard," sources said. After the second hearing of the case, the court issued an order to the Pakistani exporters to pay $2 million as demurrage charges.

On the other hand, the State Bank of Pakistan (SBP) is also demanding of the exporters the bank payments. "SBP gives a time period of 180 days to the exporters after the shipments of their consignments. After 180 days, according to the SBP policy, the foreign exchange should reach the country", it says.

But most of the exporters have not met the deadline and now SBP is issuing notices to them. "SBP should increase time limit for the exporters who are already facing high demurrage charges", they emphasised.

The exporters have been demanding of the government to either solve the problem through Foreign Office or High Commission. "We have written a letter to the Textile Ministry about the problem but nothing has been done so far", they said. "The commercial counsellor of Pakistan is also not providing any assistance", they remarked.

"We have talked to the port authorities to reduce demurrage charges, indicating that the importing company has become 'defaulter or bankrupt' but they are still demanding payment of demurrage charges that have increased to $2 million.