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