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Cotton hedge trading move faces rejection
ISLAMABAD (April 24
2004): Cotton hedge trading and future marketing
are said to be in danger as the government is
likely to review its decision on both issues due
to strong opposition from the ginners.
Sources told Business Recorder here on Friday that
the government was convinced that the facilities
would not bear the desired results, as cotton
consumption is higher than its production.
The only one future market is running successfully
in New York, where cotton production is more than
consumption and they have to market the entire
crop by selling forward to cover the risk by hedge
facility.
Pakistan Cotton Ginners Association (PCGA), which
claims to be the representative body of all
stakeholders, had approached the federal
government on the issue of 'Cotton Hedge Trading'
and warned that by resorting this instrument the
speculators would be get free hand to dominate
cotton trading.
In a letter to the Prime Minister, the PCGA
requested for intervention to purge the market of
speculators, adding that all growers, ginners,
textile mills and exporters are opposed to the
facility which is yet to be opened in Pakistan.
Copies of the letter were also sent to ministers
for finance, commerce, Senate chairman, National
Assembly speaker, Governors and chief ministers of
Punjab and Sindh, chairman Trading Corporation of
Pakistan, All Pakistan Textile Mills Association
and Council of Islamic Ideology.
Karachi Cotton Association (KCA) and some cotton
exporters have been lobbying for opening cotton
hedge trading as being practised in various
countries like USA, India etc.
"The KCA, which mostly represents cotton
exporters, and a lobby of speculators, who are
already active in the stock exchange and other
commodity markets, are supporting the new
concept," the letter said.
The PCGA said that country's cotton production is
hardly ten million bales while mill consumption is
over 12 million bales. In this context, there
remains no room for export of cotton and this
facility for cotton exporters, it added.
It is again a miserable fact that New York cotton
futures market has already caused enough
instability in Pakistan's market, resulting in
huge losses to cotton ginners this season.
The country cannot afford another future market
under the hedge trading for the disaster of cotton
trade. The facility is bound to be exploited by
the clever elite to the disadvantage of small
country ginners, argued the PCGA letter.
Even in Bombay the experiment of hedge market had
failed simply because India is also a not cotton
importing country like Pakistan.
According to the letter, the 'entire' cotton
ginning industry had unanimously opposed the hedge
trading, in its general body meeting held in
March, 2004.
Courtesy Business Recorder |
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Pakissan.com; Advisory Point
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