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Analysis: Cotton trade dull, prices
almost stay put
SHAFI AHMED SYED
KARACHI : Subdued trading was seen on the cotton market amid
shortened week due to the Eid-ul-Azha holidays, relevant
sources said. The spot rate firmly held the present level at
Rs 2075 during the shortened week. Commenting on the lack of
buying interest on the part of the leading buyers, sources
close to the textile circles said, primarily activity came
to nearly halt on non-availability of the transports and
secondly they (buyers) felt it's better to make new
purchasing after Eid holidays when the clear-cut situation
would emerge concerning the prices and availability of
cotton stocks.
Some analysts explained that the latest developments, such
as rise in demand by the importing countries, likely to push
up prices due to tight supply of fine quality cotton.
The Trading Corporation of Pakistan (TCP) was away from the
market these days as it had been asked to stop buying and
has been already delivered 1.3 million bales of cotton so
far.
WORLD SCENARIO: The trading in cotton in NYCE was
merely for two days, Monday being closed on Martin Luther
King Day and in Pakistan was cut short by two days due to
intervening Eid-ul-Azha holidays. However, while prices in
Pakistan stayed firm futures rates were driven higher due to
speculative buying.
The Monday session was off, but on Tuesday futures settled
near the session highs on speculative buying and steady
interest by speculators could drive the market higher after
a holiday break. Traders observed that there was a tug of
war between trade selling and specs, and added that the
specs won the battle simply because they have 'more money.'
While the market is plagued by the bearish factor of record
crops in the US and places like China, the funds have
apparently decided to go long in cotton and are buying up
the market, analysts said. On Wednesday futures finished
higher at a 14-week peak on speculative fund buying with
fibre contracts seemingly poised to run higher in the days
ahead.
Traders observed that funds have covered several thousand
lots of their short position and are itching to buy further.
Analysts say the record harvest in 2004-05 will not likely
be repeated while global cotton consumption was seen staying
strong over the coming years, pointing in particular to
robust fibre consumption in China. The March opened higher
at 46.71 and ended sharply higher at 47.96 cents a pound and
May opened up at 47.70 and closed at 48.95 cents a pound.
LOCAL TRADING: Lacklustre trading was marked on the
local cotton market evidently because of more than one
factor which had taken off interest from the sellers and
buyers. The means of transportation not owned by all the
buyers was engaged by faithfuls who needed trucks for
carrying purposes of the sacrificial animals.
However, consumers also halted buying because of expected
PCGA statement on arrivals. The reports also hinted that TCP
had to stop continued buying owing to its wait for release
of fresh money from the central bank. The spot rate was
unchanged at Rs 2075 on Monday.
The ready business was said to be nil on Monday, the record
cotton production had forced buyers to look back and know
how fast they should go. On the second trading day, again
holidays ahead and transportation problem led spinners to
buy if they had their own trucks or trolleys. Still change
of hands was just a few bales.
Thus phutti in Sindh was priced at Rs 800/930 and in Punjab
it was Rs 800 and Rs 950. In ready ruling cotton prices were
Rs 2100 per maund. On Tuesday trading depicted usual
lacklustre conditions as buyers/sellers seized the
opportunity to exchange sky rocketing prices of the
sacrificial animals.
They expressed their views as to how market would react when
session will resume normal business after Eid-ul- Azha
holidays. Spot rate was unchanged at Rs 2075. However,
concern was expressed by relevant people cotton availability
may not be enough despite production glut in the country and
all the cotton producing countries.
On Wednesday a couple of deals were struck although sellers
and buyers both had perception of price rise. Spot rate was
put at Rs 2075. Phutti stayed steady in Sindh and Punjab.
Ready Punjab price of cotton was Rs 2125. A scenario change
is being expected by the market operators on market resuming
normal business after Eid holidays.
MATCHING DEMANDS: Who will consider demand raised by
PRGMEA for instant and effective solution to the problems
such as subsidy and GST abolition? No doubt demands should
always be and remain subject of respective departments. But
initially textile ministry should look into the worth of the
complaints or demands and recommend for the solution and the
way it thinks should be solved or rejected so that relevant
departments are spared from hassles and likely corruption
involved.
Knowledgeable sources opined. Quite often such demands are
forwarded that if accepted well and good and if rejected
will be paltry loss of some piece of papers and typing and
despatch cost. However, the fact is the WTO system brings in
its wake more challenges and more risks to be fully
undertook and tackled by the exporters of apparel and
garments.
The government with more resources and contacts and work
force., at the outset of the WTO regime listen to every
genuine and solvable solution. The bad luck, they said, is
that the value added and apparel makers have hardly been
paid due attention resulting in textile exports, 67 percent
contributors to the total export earnings remained stuck up
for years and years at $8 billion.
The Pak exporters circles alleged bad practice and in that
authorities fully co-operated to sell semi-raw material
worth a pound eight times less compared to value-added
products value.
Coming back to PRGMEA demand that is visible to naked eyes
and solution has been sought. The body has showed concern
about 12.5 percent duly consequent upon scrapping of GSP
zero duty scheme. Besides that substantive facilities have
been provided to apparel exporters from the competitor
countries like China, India, Bangladesh etc the BD has
dropped VAT etc.
PRGMEA apprehends unless some matching measures were not
taken will drive 600 small industries of f track and as
estimated 50,000 workers go jobless. Initially the garment
manufacturers be given 12pc subsidy and doing away with 15pc
GST ensuring exporters to be alike to compete.
RECORD COTTON PRODUCTION: The cotton production at 14
million bales plus makes this year unprecedented for couple
of factors. The growers had or were so convinced about WTO
inception on January 1, 2005, will see orders for imports
looming. So acreage had been raised and the natural diseases
have also spared the crop.
It may be that growers and agriculture field workers took
extra pains and deterred pest attacks and other setbacks
without much ado and fanfare usually is seen to unnaturally
please one or the other interests. The growers in Punjab and
Sindh increased cotton sowing area, but remained
apprehensive about natural and man made hurdles more
particularly in upsetting price trend. Some interests at
times look TCP induction and longer stay against them. But
determined authorities have stalled any effort to break the
chain.
The result has been that spinners and textile millers have
acted like partners in trade and have lifted 1.450 million
bales and TCP has in its godown 1.070 billion bales.
Exporters despatched 0.456 million bales. The textile
millers appear to have an eye on the future when they will
demand more cotton to meet the demand in days to come.
Only a couple of years back the spinners/textile sector had
imported over 1.5 million bales just to keep local cotton
prices depressed and putting ginners at great loss. Now
textile millers cannot think likewise staking availability
lest cotton growers switch over to some profitable crops. In
this connection authorities have struck a balance to ignore
procurement price at Rs 925 not being honoured, to see
stocks get thin and thinner.
Cotton availability is expected until March and millers will
lift cotton as and when they so decide despite in due course
of time steadily rising demand of cotton and price. The
exporters of madeups remain on guard despite supposed WTO
regime stood for free trade. Within days January 3, 2005
Pakistan felt the pinch of countervailing duty while China
and Bangladesh coming under what they called "under review."
The fact has signalled that not all is well. Prosperous
nations sit back on agriculture subsidy for shaky one year
and arrangements to desist - attempt of disruption of
markets.
TAIL PIECE: What's wrong if govt had announced on
December 9, 2004, that it would help airlift the
consignments of exporters of US held up due to embargo. It
was fair enough. But it seems that reasons not expressed
explicitly exporters with US consignments failed to deliver
goods at the destination as firmly had been directed
sometime back.
The govt seems to have taken the plea that time period be
extended a bit to see consignments through. The authorities
took the request as an exception and sprang to tell
exporters that exporters will have no chance to despatch
consignments on govt expenses.
The exporters may have some genuine reasons to ask
authorities to extend favour or they will take grievances to
the media. The commerce ministry has countered the exporters
by firmly telling them attempt to blackmail won't work.
Courtesy: Business Recorder
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