Prices move up despite cautious buying, spot rate raised to Rs 8,650； new crop phutti also on the rise

Cautious buying by mills helped in raising spot rate by Rs 150 to Rs 8650 during week ending on June 25, 2011. In the ready business prices also held the steady levels, trading within the range of 8400-9000.

WORLD SCENARIO

The rising trend in cotton futures changed perception of cotton growers in many ways. In Africa farmers openly called for better price or they will switch over to grains, soyabeans and like crops ensuring handsome return. China decided to be self-reliant as far as practicable. But felt imports were inevitable keeping an eye over the natural calamities like devastating floods, which took heavy tools of crops. India finally came in the open calling for fresh application for exports of one million bales of cotton. Rising lint prices from 60-80 cents a pound to over two-dollar a pound had pressed surplus cotton country opted for exports. Whether India provided Pakistan its pending over one million bales under accord.

Pakistan however, recently said it had received delivery of two million bales of cotton and only nearly four lakh bales were in the pipeline. God knows what fate is waiting of much talked two million bales of cotton from Uzbekistan. Only slight hitch was being smother up over payment. The EU package for free access of yarn and fabrics was understood to be availed from January 2011, is still with the WTO body awaiting clearance if possible from Peru and India.

On Monday the US cotton futures settled higher, extending the market's advance as players fretted over the damage the severe drought will inflict on the top cotton growing area of the United States. The spot July contract climbed on short-covering by players who needed to cover short positions given the thin supplies of deliverable cotton in the contract with first notice day for deliveries coming up this week. The key December cotton contract on ICE Futures US rose 0.30 cent to finish at $1.2407 per lb, ranging from $1.2155 to $1.2666. On Thursday, the contract closed at $1.2018 in the lowest finish for the third position cotton contract in nearly three weeks. Spot July increased 3.55 cents to end at $1.4873. Total volume traded on Monday reached nearly 14,000 lots, nearly a third below the 30-day norm, Thomson Reuters preliminary data showed.

On Tuesday the US cotton futures settled mixed, as players sought to unwind positions in the spot contract before it goes into the delivery period at the end of the week. The spot July contract climbed on buying by players who needed to cover short positions given the thin supply of deliverable cotton. They then turned around and sold the new-crop December contract. The key December cotton contract on ICE Futures US slipped 0.07 cent to end at $1.24 per lb, ranging from $1.2324 to $1.2772. Spot July increased the six-cent daily limit to finish at $1.5473. Total volume traded reached nearly 14,700 lots, a quarter below the 30-day norm.

On Wednesday the spot US cotton futures ended to their upside limit, as participants tried to cover their short positions ahead of the delivery period at week's end, but December cotton fell on news of spotty rains in drought-hit Texas. "At least we're getting a little bit of rain down here. We've been in severe drought," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana. The key December cotton contract on ICE Futures US closed down 2.55 cents, a two percent decline, at $1.2145 per lb. The range ran from $1.1922 to $1.2545. Spot July soared four percent, a 6.49-cent gain that came close to the seven-cent daily limit, to finish at $1.6122. Volume traded in those two contracts came to healthy 22,249 lots. The July contract geared up at the open and rose to its highest level since June 6, as players still holding short positions in the expiring contract scrambled to cover them.

On Thursday the Spot US cotton futures pushed higher for a fourth straight session on Thursday, as short position holders scrambled to cover ahead of the start of delivery period on Friday. The rest of the board ended lower, falling under the weight of a stronger dollar and disappointing weekly export sales data that saw cancellations in both the old and new crop. "December cotton is struggling because of the terrible sales," said Keith Brown of Keith Brown and Co in Moultrie, Georgia.

The key December cotton contract on ICE Futures US shed 2.05 cents, or 1.7 percent, to finish at $1.1940 per lb, near the bottom end of its $1.1869 to $1.2302 session range. Spot July climbed 3.33 cents or two percent to end at $1.6455 per lb. The spread between July and December cotton has grown considerably over the past week, growing to its widest level since April, as players still holding short positions in the expiring contract scrambled to cover. "July has a squeeze of sorts about itself," one cotton broker said. Friday marks the first delivery day for the July contract.

On Friday the US cotton futures posted their first positive close in four sessions, rallying more than two percent as recent pressure from a short squeeze in front-month July eased, as the contract went into delivery. The July contract rallied more than 14 percent in the last week. On Wednesday, it hit its highest level since June 6, as players holding on to short positions scrambled to cover in front of the start of the contract's delivery period Friday. "July was up earlier today because we had a strong taker in the July contract," said Sharon Johnson, senior cotton analyst with commodities brokerage Penson Futures, referring to delivery notice data that showed 455 of the 459 notices were stopped out by one company. "When you get 99.9 percent of the delivery, you have 99.9 percent of the open interest. With open interest this morning at 2801 lots, 99.9 percent of that is in the hands of Allenburg. The spot July cotton contract on ICE Futures US edged up 0.67 cent to finish at $1.6522 per lb. The key December contract rallied 2.52 cents or 2.1 percent to end at $1.2192 per lb, dealing from $1.1960 to $1.2274.

LOCAL TRADING:

Lacklustre trading activity was marked on the cotton market on the opening day as buyers and sellers both adopted wait and see mood both expecting developments in favour of them. The most market players commented on lean business due to restricted phutti arrival. Spot rate held to weekend level at Rs 8600, while phutti in Sindh was charged at Rs 3700 and Punjab selling at Rs 3900, while old crop phutti in the two provinces inferior type was selling at Rs 2500, while superior type was Rs 3000. In ready take of approximately 300 bales of cotton changed hands at Rs 8700.

On Tuesday trading gained momentum, as 2500 bales changed hands between Rs 8200 and Rs 8750. Spot rate was unchanged Rs 8600, phutti was higher at Rs 3800 in Sindh, while in Punjab rates were Rs 3900 and Rs 4000, low type was selling at Rs 2500, while superior type was asked Rs 3000.

On Wednesday cotton prices turn weaker but buying slowed for prices to be lowered further down. Spot rate was down by Rs 100 to the level of previous week at Rs 8500, phutti was lowered by Rs 100 both in Sindh and Punjab to Rs 3700 and Rs 3800. The consumers lifted some 1000 bales of cotton at prices between Rs 8400 and Rs 8700. The market operators survived development purely on buyers attitude to lift lint when extremely avoidable.

On Thursday buyers hope died out as prices took a firm line leading to their business. The spot rate was unchanged. Around 12,000 bales of cotton changed hands in price range of Rs 8500 and Rs 8775, phutti was down Rs 100 both in Sindh and Punjab. In world markets trading moved both ways. In world markets trading moved both ways.

On Friday official spot rate was kept unchanged at Rs 8,500. In Sindh price of new Phutti was higher by Rs 150 to Rs 3850 and in Punjab up by Rs 100 to Rs 3,900. In ready business, above 5000 bales of cotton changed hands between Rs 8300-8850.

On Saturday official spot rate shot up, gaining Rs 150 at Rs 8,650. Upward trend continued in the new crop, as in Sindh prices of new Phutti was higher by Rs 100 to Rs 3950 and in Punjab rates were up by Rs 100 to Rs 4000-4100, they said. In ready business, trading came down, as a result of rise in the asking prices by the ginners, nearly 2000 bales of cotton changed hands between Rs 8500-8850.

PAK IMPORTED INDIA COTTON WORTH RS 40 BILLION

For weeks stretching now to months Pak importers fed hazy stories about Indian exporters denying one million bales despite written accord. The pretext extended, as that foul weather had damaged or was likely to damage, so accord was held back. The efforts, however, continued to receive back the lint held up by India. Indian authorities after about a long time wait and see asked cotton exporters to apply for exports of one million bales.

However, Pakistan side story quoted by top official said two million bales from India has already reached here. Now pending 4.4-lakh bales lint is said to be in the pipeline. The hurly-burly created by neighbouring country over around one million bales gave a pat on back of needy Pak consumers to look around cotton surplus areas and a strike was hit in Uzbekistan. That is also not clear whether deal is on the way or cotton after imports of Rs 40 billion has been signaled back to wait until further information. In the meantime the EU free market access also continued to attract interested quarters in Pakistan.

The friendly EU had favoured with the Package and it expected Pakistan would enjoy the facility following green signal from the WTO. India had blocked the package along with Peru. In short further information again remain hazy perhaps some more time is required to lay hands on correct ailing spot.

WARNING NEEDS TO BE HEEDED BEFORE LONG

There is always some bit of exaggeration in demands put forward by business and trade leaders but if looked from deeper economic prospectus they call far effective handling and care. After decades the deep-sea edge Pakistan are trying to avoid the last plunge. The authorities, more deceivingly the textile ministry weigh every demand put up and placed such as they claimed unprecedented gas suspension, high rate of interest the sufferers believe have jeopardised growth of the textile industry and exports.

Once again like the lapsed decades, textile ministry has been if not morbid, inactive. They also pointed out while urging that government should privatise gas supply. They made pointed reference that should government ensure necessary supply it will go a long way in securing 15 million jobs in this crisis ridden situation and record $14 billion exports during current fiscal.

Non supply of gas adversely affected textile production, worse they pointed out 43 percent of its potential remained non-operative. The results from non-operation of industry natural consequence are loss of labour force who are but to be paid off. They have rightly indicated that the industry has contributed a billion dollar every month which is in no way a big contribution International scenario is coming in the way, they said and it was unlikely that will stay quiet. Therefore considering that textile industry, life nerve of the country's economy has, God forbid negative elements to take away its power of contribution.

RECORD COTTON PRODUCTION DURING 2011-12 LIKELY

Pakistan's free trade agreement, which ended the other day utterly failed to gain as whatever potential God has given it sells cheaply in the shape of raw material, However, textiles value added products took full scale advantage otherwise imports from China would have far exceeded than nearly just half depicted by first FTA agreement.

China had approached Pakistan with scores of suggestions in a bid to help this country to attain stability. But China's efforts had not brought that result owing to this country's inherent lack of determination. Cotton has been blindly exploited for exporting. Cotton and yarn discoursing through decades to switch over to value-addiction. The worst "sample" is a pathetic indifferences. Sialkot, a city of 'Built-up' exporters strangely enough said to have built roads factories, but without government help and polishing. The sports goods, surgical goods and nearly half a dozen exportable. The city people, who intrinsically possess variety of acquired knowledge, science, know how etc and contributing to country's economy.

Today 'terror and terrorism' are dreaded and labour and money that had found way into huts of poor below poverty levels people perhaps Pakistan had enjoyed stability and credence like China, India, Singapore, South Korea etc. According to a recent report about focus of production on cotton around 15 million bales, which is achievable.

Besides what is of great value is Pakistan aim to launch 2012-16 Pak China Development programme on Trade and Economic Co-operation (FYDP). This will include much talked but little done is collaboration of institute of textile and clothing.

TEXTILE UNITS PAY RS23.5BN TAXES

The figure is subject to vicissitude depending on weather and crying need prevented in particular time. In our country ethics is not observed or ignored. If cotton rate trend in NY is high, under demand and supply rate cotton price is raised up to sellers whims, the trend on the reverse side is either left unchanged or brought down up to the chemical level. The authorities that should have through decades overseen the cunning leave to be born by the victims. For such discrepancies in these pages had knowledgeable circles pleated time without number. However, some thirst will quench with the figure about actually question before writers on economic matter was how much textile sectors pay and invest or reinvest so that their earning and tax level went up.

The clamour-always resound, which is extracting some favour from the government always itself looking for means so that election manifestos are effectively met, which was never heard or seen. The hapless government apart in the name of trade and commerce and to feed country's economy very often stretches their hand to banks, financial institutions without always minding to pay back. The banks after every one or two years declare bankrupt.

Not that only the traders who pay through nose some tax what is reserved after connivance with the "custodians". A layman overseeing draining out of the due to government kitty can surmise some wrong somewhere but can't lay hands on. After over decades time is up to look back before dent reaches beyond repair point. And where the repair is to be taken in hand is thoroughly destabilised economy and distorted face of state governance.