Cotton prices, spot rate turn lower on good crop expectations
KARACHI (September 15 2008): The cotton trading continued full of life and thrilling activity owing to sustained buying despite high rate though some fluctuations were seen in spot rate, coming down to Rs 4000 during the week's last session, phutti prices and asking prices in ready turning downwards during the week ending on September 13,2008.
WORLD SCENARIO:
The cotton futures on the NYCE was impacted by other markets and how the dollar behaved, besides investment fund sales/buying and debacle in financial markets. The market players were disappointed by losing futures and expected further glum.
However, the December futures closed down 0.24 cent to 65.60 cents a pound on Monday. March was down on the day as investment fund indulged in liquidation added to the trend by reports from other markets. The week saw bail out of the financial giants Fannie Mae and Freddie Mac. The market players were also watchful of signals from weekly export sales and monthly supply and demand and damages done to cotton quality and production size.
On Tuesday the overall picture of the trading was not different altogether. The players had little hitch in expressing that trading was borrowing trend from outside markets, while keeping attached to usual USDA reports for real direction.
The damages done to cotton crop quality and production wise were being keenly studied. But as a whole improvement in trading was not seen by them despite the couple of storms hit cotton-producing areas mildly or otherwise.
On Wednesday losing streak maintained on NYCE, as liquidation by players was seen ahead of USDA crop report just in few hours time. The primary wait on Thursday will end when weekly export sales were reported then supply and demand report, which traders expected will give them a direction showing rise in futures in coming days. The futures (Dec) was down 0.24 cent to 64.04 cents. Late trade buying support kept futures somewhat strong.
On Thursday the cotton futures stayed weak despite corn showing nearly steady trend but was impacted by rising dollar value and liquidity before USDA couple of reports to be released shortly. The market, which is keeping generally weak is waiting release of supply and demand report for some positive direction. The players are however expecting 2008-09 cotton estimate lower. The production sizes in China and India will however pull the estimate to reliable size. The global overall economic situation is causing worries among the traders. The last trading session saw up trend in futures as investors indulged in buying encouraged by losing value in dollar and boost in prices of grains. The market sentiment was supported by likely damage to cotton belts in Texas and other areas.
These areas would need hot and dry weather to offset some of the damages in Texas. Supply and demand report was just ignored. The world ending stocks was being raised to 52.32 millions (480 Lb) from 50.98 million bales. Consumption however was cut to 1237 from 124.54 million bales. December was up 0.66 cent to 64.52 cents.
LOCAL TRADING:
Strange spectacle is witnessed on the cotton market, which is not expected normally as was marked during the week under review.
On Monday cotton consumers were on rampage unmindful of the effect they lifted every available bale. The total came to nearly 22000 bales, around Rs 4100 and Rs 4200 while the spot rate held at weekend level at Rs 4125. The market operators were puzzled over the panic buying at Rs 4100/4200, perhaps due to some easing in oil and boosting dollar.
The Sindh phutti prices were held also at the previous day's level at Rs 1900 and Rs 1925. In Punjab phutti was being sold at unchanged levels at Rs 1800 and Rs 1900. As far as the authorities are concerned they are tightening up the ruling leniency such as liberal subsidy.
However, on Tuesday what happened much to the surprise of many that spot rate was dropped, though modestly from present point of view, by Rs 25, despite sustained buying coming without break for the last few days. The phutti prices, were not cut in line and stayed at same level as on previous day both in Punjab and Sindh.
The size of the buying was not as big as on Monday, but was hectic at 12000 bales by the end of the day on Tuesday showing that ginners had for reasons known to themselves why have they turned so lenient!. However, the traders visiting the market had following to say: The cotton production has been spared of some spectacular diseases and disaster and hence a bumper crop is expected. Any way if cotton production reaches the size of target 12.5 million bales, prayers will be on the lips of growers, ginners and indeed, the manufacture and exporters of textile products.
On Wednesday no respite form heavy buying was noted as the consumers lifted around 14000, bales, despite hope that cotton may sell at relaxed value. The sport rate and phutti prices in Sindh and Punjab were unchanged.
On Thursday the consumers fear that rising purchases will cost them has proved somewhat wrong. As growers who have been constantly in touch with the ginners restrained price hike as they know the cotton has good growth and arrivals will smoothen with weather remaining generally workable. Thus the spot rate was pulled down by Rs 75 to Rs 4025; phutti prices were reduced in Sindh by Rs 25 to Rs 1875/1900 and in Punjab price ruled between Rs 1800/1850.
On Friday consumers maintained forward buying as prices matched their psychological scale. Spot rate was unchanged at Rs 4025, phutti in Sindh was selling at Rs 1875 and Rs 1900, while in Punjab stayed put at Rs 1800 and Rs 1850, while in ready off take where over 18000 bales changed hands prices ranged between Rs 4000 and Rs 4050. While growers and ginners presume better harvest, cotton consumers indulged on Friday big lots buying perceiving production to remain below requirement.
On Saturday expectations for current season's production increased due to favourable weather. The official spot rate was lowered by Rs 25 Rs 4000. Phutti prices in Sindh were at Rs 1875-1925 and in Punjab, the rates moved both ways at Rs 1750-1900. Besides, continued fall in the NY cotton market was also a dominating factor in slide in the beginning of the week. Volume was down to 8000 bales, price range down to Rs 3975-4025.
TEX SECTOR WAY OUT FROM FRAGILITY:
The government has decided to convert textile specific research and development (R&D) support is to "draw back" for one year only (until June 2009) while textile subsidy will be completed from next fiscal. The sources said that Ministry of textile Industry has submitted a summary to ECC for R&D support for textile and clothing industry. The separation textiles and clothing is meaningful and will have desirable effect for all times to come.
The yarn and grey cloth exports are as good as semi textile production, which fetch negligible forex. which can be exported if they are surplus the rest should be for local consumption, which when added value yields 10 to 12 times more return and high desirable. The grey cloth and low quality yarn when exported adds to exports of Pak textile ready made garment and other products pretty competitive. Till late more stress was laid on exports of primary products, while local value adders of product begged producers to stop unbridled bulk of yarn and other primary goods but as it goes like this louder voices were heard in the country's capital.
Although the garment sector has not reacted quickly apparently the decision to pass on the draw back facility to garment industry with in house cutting and stitching facilities seems acceptable. This and other ready made products like towels, hosiery, bed-wear etc demand authorities attention better. The past had been stiff for them as a result a year or back so overall exports unfortunately have to import textile machinery, dyes and chemicals worth billions of dollars, which in fact adds to high cost of doing business.
REVENUE IMPACT OF FTAs:
Why our exports have been showing continued decadence, no doubt for lack of correct approach, and deficiency in infrastructure. The authorities probably hardly bothered to figure out two-way revenue impact. Every thing that glistened attracted Pakistanis but at the end of the day lamented on with trade deficit. The Federal Board of Revenue has awakened to the task and approached Ministry of commerce to figure out revenue impact of free trade agreements (FTA) between a couple of countries.
Pakistan signed FTA and PTAs. A loud roar by textile sector that only setback was high cost of doing business without going into the depth of problem, which indeed could have surfaced other facts behind for the apathy. The finding would then have given factors that have kept this sector in perpetual abyss. It is hoped the FBR's inquisitiveness would not end in traditional forming committees and holding conferences and putting the valuable finding on the back burner. If so the interested quarters, sources pointed out may, misguide and malign authorities against promise that inquest bring forth and unfurl the hidden truth.
Pakistan in the last few years have signed FTAs with China, Sri Lanka and Malaysia. The agreements can fetch if two-way trade matched and yielded the assumed benefits. If it was so, our trade and exports particularly textile sector could have been in far better shape. Table can still be turned if whatever is planned and aimed today or tomorrow is pursued diligently and full faith that new government set-up will deliver it has been promising to deliver.
The disappointments through out since independence had demoralised. A slight mistake or mishap that had occured some days back was met with stiff resistance by people who were asked to vote being the master of the land are showing signs of utter indifference. The changing ideas and new moves to mend ways give hope there is sparkle at the end of the tunnel.
COTTAGE INDUSTRIES GAP FILLER:
The large manufacturing units enticed away the rural cottage industrialists to man the big ones - in most cases away from remote corners. The menials would spin yarn from cotton and weave that into Khadis, which tailor made into wears of wide varieties. And, stem-full date trees' fiber and leaves were woven into baskets, bags, purses, ropes etc serving people not in rural areas but in cities and were even exported by entrepreneurs. But it was early in days when Pakistan was born over 60 years back.
The self made skilled workers and raw-hands rushed to get jobs in Jute mills, paper mills and textile mills. The rate of mills sprawling was slow. The cottage industries suffered hugely as they were void of people attached to them. Since they lost charm by illiterates and unskilled, the indelible mark it left on the minds of people still craws and headlines like setting up of mini-industrial estates in rural areas on the cards were meant for giving false hope to hungry and jobless.
The big industrial units are showing signs of tiredness and stagnation as investment local as well as foreign is shy owing to many factors including law and order situation, political will and sluggish movement of files from one table to the next. The need of the hours is that talks must replace action and that by removing the snags, which have resulted in turning this resource-potential country into dumping house of countries producing in tons.
Why only Punjab. Pakistan is an agricultural rich country. Its every inch of rural stretch rich with one or the other product but somewhere financial lag or skill deficiency is keeping people jobless and looking out for signal from areas establishing huge buildings to produce much less than capacity planned.
So with the change in new set-up authorities should project on priorities and move fast to give the project a practical shape at the time fixed. Textile industry should be given respite to plan better and contribute country better. And the mini-industrial units to supplement giant industrials lapses.
HMC REVERTED TO:
The ministry of Industries and Production succeeded in getting the Economic Co-ordination Committee (ECC) to reverse a decision to allow the strategic plans division (SPD) to handle the affairs of HMC, officials sources said. Whenever, HMC mention comes, the high cost of doing business in textiles comes resoundingly in mind. And, more prominently comes to mind Heavy Mechanical Complex must have been dream of some patriotic person to make Pakistan and exports strong.
The idea awakens why even unimportant deed by Pakistan receives prominent places in newspepers, why the achievements of such big project digested without making a hissing sound?
The latest report prominently mentioned that HMC was set up to manufacture industrial plants - all are mentioned by name such as sugar, oil, gas, cement, fertiliser, chemicals, and other industries (textile excluded?) and heavy machinery including construction machinery. Very simple every plant conceivable under the blues, which should have textile machinery making plants. But it is neither mentioned here nor ever made even by a mistake keeping in view that its imports from all the world over the great cost, which adds to high cost of doing business. When one was in quest for textile machinery plants in Pakistan, pleasant story was circulated in newspapers that sugar manufacturing plant was being (about to be exported) exported to Bangladesh. That was once which was not heard whether dream stood fulfilled.
Even the story on September 6, 2008, made passing reference, not giving slight idea plants, like other plants, were being exported to M Ecast, African countries, Bangladesh, Sri Lanka and Indonesia.
These days particularly is too much nagging about high cost of but for lack of plants, which manipulated in a way to tell people of Pakistan have no material and skill and technologies. The prevailing perception is utterly wrong and manipulation is to make few richer and block development of public interest as is evident from weaknesses all-round. Report mentions among others chemical where is chemical or more importantly petro-chemical industries in the absence of which tons of dollar worth dyes and chemicals for textile products are imported.
Yes, supplements do mention about some units producing chemicals, which serve the initial raw material purposes. The sources called upon democratic govt to look into claims of high cost of doing business, which hangs on deliberately, they said!
NO NEED FOR BINOCULARS:
When textile sectors in recent months nearly surrendered to export products matching regional rivals, some one among authorities whispered this to be replaced by any knowledge based sector. While the knowledgeable circles do not entirely agree with word to replace textile sector, propounded that exports must jump to save economy from collapse. It seems textile exporters have somehow managed to surmount local and foreign created road blocks and probably leniency shown by authorities to stand and force them to realise hinting textile sector replacement by other products is still difficult.
God gifted cotton, looked down by foreign importers, who rob this country of dollar one billion or more annually, and go by their idea is to deny the potency this gift of God offers.
What was the immediate and important need to look into the not so loud demand of the cotton growers and ginners, who give to meet their input cost and marginal profit to survive, much improved lint could be supplied to make up quality rather better than what seen as inferior. While improving the cotton production, reasonable gains of the suppliers, should authorities give importance of what wealth is being "dug out" by self-made "Karigars" of Sialkot.
Not long before reports about the great achievement by very much Pakistanis, other than textile sector's. The forex of course did not match its size, but promise showed stuffs being made in Sialkot and exported products need genuine interest of the new government to increase manifold, sports goods, musical instruments, gloves, martial arts uniforms, cutlery, surgical goods and military uniforms badges.
The textile sector could learn how "Karigars" in Sialkot boosted their exports and are looking forward to improve. The scintillating information the report gives to readers is that exporters are conscious of their city, beautification and comfort. Let the "Khushbu" spreads beyond Sialkot!
