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Cotton prices seen impacted by new phutti arrivals beginning, Texas drought reports£» spot rate remains unchanged

Updated: 2011-6-13 Source: Business Recorder

How the cotton needs of various non-cotton-producing countries will be met as smoothly as was until 2010 is a question. America was first despite no problem to exhaust stock. The following developments took prices to century back marked at $2 a pound. This season has been remarkably opposed, as both drought in Texas and damages on both sides of Mississippi River have taken heavy toll. As against this elsewhere good show has been reported by other cotton producing countries such as Australia, Brazil, Argentina and India.

China is not mentioned because it is net importer country. In production it matches India but hefty consumption as China has taken responsibility of the crisis countries to meet their requirements at competitive rates, India was head bowed down despite courage to enter into contract only to be calculative fearing weather.

Pakistan bound over one million bales to receive from that country has still in wait. India stood against Pakistan in WTO where the EU philanthropic duty free access package is still waiting to be shown green signal.

The EU's all the leading members are in agreement Pakistan get the package, backed by even EU parliament. Pakistan has not lost hope and buying cotton from anywhere it can avail. India has announced one million bales for exports, that size matches Pak cotton held by India under accord who is to clear the deck?

On Monday the US cotton futures settled sharply lower on switch trade and liquidation, as players moved out of the spot contract but the worst drought in a century in the key growing state of Texas kept losses in new-crop contracts to a minimum. The benchmark December cotton futures on ICE Futures US fell 1.77 cents to end at $1.3693 per lb, moving from $1.3472 to $1.3964. On Thursday the contract finished at $1.3923 per lb, the highest settlement for the third position cotton contract since May 3. Spot July cotton dropped the six cents daily limit to end at $1.5563 per lb. The new-crop December cotton contract, on the other hand, is very well supported by the severe drought in Texas, the biggest cotton growing state in the United States. The National Drought Monitor said in a report last Thursday that more than half of Texas is experiencing "exceptional" drought. Open interest in the cotton market was at 161,193 lots, as of June 3, its loftiest level since April 20, the exchange data showed, and a seeming indication of renewed investor interest in the cotton market. Total volume traded on Monday reached almost 25,000 lots, over 50 percent above the 30-day norm, Thomson Reuters preliminary data showed.

On Tuesday the US cotton futures settled the daily limit down, as follow-through liquidation and switch trade deflated the market for the second consecutive session. Some in the trade wondered if fears the US Agriculture Department's monthly supply/demand report on Thursday may show a reduction in US cotton exports, which could have pressured fibre contracts as well. The benchmark December cotton futures on ICE Futures US fell the seven cent limit to end at $1.2993 per lb, with the day's top at $1.3728. It is the biggest one-day move for cotton since March 8. Last Thursday, the December contract finished at $1.3923 per lb, the highest settlement for the third position cotton contract since May 3. In the span of less than a week's trade, the market has lost 6.7 percent in value. Spot July cotton also dropped the seven cents daily limit to end at $1.4863 per lb. Open interest in the cotton market was at 159,809 lots, as of June 6, still within striking distance of the 161,193 lots in open interest on June 3, its highest level since April 20, the exchange data showed. Total volume traded on Tuesday reached almost 25,100 lots, over 50 percent above the 30-day norm.

On Wednesday the US cotton futures closed mixed in largely spread and switch trade, as players moved out of spot July, while bracing for release of a pair of government reports tomorrow. The trade will be looking closely at the US Agriculture Department's monthly supply/demand report and its weekly export sales report when they are handed out at 8:30 am EDT (1230 GMT). The benchmark December cotton futures on ICE Futures US rose 0.22 cent to conclude at $1.3015 per lb, trading from $1.2778 to $1.314.

Last Thursday, the December contract finished at $1.3923 per lb, the highest settlement for the third position cotton contract since May 3. In the span of less than a week's trade, the market has lost 6.7 percent in value. Spot July cotton fell 3.58 cents to finish at $1.4505 per lb. The December contract enjoyed technical support at the 21-day moving average of $1.2718 and the 50 percent correction in the move from $1.44 to $1.14. Open interest in the cotton market was at 159,300 lots, as of June 7, still within striking distance of the 161,193 lots in open interest on June 3, its loftiest level since April 20, the exchange data showed. Total volume traded on Wednesday reached almost 33,400 lots, more than double the 30-day norm.

On Thursday the US cotton futures ended higher on investor buying prompted by a government crop report that cut US 2011/12 cotton production resulting from the worst drought in a century to hit the major growing area of Texas. The US Agriculture Department's monthly supply report reduced its outlook for 2011/12 US cotton output to 17 million (480-lb) bales from the 18 million forecast last month. The drought has hit hard cotton output in the world's top exporter and No. 3 producer of the fiber. The key December cotton contract on ICE Futures US jumped 2.84 cents to close at $1.3299 per lb, dealing from $1.3025 to $1.3455. The spot July contract jumped the six cent daily limit to conclude at $1.5105 per lb. Total volume traded on Thursday reached around 23,500 lots at 2:48 pm EDT (1848 GMT), some 40 percent above the 30-day norm.

On Friday the US cotton futures closed higher on follow-through investor buying as the searing drought in the top growing area of Texas trumped the weakness of outside markets. The key December cotton contract on ICE Futures US gained 0.66 cent to close at $1.3365 per lb, dealing from $1.308 to $1.3417. It was an inside day since the range was within Thursday's $1.3025 to $1.3455 band. On the week, the third position cotton contract was down 3.64 percent. It was the first weekly loss for the contract in four weeks. The spot July contract dropped 1.02 cents to settle at $1.5003 per lb. Total volume traded on Friday reached around 26,200 lots at 2:45 pm EDT (1845 GMT), some 50 percent above the 30-day norm, Thomson Reuters preliminary data showed.

LOCAL TRADING:

Cotton market on the opening day was marked direction less, no fresh deals were struck. The sellers and buyers both were in double mind-sellers firm to gain maximum from the pending stock, while the buyers were expecting streaming new phutti into the ginneries will change ginners mind to lower prices to quicken sale of current stocks. The spot rate was unchanged for the second week at Rs 8500, Sindh and Punjab phutti low type was doing at Rs 2500, while better type was quoted at Rs 3000. Modest change over led to sale of 1000 bales at Rs 8500 and Rs 9000.

On Tuesday activity improved, which led to sellers, ask higher rates. The buyers were inclined to start lifting after wait to see prices favourable. However, nearly 2600 bales of cotton were sold at Rs 8000 and Rs 9000, spot rates and phutti prices were unchanged. The millers were eager to buy all lots on offer but sellers were not ready until prices went up.

On Wednesday the fond hope of the exporters of yarn and textile products was listened and the sellers felt gain in selling the stock with them before new arrivals further pull prices down. However, rate of new phutti was quoted at Rs 3500 and Rs 3550 and the rates of old crop phutti both in Sindh and Punjab of low type was at Rs 2500, while superior type was quoted at Rs 3000. This is favourable for textile exports speeding toward attaining new height.

On Thursday trading scenario almost reversed, as buyers collected 8000 bales at prices ranging Rs 7800 and Rs 9100 depending on quality. The weather injected among growers both fear and hope if it will not lead to another flood. The normal new crop flow has been casting favourable affect on buying. Sindh phutti was quoted at Rs 3500 and Rs 3550, while old Sindh and Punjab low type was Rs 2500 superior quality was a high, as Rs 3000. The picture given here is of prior to forecast heavy rains and gusty wind expected on Friday and following days.

On Friday prices were on the bullish side, as growers were demanding higher prices due to high cost of inputs and cut in cotton production in Texas owing to drought. KCA retained the official spot rate's overnight level at Rs 8,500. In Sindh prices of new Phutti were quoted at Rs 3500-3550 and old phutti crop in Sindh and Punjab, the rates were of low type at Rs 2500 and that of superior type at Rs 3000. In ready business, over 5000 bales of cotton changed hands between Rs 8475-9200.

On Saturday the mills and spinners adopted wait-and-see attitude to observe the latest developments, as they have covered short-term requirements. KCA official spot rate was kept at the overnight level at Rs 8,500. In Sindh prices of new phutti were quoted at Rs 3550-3600 and old phutti crop in Sindh and Punjab, the rates of low type was at Rs 2500 and that of superior type at Rs 3000. In ready business over 1600 bales of cotton changed hands between Rs 8200-8900.

INDIA TO EXPORT COTTON IT FAILED TO DELIVER TO PAKISTAN

This country is in a habit to import cotton from India often just to keep a tie. This season too Pakistan rushed and signed accord for supply of over one million bales. The price position at the time of signing agreement was quite normal and no one could foresee prices will immediately surge to century old size $2 a pound. India had by then delivered cotton to Pakistan was peanut size. The bulk of accord one million bales, however, was adroitly held back by an official order because weather as it was them claimed was threatening standing crop.

Pakistan, worried because of cotton loss due to devastating floods got irritated but that country had already decided to default until a new agreement was made. It was weeks back. In the meantime India was approached through every proper channel but even positive reply was not received so far. Now the report says India has allowed extra one million bales for exports. Will this lot listen to grave calls from buyers of this country?. The report further explains that India had already allowed 5.5 million bales (1 bale = 170-kg) in the current cotton year started in October 2011.

The enhanced cotton production touched a record 31.2 million bales in 2010-11, according to advisory board. The latest move of farm ministry is justifying extra one million bales for exports, which the cotton consumers are opposed to selling any further, without harming the textile exports. However, the debate touches nowhere surrounded by cotton shortage Pakistan. May be the extra export has in view the one million bales awaited here.

RESERVATIONS ON BUDGET NEEDS PONDERING:

The exporters generally have not shown much of the soft corner for the Budget 2011-12. Those who have they found expression in sober and selected words after exercise. One rather blunt headline was no relief for common man and budget bashing is a national pass time. The leading bed-wear exporters found budget disappointing, as they see no strategic policy steps to boost industrialisation, exports and job creation. Very little money has been set aside for the fast crumbling infrastructure. A seminar was held on "corruption biggest threat being faced by country".

Over a week has lapsed, and budget-related talks have turned into gossip. But of those businessmen and exporters who have to bother about exchequer naturally fall sick with feeling where from to oblige the tax collectors. The Budget is big hope like any exporters, the bed-wear exporters expect budget, which cares about all those who help run efficient government, should offer gains in silver plates.

Instead, the bed-wear exporters are horrified to read increase in GST on textiles five percent which they take as regressive specially in view of the massive swing in prices of raw materials unless serious strategic policy decisions are taken, awaited since the inception of Pakistan, exports are boosted, rapidly rationalise the country and create jobs and ensure secure working environment and make power, gas available to run industries to stand on our feet. This is not what bed-wear exporters but all and sundry pray for the type of day when country has broken the shackles.

EXPORTS TEMPO BE GRUDGINGLY PRESERVED:

Boasting about record exports calls for a determined coming days should see things to come. After six decades to unsteady go, certainly when conditions were favourable $6 to $8 billion was the collective export earning, calling by local and foreign experts to switch over to value-addition. The advise, however was subject to authorities deep thinking and attachment. Today production rise and concentration to give exports boost to around $20bn in the facing year.

The appreciation from PM that a record export was made despite rising energy costs. The outright praise, according to circles close to trade and exports should have associated with belief causes that led to rise and not what was holding back the rise. They quoted that countries depending on our cotton and yarn have scored ten times more size and are turning leading exporters - BD for example, S Korea, Malaysia and Singapore.

The circumstances leading to achieving so called export target need examination in depth of cause and causes. In the past, even during Dr Mahbub's time, $6 to $8 billion would be exports. Today some makes made attractive for the international buyers such as surgical goods, various sports goods. The fact no backing, or if at all, nominal care of the rulers of time.

Only once a report datelined Sialkot shrinks made thinkers utterly nonplussed saying non-textile exports had achieved the top position. Late 2010 and mid-2011 shouts were frequent textile manufacturers wayward looking for yarn and at affordable price. For some months yarn was restrained from exports to any limit. Has that worked wonders? Authorities should look into the matter. The minister perhaps lost his job on this count needs pondering.

$20BN TEXTILE EXPORTS, PROVIDED:

Among a few punching headlines following the budget day, the above was the most promising of all, where the textile exporters were looking for cheap raw material like cotton, which farmers say the levy of GST on agri inputs, including fertiliser and pesticides have led to increase production cost by Rs 4000 per acre. The shortage of water and power outage or like cause are, besides textile leader has attributed to. The textile leaders have derived courage of connection from achievement of $14bn this season despite nagging about high cost of doing business. The fact behind this glaring feat won't ever surface, as the textile minister once that was is no more to give account of.

The sources close to textile business and exports have been one on this point. Various textile sectors work hard undoubtedly but take pride in individual achievements to gain appreciation from authorities in establishment. The pride figure $10, $14bn or 20bn dollar stand nowhere. Look of countries with basic raw material acquiring from Pakistan such as cotton and yarn prominently South Korea, Bangladesh, Singapore and so many others export worth more than this country-if memory is working they said South Korea exports textile products worth more or less $100bn. If authorities manage how free trade mechanism and supply and demand achieving $100bn exports-yes-textiles alone are achievable.