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Analysis: Cotton trade remains almost
range-bound
SHAFI AHMED SYED
KARACHI: The cotton market could make no major gains,
despite developments offered opportunity came in the wake of
rains since inception of the trading and reduction in world
ending stocks. The rates in ready budged slightly but spot
rate stayed put for most of the days during the week ended
on Saturday (February 12, 2005.)
WORLD SCENARIO: The cotton futures in NYCE trading
was looking for news to spurt, following crop report or cut
in world ending stocks but players were disappointed and
turned their attention to US export sales on Thursday.
The March contract opened at 48.24 and May contract at 44.60
and March closed up at 44.95 and May 46.78 cents a pound.
On the opening day futures ended mixed in activity featuring
small speculators, as players moved position out of the spot
contract and the trade eyed release of couple of government
reports. However traders were saying openly that the much
awaited reports had not much weight at the crop size already
known and no changes to demand were made incrementally over
a period of several months.
On Tuesday futures ended easier on switch trade as players
rolled positions out of the spot contract before it goes
into delivery while others awaited release of crop report.
Trader said market will see more of the same type of
business as players get ready for delivery on February 22 -
to derive any help traders turned to production in China
which is expected to be down around three million bales.
The third day's trading saw futures gain on trade and
speculation buying while reaction to a bullish govt. crop
report was mostly subdued. However, traders believed that
focus in cotton continued to stay on switch trade as players
transferred their positions in spot March.
The USDA supply/demand report, it cut world ending stocks to
46.74 million bales and reused US exports to 13 million
bales from 12.7 million bales. Traders commented that market
took a look at the report but saw nothing major in them.
On Thursday futures rose by substantial amount on heavy
speculative buying sparked by strong US cotton sales, and
players hoped the market will turn higher in the coming
days.
The USDA said US cotton sales soared to a hefty 545,000 RBs
against belief it would only range from 300,000 to 400,000
bales. On Friday session on the NYCE was modestly higher.
Speculative buying and switch trade helped. Analysts
observed that world-wide elimination of import quotas on
textile may be resulting in greater world-wide demand for
cotton than was imagined. This will lead to competition.
LOCAL TRADING: Trading on the local cotton market
showed nothing spectacular though ginners would have wished
to have the best deals while the sun was behind the clouds.
The buyers, however, with the knowledge of the situation
that what actually rains meant kept buying subdued to leave
ginners thinking.
While sellers would have wished to exploit situation they
also adopted wait and see attitude for the situation rains
have created. Supply position dips in such times and prices
firm up. However, spot rate stayed put for most of the week
days, at Rs 2125.
Muharram has also affected trading which began on Friday.
The cotton rate in Sindh ruled around Rs 1950 and Rs 2175
and in Punjab at Rs 1950 and Rs 2200 while seed cotton
stayed at Rs 925/1050.
On Tuesday buying support was witnessed as spinners, textile
millers and exporters looked for quality lots and lifted
some. Prices were firm. Spot rate was unchanged at Rs 2125.
Trading said to have been hit as Europe is not sowing
interest in Pak yarn.
On Wednesday, ready prices had some budge but generally firm
trend was noted. Sellers waited rains which continued and
played some spurt in cotton prices but the same was off set
by lower inquires. Spot was firm at Rs 2125 and ready prices
also held to previous levels both in Sindh and Punjab.
Thursday's session saw some buying support coming from mills
and exporters on anticipation of the further increase in the
cotton prices.
The buying encouraged ginners who raised spot rate by RS 25
to Rs 2150 without upcountry expenses. In Sindh and Punjab
cotton sold around Rs 2000 and Rs 2200, on the higher side.
Seed cotton formed at Rs 1950 and Rs 1050, ginners may take
note of fall in planting in US to 28 million hectares.
However, analysts commented that futures up on trade and
speculative buying while reaction to a bullish government
crop report was mostly subdued.
On Friday steady conditions prevailed as spot rate
maintained Rs 2150 level. Exporters lifted some bales while
spinners were reluctant to go for every lot but were looking
for quality lots.
Muharram has set in and is likely to dampen trading. Seed
cotton rates and cotton rates in ready were almost unchanged
on Saturday local cotton market was steady as prices showed
further rise in prevalent levels as some 2000 bales of
cotton from upper Sindh were sold at Rs 2225 and were found
demanding Rs 2300 for best quality of cotton.
JUST $16.4BN? By 2010 textile sector alone hopes to earn
double of the cumulative export earning from exports of all
resources today.
The industry envisages part of life savings Rs 300 billion,
according to APTMA, experts projection. The statement claims
experts have been realistic as they have touched upon issues
come in their observations during the decades. But have
they? Inordinate lapses speak for themselves as they have
not regrets that exports earnings stagnated around $8
billion for years.
The experts have not mentioned reasons why industry found
itself helpless in enriching the cash-starved country.
During the years they have quite a number of speakers
invited to address seminars and workshops who earnestly
called upon the textile exporters to discourage exports of
cotton and low count yarns, but it had little effect.
A realistic projection should have large parameters to cover
all shades of opinion related issues. If the experts would
have so wished to be realistic they would have expressed
gratitude of the cotton growers who under odds meet needs of
ever thirsty mills. The need is now upgraded to somewhere to
around 17 million bales in not too distant futures. The
growers should have been referred to as partners in
prosperity.
The growers experts should have been invited enlighten them
about past deliberately created discrepancies in lifting
cotton from local markets with compassion. The growers have
no time for rest ever since they start plowing the fields,
sowing until the harvest.
Why? Because sometimes nature turns unkind and often the
trade in partners. Stretching cotton needs to high to
prepare growers to help but when consumers have met their
needs leave rest of cotton to rot in the godowns and
ginneries, sources said. For increasing cotton acreage will
other crop be sacrificed? The experts have not discussed nor
even touched upon.
GARMENT PROSPECTS: Great opportunities exist for
garments made in Pakistan, ignored by the American buyers
during quota period.
The above observations could be of rich practiced value as
Wajid Jawad had experienced both as a manufacturers and
exporters of garments and as an authority by dint of being
EPB chairman.
The former EPB Chairman advised Pak garment exporters while
addressing Export Clinic on garments organised at Pak Expo
in Karachi the other day. Jawed Jawad was however
particularly vocal about quality which should match or even
excel the competitors like India and China.
He mildly cautioned that Bangladesh and Sri Lanka had
advantage of 10 percent due to low labour cost while
Pakistan had clear disadvantage due to expiry of GSP and non
inclusion in GSP plus. Besides pending some favourable
decision Pakistan was facing anti-dumping duty on bedlinen
exports. He advocated for developing export culture by
creating what he said interest and enthusiasm into actual
export capacity.
Expressing indignation Jawed Jawwad called for nearly doing
away with exports of raw material and semi raw material as
he saw salvation lied in increasing manufacture and exports
of value-added goods by establishing chains within the
sector. Referring to just set in WTO system ,he said,
offered vast scope and stressed on large scale organised
sector instead of small scale factories scattered in far
flung areas.
The quota supervisory council chairmen in his paper tried to
invoke that Pakistan had natural advantage of itself
producing fine quality cotton besides reaching a high of
14.5 million bales along with India and China. He cherished
consumers and manufacturers exploited the advantages offered
so generously by the providence, they can cover some of the
disadvantages beyond their power to surmount, (such as
machinery plants and chemicals and dyes produced locally.)
PREMATURE DISCLOSURE: The European Union has taken a
decision, may prove very harmful to Pakistan, said to be due
to premature disclosure by this country about the proposed
visit of a team to determine whether exporters of textile
products had dumped there.
The EU had imposed anti-dumping duty on eight Pakistani
exporters but subsequent approach with the EC authorities a
team was proposed to come to Pakistan and decide after
verification whether anti-dumping duty verification on Pak
exporters was on correct appraisal.
It will be pertinent to mention hear that anti-dumping duty
case had been lingering on for sometime. Earlier, when an
answer to this question was in sight, the visiting EU team
left Pakistan abruptly on similar pretext. The team is said
to have been receiving threats from unknown quarters.
The Pakistani exporters fate hung in balance thereafter as
if exports bids were made, Pakistanis would have paid 12pc
duty making product simply uncompetitive.
In the meantime a further setback was caused to exports
under GSP which expired. This meant that if Pak exporters
would venture at all would pay 13.1pc more due to loss of
facility under GSP, or a total of 25pc. Continuing exports
to that friendly country (countries) were an impossibility.
Pakistanis were very upset, down trodden and broke that PM's
visit was heard to take place. It was genuinely hoped that
PM would be able to tackle the situation, as authorities in
EC were talking to explore with the PM even playing ground
for that country. PM was back and his trip and talks were
widely understood to have been successful. But some Pak
official annoyed EU authorities and all hopes were dashed.
Now amid disappointment quite a few exporters contacted
referred to very smooth ties/trade ties with EU and appeared
optimistic that things will go Pak exporters way. Latest is
while on dumping duty mystery prevailed, GSP plus facility
was likely from April next.
TAIL PIECE: The World Bank chief was profusely
appreciative of improvement in some fields, but had some
bitter pills as he observed that health care, education
roads agriculture that are central to the poverty reduction
leaves much to be desired. That insight has been offered for
the first time but never was heeded as much as it should,
sources said.
Courtesy: Business Recorder
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