Pakissan.com; Spot rate cut by Rs 25 on cotton market

Spot rate cut by Rs 25 on cotton market

KARACHI (March 29 2004): The ginners in Pakistan had their nerves under hold expecting support to come from abroad enabling them to gain but it was not to so during the week ended on March 27, 2004.

Utmost they did to satisfy their urge to hold back spot rate at Rs 2975 but on Saturday saw spot cut by Rs 25 to Rs 2950 without ST and upcountry expenses.

WORLD SCENARIO:
In New York trading, the futures continued under pressure of trade and speculative sales climaxing on Wednesday session when fall was above two cents.

Futures got a week support on Thursday, which saw combined trade and speculative buying. The spot May opened at 67.00 and closed at 68.40 cents a pound and closed May at 64.90 and 66.64 cents a pound.

The trend resulted in substantial losses. The week opening day was easier on modest trade and speculative sales as the market pulled back after posting gains in the past five days.

Dealings remained modest though as most players appeared gearing up for release of a slow of reports this week and coming weeks.

Traders said they will look at the USDA export sales and planting intention report. On Tuesday futures tumbled to a week finish on speculative and options-related selling. Traders observed the trend was still down adding that technical bottom, which seemed to have formed above 66 cents has been "negated".

On Wednesday futures snatched some gains on combined trade and speculative buying. The traders noted that market fundamentals still looked positive with steady demand for US cotton seen in the weeks ahead.

Thursday's session depicted mixed trading, with fibre contracts seen grinding lower henceforth.

Meanwhile, USDA export sales was not a factor in the market. It said that total US net upland cotton sales reached 190,300 RBs (500 Lb each) against belief of 200,000 to 300,000 bales.

The planting intention report on March 31, was eagerly awaited for a direction. The last session saw firmer close, second time gains, after steady ? of trade buying.

Traders said that cotton prices had benefited from strong demand for US cotton, though players are keen to derive aspiration from planting intention report next week. Analysts said rally in soyabean prompted some US farmers to switch acreage away from cotton and into beans.

LOCAL TRADING:
The trading in cotton was heavily interrupted by Republic Day holiday as well as Pak-Bharat cricket matches or at last so was stated by the brokers.

The quarters who want to see trading as clearly as possible to mark the direction were utterly disillusion to partially reported after 24 hours. However no less impact was on local cotton of futures shape in New York trading. Trade and speculative sales driven futures down.

However, ginners here while kept spot rate unchanged at Rs 2957. Sold cotton in ready priced according to the quality. However, the first day's trading was reported nil.

The spot rate was maintained at the week-end level. Second day depicted no change in mood and behaviours. No deal was reported in ready. Pak-Bharat match ODI's series last match was held hopes rising of a memorable one but it was dull and could be predicted which way the match was leading to.

The New York cotton futures fluctuated, both ways though volume remained low. On Thursday spot trading was again stated to have not yielded any deal but previous day's as DMR reported two deals were seen.

The declining futures in New York showed hard up spinners to wait hopefully for a pull down in Pak cotton. But it was during bargains that put spinners or ginners on the test. But spot rate and rate in ready continued as usual, the latter depending on the stamina to force other down.

The Friday session was noted dull but a previous day's deal was reported by the KCA's DMR.

There was no ODI (one day international) and only the price factor and of course quality mattered. Neither buyers nor sellers were prepared to speak on future trading in cotton.

Spinners were thinking they can import unless ginners low down to the world trend. Ginners were conscious of what was happening in world and that next month sowing was likely to be started in Sindh.

Saturday's saw spot rate pulled down by Rs 25 to Rs 2950 to turn buyers indulging in calculated buying.

The decline encouraged spinners who lifted around 7000 bales of cotton sources said the buying in likely to sustain now.

FARMERS' QUIET:
The cabinet committee recently decided and announced support price for cotton at Rs 925, against last year's Rs 850 per 40 kg.

The ruling prices during the now coming to a close season have been more or less Rs 1000, per 40 kg. It means that Rs 850 was much less than the value cotton commanded.

The farmers had in early days called for upgrading the support price to Rs 1000 or above. However govt taking for granted that Rs 850 was enough. The present regime is hardly seen budge merely political reason.

This regime has been also realistic in its own way to formulate a thing and stick to it. The current season's support price was maintained at Rs 850 despite voices were hard to raise the level. But the govt was bound by its promises to lift cotton if buyers tried to exploit the situation at Rs 850 or depending on quality. Before the TCP was inducted also for intervening in cotton buying if growers were put in tight corner previous similar organisation? was put of government which ordered to buy thousands of tons at below profit level to please the growers.

The banks borrowing used to be common some years back and poor tax payers would pay for the rich. But since TCP has been assigned the job, even though has made mistakes at times but was withdrawn from playing the philanthropic role.

TCP was given desperate calls by ginners but the organisation on record to have intervened to buy only cotton worth exports.

However, today when seed cotton prices are keeping above Rs 1000 level, the calm, on the issue by the growers are meaningful. Or, the past is evident that when the final hours come the support price is ignored.

ANTI-DUMPING:
It was indeed expected that a full-scale struggle will be waged to stall and win anti-dumping imposed by EU recently on Pakistani bed linen. But that EU had not only imposed to the extent of 13.1 percent and GSP facilities also withdrawn.

What actions were being taken and what results follow-through measures were yielding was a guarded matter. A not very reasonable retaliation was thrown open that all the chemicals and dyes and textile machinery imports were to be stopped forthwith.

The retaliatory steps that came in hurry had probably not taken entire implications in view.

The EU is a big partners though some decisions like purchase of planes etc come in the way by and large good sense prevails. Some months back following the September 11 case, Pak participation in fight against international terrorism gave Pakistan great boost.

They were now other but basically the EU, which announced steps to facilitated Pakistan to help boost trade.

The EU should also be guided by the past when ultimately had to withdraw cases. But the manufacturers complaint has been too frequent that led RCCI president Osman Khalid Waheed to say that use of frivolous anti-dumping law was emerging as a tool for developed countries to impose penalties on false cases.

However, Pak exporters should also stay at guard always to give an excuse. Cheap products are always subject to such penalties. Why? Needs a thinking.

TAIL PIECE:
At a time when everything in respect of hedge trading in cotton was taking shape taking for granted it was acceptable to all the players. Ginners have shown strong opposition to the system.

The ground: being offered opposition is that its un Islamic. Other players remain silent while gainers have warned action will be taken to court.

Courtesy Business Recorder

Pakissan.com; Advisory Point