Hectic buying within range-bound prices, decrease in spot rate marked the week
KARACHI (September 01 2008): Price behaviour, with quick changes was incomprehensible as cotton production's size was expected to be good and seed cotton supplies were too pretty normal. Hectic buying was feature of the week. The spot rate opened firm but was subjected to change and finally settled at Rs4075.
WORLD SCENARIO:
Cotton futures were impacted heavily by declining grain prices and lack of buying support kept futures weak, but market was looking end of Olympics being held in China hope industries demand would rise pushing prices on the surge, perhaps.
On Monday December future shed 0.51 cent to 69.12, while March was down 0.47 cent to 74.03 cents a pound. On Tuesday futures values merely stabilised as grain and other markets influencing cotton, except oil, fared not in so good way. The trend was more bearish but end in China of grand Olympic show and hope mills heart will start heating pushing demand from China was expected to rebound. The dollar like oil also effecting cotton value was prompting the stockiest of cotton to indulge in profit taking any way how trading behaves on Wednesday will leave strong imprint in coming days. The weekly exports sales and shipments have not been strengthening muscle.
On Wednesday futures closed firmer as most grains value registered rise impacting cotton contracts. However, major dent was made by news that Hurricane Gustar, in the Caribbean was heading up creating apprehension among players the cotton crop may get hurt besides other corps. The hurricane is considered too strong to cause damage to gulf of Mexico oil production by next week and some feared definite loss.
On Thursday the cotton futures on NYCE closed with gains, second day in a row as storm Gustav was projected to collide with Gulf Coast knowledgeable sources said. The December futures with substantial 1.17 cent gain ended at 70.63 cents pound. The other crops also added to futures strength. The Gustav strength was unpredictable until Monday when it was likely to gain and colossal damage to cotton crop was likely. In fact if heavy rains hit any crop belt will cause harm to them.
On Thursday USDA reports weekly export sales that were projected to come to around 245,000 RBs, analysts said. On Friday, the US cotton futures closed modestly higher on buying ahead of a potentially damaging land strike by Hurricane Gustav boosted prices, but end-of-month profit takers, a strong dollar, and a slip in crude oil prices limited gains, brokers said.
US futures markets will be closed Monday for the Labour Day holiday. Key December cotton futures ended with small gains of 0.42 cent at 69.78 cents a lb. December's contract range ran from 69.37 to 70.90 a lb. After hours, December cotton stood 0.22 cent higher at 69.58 cents a lb. By 3:05 pm (1905 GMT), December's contract turnover was 9,690 lots.
LOCAL TRADING:
The kind of production cotton will be witnessed in a month or so remains vague. The monsoons till date has behaved like disciplined children. Growers have been satisfied with this, thought field workers have hinted mealy bug attack. Prices have been leaping high and falling with thud. By and large ruling lint prices more or less Rs 4000 are not being grudged by the consumers. The opening spot rate was Rs 4125. Seed cotton prices too maintained nearly weekend level around (in Sindh) Rs 1875/1925 and in Punjab Rs 1900/2025 per 40 Kgs. The opening day sale was substantive at over 13,000 bales.
On Tuesday market showed vulnerability as ginners decided to bring spot rate down despite buyers strong support continuing. It may be that the week's second session added buyers interest on probable hope demands were being considered for package among authorities who matter in dealing lint matter. The spot was down by Rs 75 to Rs 4050. While phutti in Sindh shed Rs 25 to RS 1850 and Rs 1925 and in Punjab seed cotton was nearly nose diving as it lost sharply by Rs 100 to Rs 1800/1950. The asking rate in ready when nearly 15000 bales were lifted prices ranged between Rs 4075 and Rs 4100.
On Wednesday buying support rose due to rise in dollar value and nearly 20,000 bales of cotton changed hands at prices between Rs 4100 and Rs 4125, while hectic buying prompted ginners to raise spot rate by Rs 25 to Rs 4075, while phutti in Sindh was selling at Rs 1850 and Rs 1900, in Punjab phutti rates ruled between Rs 1800 and Rs 1925. Conditions favouring export parity cotton buyers turned active on the market to take full advantage. The government incentive too was in the background of expeditious buying. However, the textile exporters seem to believe more in themselves rather than in tax payers money.
On Thursday cotton consumers ran amok and lifted nearly 20,000 bales without minding prices, which have been showing rising trend. The millers seems firm requisite package may be coming or as they have hinted will go without that. Spot rate was sharply up by Rs 50 to Rs 4125.
On Friday nearly 15000 bales changed hands as buyers were showing sort of panic buying for the last three days. The market circles were slightly reluctant to confirm whether exporters have received some positive assurance from authorities or shunning past ways to depend on outside help. In any case they said the beginning is good as X'mas market sales must not be failed on any count. Meanwhile, prices seems not to very much - phutti in Sindh and Punjab at Rs 1800/1900 and Rs 1800 and Rs 950 respectively.
On Saturday Ginners panic selling pushed the prices down on the cotton market as good crop position propelled them to dispose off the unsold stock to keep themselves safe from huge losses. The official spot rate was brought down from overnight level by Rs 50 to Rs 4075, they said.
The mills were active and trying to grab every lot offered by the ginners at the lower prices. About 11000 bales changed hands within a price range of Rs4075-4100.
EU DUMPING DUTY SHOULD END NOW:
The European Union once considered most considerate friendly country of Pakistan with open heart, mind and market for Pak goods. But the attitude seen in the last few years has not only been shocking but causing draw down, economy touching the lowest ebb for some home factors and to a great extent observance of harsh rules and measures in the shape of 12 percent duty on textile products such as bed linen, bed sheets, curtains, sofa cloth and home textiles. All these named products earn for Pakistan more than 65 percent of total exports. In fact textile exports keep economy of Pakistan afloat.
Along side the EU, other patrons, too, withdraw favours hitting hard at the textile products of this country. Billions dollar worth of textile products were lying on US ports as importers refused to honour by simply refusing to make payments against them. To add to this to a great extent not natural deterrence has these days been oil and food imports. Efforts of top leadership of Pakistan has repeatedly failed to win over friends on count of sharing countries worries after 9/11 incident.
It was greatly hoped post election scenario in this country will turn to better with investment and other favours inflows from countries, which sing at top of voice in praise of system that binds countries closer in needs. But a renewed effort by Commerce Secretary Syed Asif Shah who concluded week long journey to Germany, Italy, Spain and UK discussing with officials of the above named countries had to drop good news for his countrymen in general and textile exporters in particular that the five year anti-dumping duty imposed on Pakistani textile products by the EU will come to an end next year, and may be the punishment will not be applied any more. This however will depend if Pakistan economy emerges next year as formidable to reckon with?
ROZs STILL MONTHS AWAY:
Among three basic demands from America were bilateral investment treaty (BIT), free trade agreement (FTA) and reconstruction opportunity zones (ROZs) only ROZs have moved apace a bit with signal from that country. The same remain still three months away from now. Weeks back house committee had taken up ROZs injecting hope it would start operation in days. But the friends waited to study the aftermath of election how that faired in relation to that country. Those US people in Pakistan and even from Washington and New York men rained to know the mind of the authorities so that no mistake had been committed and no repentance there after.
All the response came for out of the co-operation was in the air that was regarding the ROZs. As BIT and FTRs remain under fog for the time being, some advance is heard has been made in ROZs. Something is better than nothing, ROZs are expected in Pata and Fata, that too stay at the moment in distant time. The NWFP government initiated move and constituted a committee to start preparation for launching still unclear US basked ROZs if all went positively in three months time. The delay should not have stood in the way, sources close to trade said, as the idea was productive and should have launched here with strong expectation ROZs green signal was coming in the wake of year of friendship and co-operation.
The only positive thing, if taken on face value, is that a committee has been constituted in a meeting attended by, say co-chaired by NWFP Governor and the Chief Minister. The disappointment moving along with the report is that meetings and such thing abound in this country soon after a body was formed or decision taken but implementation and its smooth working was hardly seen. The burning hope also is that programme management office is set up at the earliest.
It will be, report said, one window to facilitate eager to set up industries in the ROZs with facility to export products to the USA duty-free. This was briefed to the participants of the meeting. The message dropped is very pleasant as it widens the scope to set up ROZs at least in each city of provinces of Pakistan with or without access to the US. An opportunity if offered to Pakistan looking for it. Thus small or big investment flow will begin for which the country looks.
The Governor and Chief Minister who participated rightly voiced with thousands that the locations benefit the people of zones whenever they are created. It is hoped that zones come into being soon and start operation. Last but not the least, the local skilled and unskilled labourers should be given preference, without any reservation.
NON-TEX EXPORTERS VERSUS:
In fact the non-textile exports have nearly doubled during the first month of the current fiscal year despite input cost of such products witnessed a substantial increase versus textile products exports, which registered substantial decrease.
The sources expressing happiness over the rise hinted that subsidies are not the real issue, but there is a need to address the structural weaknesses in the textile sector. They noted with the exception of raw cotton and cotton, both considered raw and semi raw materials, all other major components of textile manufactures registered a negative growth. This they observed despite a major depreciation of rupee and an appreciable gain made by the currencies of the competitor countries like much quoted India and China.
This speculate should work as an eye opener for the authorities who hear the loudest voice taking for granted to bear some substance, sources said. The sources seized the opportunity to voice concern over most products making textile exports attractive are imported from China and India such as textile machinery, dyes and chemical, zib etc they called upon the new government to take stock of every demand coming under impression of improving business and exports. The callers for helpers given help only on firm understanding that tax payers money, mainly for development projects are paid back in addition to exports value earned. New fields are being explored, and in the best interest of trade and business, but need is they are implemented to ensure gains they are presumed! One such decision is to ensure that sugarcane crushing begins on Nov:2008- One needs to count days.
BUSINESS ETHICS LAG:
The think tanks, economists and victims of indifference in loud tone or whispers have always been telling to tarry and know a word "Satisfaction". The trade and business have spared no opportunity to remind authorities their every step hits the trading flow and smooth exports. The attitude showed their being ever in dire needs and dissatisfaction and the natural or manipulated pressure adds to existing nags.
When the time was not for back but the desired resources were available at the first call the return to the lease was not matching. The result was ever surging trade deficit and depleting reserve. Today the first calls are simply ignored as the time has changed-- cheaper credit from national or international origin has bulged and even being refused. In Pak case all export sectors including the much boasted textile sector are decidedly the suffers credit is not available. The State Bank of Pakistan (SBP) is trying as far as practicable to maintain flow of finance to the exporters realising the politics is in swing and hence businessmen and exporters be as much helped so that return will make a balanced progress. The refinance money has been raised.
There, however, are certain factors that the local bank's have not been as liberal and world renowned donors either have stopped lending because of the never solvent country owing to absence of equitable distribution of wealth. Among the people who create them. Changed time has come laden with enormous opportunity and hopes. If the system is given a new look with honesty and dedication scenario change will make this country a better place for those who lived and worked dedicatedly hard and continued to do so. The international donors will be at our doorsteps to lend money on our terms.
KNOWLEDGE BASED SECTOR:
Unless knowledge based sector replaces textile sector, like information technology or non-textile exports are given necessary wherewithal that to maintain the trend achieved reported the other day, cotton should continue to receive respect it has commanded so far. Any slackening deliberately or otherwise in grow more cotton attitude should continue.
Unfortunately textile town, cities and garment enclave have not been heard for quite sometime. Sources have long been hoping, they provided given existence, may turn the declining trend in textile exports by now aging traditional industries. The new cities and towns planners and enthusiasts can bring with tem better infrastructure that have been ignored for the last 60 years.
Merely God gifted cotton and cheap unskilled labour with machinery, dyes and chemicals have done their job but need novelty India and China and others are constantly modernising and supplying such products importers world-wide order and entertains is evident from their prompt payments.
The textile sector should realise that everyday customers tastes and fashion changes with that innovation in machinery, colour and better trained workers have to be engaged to match those countries people here see edge coming from the blues. Even visits of foreign countries should be undertaken with enthusiasm that countries penetrating into world markets will henceforth be left behind. Competition is one way welcome to improve upon them to beat rivals. Watching China taken over the world markets like storm is no wonder. During world War II Japan was wonder country, which had no rival then in the world. Quoting the two great captors of the markets is to create courage to display similar feat.
