Analysis: Ginners fear TCP selling would push down cotton prices

KARACHI : The ginners harboured fear that TCP would soon be selling cotton to local bidders triggering price downturn. But authorities were probably reluctant to ask TCP to sell and then ready to buy for stability in price. The spot rate was quoted at RS 2175 without upcountry expenses.


Rising tempo in cotton futures was evident on the NYCE as speculative buying and switch trade helped, though trade expected downturn in prices shortly. The March contract opened at 44.95 and May at 46.19 cents a pound. The first session saw futures higher on speculative fund buying although the focus will be on switch trade as players liquidate position in spot March before delivery. Analysts said that robust level of world.
Cotton demand should busy fibre contracts and give the market ammunition to make a run toward 50 cents to 51 cents region. On Tuesday futures settled at a three week high on speculative buying and switch trade, but contracts appeared to be getting a bit top heavy and the surge could slow down soon cotton expert said though the buying which had spurred a rally in fibre contracts might run out soon and players could square their position before holiday next week.
The trading on third day saw future down with small inactivity dominated by heavy switch business as players scrambled to got out of position in the spot March contract.
Analysts said the ability of the market to lay near its current highs seems to indicate that a further advance may be in store for cotton. The trade was waiting for USDA report on export sales. On Thursday session saw futures lower as heavy switch over took place as players scampered out of spot contract with only one session left before it went into delivery next week. Monday will be a holiday (US precedent’s day), traders said.
They said USDA cotton sales hit 263,700 RBs, slightly above the trade belief. Shipments of previously booked orders stood at 308,600 RBs. However, market hardly reacted to the USDA export sales , traders said, because players did not want to take delivery of cotton when first notice day started on February 22, 2005. Friday’s session settled firm on late trade and speculative short-covering right before market goes into delivery next.
Tuesday, Monday being holiday. A report said that if sufficient export interest surfaced futures might yet push up to mid January 48.25 cents basis May. The March contract opened at 45.98 and May at 46.66 cents.
LOCAL TRADING: That TCP will be selling cotton to local consumers had paralysing effect on the sellers but it proved to be nearly wrong for the time being and prices maintained firm trend. The spot rate was unchanged at Rs 2150 without upcountry expenses. The cotton prices stayed above spot rate while seed cotton also firmed owing to low arrivals. On the first trading day despite rumours , ginners were in driving seat and were keeping asking prices higher than the spot rate.
The fortnightly statement from PCGA was expected any day. On Tuesday nearly 5000 bales of cotton changed hands. The spinners and millers were reluctant to go all out in the face of arrival report. Spot rate was maintained at Rs 2150. The TCP had not yet started selling to local bidders. Cotton prices ruled at Rs 2250 and Rs 2300. On Wednesday trading remained low as prices were expected to prove higher.
The ginners made the buyers run away to sidelines by raising asking prices to Rs 2300 and above. Spot rate was unchanted at Rs 2150 and rates in ready were between RS 2250 and RS 2275 both in Sindh and Punjab. Around 4000 bales were stated to have changed hands. The trading was low on Thursday, as expected on the eve of Ashura-e-Muharram holidays on Saturday and the following days. But the sellers raised the cotton spot rate by Rs 25 to Rs 2175 owing perhaps to the perception that fortnightly statement of the PCGA show light seed cotton supply position.
The ready cotton rate ruled between Rs 2250 and Rs 2275 while phutti price held to overnight levels at Rs 900 and Rs 1050 in both Sindh and Punjab. The spot rate was raised on Thursday said to be due tight supply, though buyers had turned quite calculative and were lifting quality lots. However, trading was also depressed owing to Muharram holidays. The PCGA released arrival report.
The cotton consumers will open up or get contracted will depend how they read the fortnightly report. ON Friday brokers said deals were noted but price quotation was not made available. The spot rate however was quoted up Rs 25 to Rs 2.075..

TEXTILE BODIES MERGER: The preparations for mergers of like textile exporters bodies has been delayed by a couple of years. That WTO will sweep the world trade from the year 2005, was quite pronounced. Its challenges and opportunities too were not unknown. But, it took one year to think on such healthy lines but “ego” came in the way.
The Pakistani exporters were being offered insight by the eager Chinese and Indian textile teams to join hands to chalk out plans to keep prices at a level to heat competition. However, the fear that division may lead to Pak exporters’ failure to make most of the opportunities prompted them to sunk their differences and merge. It seems that APTMA perhaps stayed away from the “Clusters”.
The rest of the clusters under six bodies have talked about merger to make move successful by sacrificing their personnel ego to get the highest “Slot” in the merged structure. A half hearted move, not of merge, was tried couple of year back perhaps at FPCCI initiative to make exporters of different bodies, sit together and sink their differences on issues thus protecting their interests. But it was perhaps bedwear exporters members who ran away from the meeting complaining their interest was certainly safe despite “pious” feelings.
As a matter of fact there should be some sound thinking followed by a firm decision on highest “slot”. The decision should base not on how big the organisation the exporters come from lend actually how dedicated they are, how knowledgeable they are and how much he/they would deliver. The indication has been that highest slot should be on rotation basis. The particular exporter massing the bodies affairs with perfect precision and efficiency should be given to lead and lead unless he/they are considered by majority that he/they have outlived utility. The idea has downed somewhat but is welcome and should be given a strong and concrete shape at the earliest.

EVEN PLAY GROUND: The executive committee of the PCGA have demanded that the authorities saved them from possible huge loss as 105 million bales were then lying unsold. If spinners and textile millers are given green signal, as was being hinted, the ginners expected a loss of Rs 2 billion. But if TCP fails to sell cotton abroad, it will also lose considerably huge amount. The spinners aim at blocking export of cotton to their competitors abroad so that they are spared of losses.
Cotton trade and textile millers probably remember that spinners had made a bid to block TCP induction into cotton business. The growers then had apprehended and rightly so that spinners manipulation would push them into hot waters. The exports close to cotton and textile trade frankly question whether government should plan any role in ameliorating contesting parties problems or observes silence.
They were vocal in expressing that such protests made them sick as they saw authorities signal TCP go ahead with the sales to local cotton consumers. They pointed out that authorities inducted TCP to lighten the burden of the vulnerable made ginneries. As a mater of fact such rituals have taken firm root which need to be uprooted.
They were emphatic on these words as it has been proved futile always. Waste of energy and money however small should be saved. If business ethics plus are made rules in Pakistan order of the day such frivolously childish ideas could be eliminated. A lots of heart burning, fax and paper expense could be saved. Both major players have clash of interest at one time or the other. The situation demands they should find out meeting point as seen in the wider contest they both lose at one time and gain on the other.

TEXTILE MACHINERY: It was so happy to learn that latest textile machinery has been inducted and would go along way to boast exports. Thus far only huge investment was mentioned. However, it was still vague whether they were new also, people close to cotton and textile trade observed. They, however, further observed there would be textile sector with machinery produced by Pakistan in Pakistan?
Had the machinery been made in Pakistan, they said at the first instance the products would be cost effective and competitive. Besides it would save hefty and much needed foreign exchange. Cotton sales irk spinners and textile millers who want cotton surplus to be barred from exporting until consumers had collected their entire needs. The worry they used to harbour was that had Pak cotton exported to any country and products exported would have made Pak products uncompetitive.
The growers won’t forget selling cotton at throwaway prices a couple of years ago. They questioned who were the beneficiaries? Growers shouted in disgust then to switch over to other more paying crops. But their leaders in the meantime changed the pattern of asking pricing – strictly at par or higher them world rates. Latest textile machinery is being projected with a sense of pride every alternate day.
But should not be proper to inform people nature, build and worth of the machinery. Are the machinery imported and installed only to spin or used also for production of fabric and other value – added goods? However, speaking at curtain raiser of textile Asia 2005 exhibition and conference, Senate Chairman Muhammedmian Soomro lauded machinery with provision of necessary infrastructure which according to him will boost exports. The wonders are awaited for participants of the Textile Asia 2005 scheduled on March 19-21 next at Expo Centre, Karachi.

TAIL PIECE: CBR is on the right track in supporting textile exports potential to the maximum. The latest is facility of continuous chain invoices under Sales Tax Act 1990. The facility was available earlier to manufacturer/exporters of textile products. Under this scheme the commercial exporters would be eligible to claim ST refund against invoices obtained on going through various processes lake weaving, dying and printing. However now the refund claim will be valid after matching on invoices used for claming refund. The facility will improve chances of more exports by the commercial exporters thus taking full advantage of the avenues available in the WTO system.

Courtesy: Business Recorder

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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