Cotton market moved with no direction in respect of volume, lint prices revisit high mark of Rs 10,000; spot rate 9,800

KARACHI: Trading in cotton remained light during early part of the week, as sellers eyed on world trend keeping textile exporters back with wall spot rate spell over at Rs9500 with a rise of Rs300. The last spot rate was seen at Rs9800.

WORLD SCENARIO:

Indian cotton exporters are on the verge of supplying following resumption in harvesting expedited considerably, which added to hope that increased level of arrivals will enable them to fulfil export obligation. Pakistan is in queue for acquiring at least one million bales in addition to what it had when India discontinued all contracts.

Indian decision had two views, one to be sure that its mills don’t starve and that world trend was constantly on the rise. Pakistani importers have not been talking whether supplies have started.

India expects to grow 32.5 million bales of cotton during 2010-11 beating 2009-10 year’s 29.5 million bales. Lately Turkmenistan is in reports higher cotton yield that will naturally supplement the shortfall in countries such a China and Pakistan where textile exports depend on the fibre. Turkmenistan being the sixth largest cotton exporter, will come to rescue of flood devastated Pakistan and weather hit China. Its revised 2010 raw cotton harvest is 1.3 million tonnes, quite obviously all meant for instant exports.

China is shortly on way to inform surplus nation like American and India. If prices send favourable message no doubt Turkmenistan will be one country among above two named. The rise was attributable to congenial weather.

Turkmenistan is lucky its cotton production is showing rise. In 2007 yield reported was just 950,000 bales, in 2008 reported 10,000,000 bales. In 2010 production has been revised to 1.3 million bales.

On Monday, the first trading day of the new year, US cotton futures finished quietly lower, reversing lower in options-related trade following recent volatile dealings that pushed the market up nearly 92 percent in 2010, dealers said.

The key March cotton contract on ICE Futures US closed down 2.61 cents to finish at $1.4220 per lb, in a wide trading range from $1.4137 to $1.4650 a lb.

Total volume, however, was thin at 15,541 lots as many markets in other countries were closed after the New Year holiday fell on the weekend.

On Tuesday the US cotton futures settled with healthy gains, reversing small losses in the last minutes of trade, as investors saw an opportunity to buy in a tight market when prices fell briefly before the close.

Concerns about global cotton supplies kept prices propped up for most of the session, as some investors focused on flooded cotton crops in Australia and dry conditions in Texas growing regions, among other concerns, brokers said.

Benchmark March cotton contracts on ICE Futures US finished with 1.11 percent gains at $1.4378 per lb, up 1.58 cents. The contract advanced to a high at $1.45 shortly before the close, up from the day’s low at $1.3980, last seen on Dec. 30.

Volume firmed to 8,818 for the March contract, greater than the 6,823 contracts traded on Monday. Monday’s total tally came to 11,541 lots, according to ICE data.

On Wednesday, fund buying and system trades lifted US cotton futures, but late selling pulled prices off their highs as indexes re-balanced cotton holdings to align with new weightings for 2011 and some speculators grabbed profits.

Cotton showed modest losses in early business, then turned sharply higher around midday, as the commodities complex suddenly reversed course and rallied.

Market players said they thought algorithmic trading, or quickly executed programmed trades, were behind the sudden price gains, both on Tuesday and Wednesday.

Benchmark March cotton on ICE Futures US closed with a 1.42-cent gain, up 0.99 percent, at $1.4520 per lb. The contract neared its four-cent daily move limit to set a one-week peak at $1.4778 but quickly eased back.

Volume was 9,892 for the March contract, exceeding the 8,818 contracts traded on Tuesday. Tuesday’s total count also rose to 17,759 lots, an increase over the 12,176 lots logged on Monday, according to ICE data.

On Thursday, US cotton ended down about 3 percent on Thursday after rising by almost the daily limit on speculative buying before falling as much on selling related to a re-balancing of cotton holdings by commodity indexes.

“It was an interesting day in cotton where we travelled over nine handles,” Mike Stevens, an independent cotton analyst in Mandeville, Louisiana, said, using market jargon to describe the volatile session.

Benchmark March cotton contracts on ICE Futures US closed down 3.98 cents, or 2.7 percent, at $1.4122 per lb. The contract neared its four-cent trading limit to set a one-week peak at $1.4909. In later trading, it fell almost four cents to hit a session low of $1.4120.

On Friday the US cotton ended down about half percent after a relatively quiet session that capped a volatile week for the fibre. Benchmark March cotton contract on ICE Futures US closed down 0.62 cent, or 0.4 percent, at $1.4060 per lb. It moved in a three-cent band during the session, touching a low of $1.3961 and high of $1.4250. Thursday’s session was particularly volatile, with the March contract nearly rising by the four-cent trading limit only to fall, as much later. For the week, March cotton fell three percent, its sharpest loss since late November. Analysts said prices rallied on speculative buying linked to talk of limited supplies coming into the New Year. They later dived on selling related to a re-balancing of cotton holdings by commodity indexes. Index funds will be paring risk from cotton and other overly-weighted agriculture markets and adding exposure to natural gas and crude oil under the re-balancing, which runs between this week and next.

LOCAL TRADING

Firmer trend developed on the cotton market on Monday, obviously because the world rates are being followed, which are on constant rise. Thus the spot rate rise was marked by Rs300 to Rs9500. In ready take off more or less 3000 bales of cotton changed hands, by all means a caution move. The price ranged between Rs9700 and Rs9800, while seed cotton in Sindh and Punjab ruled at Rs3900 and Rs4500. On Tuesday lint prices touched record high at Rs10000 in ready off take, probably second time in lifetime. The spot rate was marked on Rs9700 after a Rs200 rise, seed cotton prices in Sindh and Punjab ruled at Rs3900 and Rs4500. Nearly 23000 bales of cotton changed laws in price range of Rs9400 and Rs10,000.

The buyers showed interest, they had lifted much less because they were expecting leniency from the sellers.

On Wednesday cotton prices encountered low businesses as consumers adopted a wait and see attitude of the sellers. The spot rate was unchanged at Rs9700. The buying dipped to just 3000 bales in price range of Rs9800 and Rs10,000 the highest this season, phutti prices ruled around Rs3900 and Rs4500 in Sindh and Punjab. Market operators speaking about ruling scenario said sellers are optimist about price trend and buyers have to be calculative under the circumstances.

On Thursday cotton prices depicted steady trend though cotton consumers lifted 20,000 bales to meet export orders for earning as much forex as possible. The spot rate was unchanged at Rs9700 seed cotton prices ruled in Sindh and prices at Rs3900 and Rs4600. The buying in ready saw also at Rs10000, the highest.

On Friday hectic trading was seen by the mills amid rising speculations about further rise in the prices, spot rate was raised by Rs 100 to Rs 9800. Seed cotton prices in Sindh and Punjab were unchanged at Rs 3,900-4,600. In ready business nearly, 32,000 bales of cotton changed hands between Rs 9,475-10,000.

On Saturday activity was down as mills were not ready to pay above their psychological level, on the other hand, the ginners were not prepared to lower the prices due to short crop scenario. Spot rate was unchanged at Rs 9800. Seed cotton prices in Sindh and Punjab were at Rs 3,900-4,550, they said. In ready business nearly, 5,500 bales of cotton changed hand between Rs 9,500-10,000.

RELIEF BAIL OUT PACKAGE FOR COTTON AGGRESSIVELY DEMANDED

The PCGA chief aggressively demanded to announce relief and bail out package for ginning units in flood-hit areas. He called for survey for flood hit areas at the earliest possible without waste of time. The urgency was seen in their efforts for coming cotton season. The chairman said a total of 946 ginning factories are operational in both Sindh and Punjab out of 1200 units.

Speaking about the cotton received during the last fortnight from December 16th to January 1, 2011 total around 10,240,366 bales depicting a loss of 14.17 percent. Giving details of loss during September floods 2010, he said cotton crops in Muzaffurpur, Layyah, Rajanpur, Multan and Dera Ghazi Khan Districts. About losses sustained by the above noted districts, he made special reference to Muzaffargarh around 41.70pc, in Rajanpur 17.64pc, in Dera Ghazi Khan 15.58pc, in Jhang 21.12pc in Hyderabad 25.34pc in Ghotki same quantity lost.

The cotton consumers earning better share ends as those who export value added goods need good amount of cotton to meet their orders in hand. The next door neighbour being the most convenient and ensuring cheaper prices has announced it will supply to needies around 2.5 million cotton until January 15, 2011. The harvested cotton, which arrived late had worried Indian authorities whether they will be able to meet local textile sectors’ needs and hence had announced to hold back-cotton in hand.

Authorities seemed to have been encouraged after a short intervention over the arrival and chops to allow exporters to apply for licences to ship more cotton.

HOPING TO ACHIEVE EXPORT TARGET AT $20bn

One has to be optimist, so any country and their rulers must be over optimist to extract from potential gifted by the God. Enough land is provided to exploit agricultural products. The potential has made country to be known as one whose economy is mainly dependent on agricultural products such as cotton, wheat, rice, sugarcane and wide variety of fruits.

Cotton and cotton products when added with value earn maximum forex simply when target in fixed how much export is likely. In sub-conscious there are textile products. Since free market economy is in full run, cotton, yarn, hosiery, towel, bed-sheet, ready-made garments are exported. The government commerce ministry undaunted by so serious condition about gas, power and raw materials set export target at $21.5 billion. But the nature was on its huge uncharted perilous course said to be unprecedented deluge hitting hard the most poor and vulnerable and leaving behind telling effects on houses, roads, bridges and a number of crops including cotton – as a consequences cumulative export target was brought down to $20 billion at the most.

Besides the floods remain – haunted different splitting headache like law and order, violence, strike calls, high input costs and non-availability, undesirable taxes like RGST and hike in mark-up rate. One can only pray authorities reap what they sow.

COTTON, PSF IMPORT FROM INDIA DESIRED

The yarn makers pressed the commerce ministry to regularise imports of all types of cotton and polyester fibre from India through Wagah border. Very recently when commerce minister was in Lahore yarn maker took the opportunity to apprise issued faced by the country’s textile sector, this sector being the highest forex earner singly through exports of textile products.

Association said it supports free market for trade in textile across the entire chain of textile products. The body emphasised due to shortage of PSF it should not be subjected to any import duty at all and man made fibre including viscose be zero rated and import of PSF is also subjected to anti-dumping duty. It made clear that short-term policies should be imposed, which discourages long term planning and exports.

Sources said commerce ministry plans to have monthly meetings based on general agenda for resolution of trade and industry issues in the interest of exports. The association showed interest in representation on Board Committee or fund of the ministry of commerce and its allied departments or independent institution including TDAP, TCP, Slic EDF etc.

It stressed that it should be taken on board in respect of efforts being made to seek market access. Besides urging State Bank of Pakistan (SBP) to provide a special line of credit for industry and competitive interest rate for ensuring investment and export to all sub-sectors of the textile value chain from yarn to garments and made-ups.