20000416

Downtrend

on cotton market

SHAFI AHMAD SYED

KARACHI: International erratic movement of cotton futures and thrice interrupted announcement of 2000-2001 new cotton policy put pressure on the hostile ginners. The TCP decision on its latest tender allowing local spinners participation can hardly to over emphasised.

All these factors together led uniform fall in local cotton official rates by Rs 57.50.

INTERNATIONAL SCENARIO

Earratic movement pronounced in the international futures price. The later price jump towards the end of the week.

The sum total was futures gain of 0.92 cent. The factors which influenced trading on New York trading during the week was increased in Chinese 1999-2000 cotton ending stocks to 16.18 million (480 lbs) bales against 13.48 million bales last months.

Noting positive trend after a couple of weeks of downdrift, traders expressed that positive backdrop was provided by weekly USDA cotton export sales data which showed shipment at 215,700 running bales (RBs) while net upland sales but 51,600 RBs.

The week saw opening two sessions bull driven. The following is the shape of trading during week-end (Friday) sessions.

Spot May contract lost 0.39 cent to 56.43 cents after trading between 57.30 and 56.10 cents a pound. The distant July lost 0.48 cent to 58.22 cent after trading between 59.20 cents and 57.90 cents a pound.

COTTON POLICY

Cotton policy saw the dawn at last when it was unveiled on Thursday. It augured well that both federal commerce and agri ministers together made it public.

The major gainers from the policy or otherwise are yet to open heart. That the policy may have universal appreciation appears distant. But the wordings vindicated that cotton policy has little scope for much of a shift.

Almost every feature likely to receive the attention of the new government was pretty understandable. The difference was in size or significance. The government has fixed Rs 725 per 40 kg for procurement of phutti (seed cotton) of Afzal type. The most optimist put it at Rs 825 while the others viewed cotton to be priced at Rs 600 per 40 kg. We will have to wait where the minimum rate of Afzal type will ultimately be placed.

GRADING

But for negligence and callousness on our part it is said and accepted by our exporters of cotton that importers offer 10 cents lower that ruling world cotton rates. Exporters and others without seriously exercising the loss say it runs into billions of dollars.

Every government made it mandatory to get the cotton certified by the Cotton Standard Institution. But governments' determined everytime caved in. During the current season, for bid was made, with the same result. Since it is important part of the policy and undoubtedly exchequer ultimately has to suffer. The government will in all likelihood will adhere to its own principle. Some debate is likely at what stage to standardisation and grading to begin. Where the dust settles will have to be seen.

MARKET ECONOMY

The market economy policy introduced some four years back, but not without occasional protest. The growers and ginners opposed the system which hit them hard. Last season, according to ginners and growers it rained them. But general belief is that growers, particularly the weaker ones were really suffered. The spinners, according to some reports, imported cotton, more or less two million bales. This obviously meant at the cost of growers. Ginners could retrieve and in fact are recovering till date.

Some opponents were openly charging that market economy policy was helping the spinners. Apart from what ministers stated on the occasion of cotton policy announcement regarding improvement in the quality of products, particularly cotton, the continuation will be watched very closely it not made amend.

TCP's OPEN BID

The pressure was mounting from Aptma on the government that the Trading Corporation of Pakistan (TCP) made tenders open so that spinners could also participate. The offer fall far short of TCP expectation at Rs 1,775 per maund. The Corporation was supplied cotton at Rs 1,500 per maund. It appeared that the TCP is confident to sell Afzal type at good return by June next. Hence spinners will have to cough out as much to satisfy the TCP. The Corporation cannot lose sight of the fact that they can hardly ignore impact of its action on cotton prices in local trading. Ruling prices in the local market is Rs 1,850 to Rs 2,000 against offer of Rs 1,775.

TAIL PIECE: Some hitch has been holding back government from doing something to listen to perennial call for putting curb on export of cotton yarn. Value-added sector has been crying hoarse for years that they would get requisite facilities. But the Council of Textile Association has again reiterated for quantitative curbs on cotton exports. They have put a number of suggestions like imposing duty on exports of cotton and permission to import yarn. The value-added sector should be put to test about taking earning to $10 billion.

The cotton policy has been lukewarmly welcomed by most players. But the growers have expressed disappointment, though, have not rejected its altogether, market sources said.