20000214

Prices sharply down on cotton market

SHAFI AHMAD SYED

KARACHI: Sharp and sudden losses were marked in cotton trading during the week ended on February 12, 2000.

The short staple Niab lost Rs 155.25, K-68 and MNH-93 each dropped by Rs 115.

WORLD SCENARIO

World rates on the New York Cotton Exchange (NYCE) set the bearish trend and last week, ending on February 12, the futures plummeted and nearly last two cents.

Reports about moisture in the key producing areas weighed on prices. Trade and locals were the ones who sold. But the market focused on speculative funds to liquidate long position.

Actually, trade was looking for a direction. National Cotton Council put sowings during 2000/2001 at 15.35 million acres, against exports belief which put plantings between 14.5 and 15.5 million acres.

As the session progressed spac funds tried to tighten up on the long positions considering more losses likely in the coming weeks. The option players awaited enquiry. The monthly USDA production and supply/demand report was not given much attention but the attention was on option expiry.

Earlier the week, March gained 0.10 cent to 56.18 and May was up 0.15 to 57.84 cents a pound. And in the last session March fell back 0.57 to end at 56.97 and May lost 0.70 to 58.89 cents a pound.

DOMESTIC SCENE

The two major players in domestic cotton market took pains to convince the government about their claims on TCP stocks. The spinners, who are much more organised, kept trying to persuade the authorities to sell TCP cotton to them.

It was talk on the market that Aptma was campaigning that its members give their requirement so that the government could be approached and some arrangements made to buy TCP cotton.

But the ginners, who think they would be hit hard, opposed the move tooth and nail. Their stand is that TCP was inducted to bring stability in the prices. If TCP sells cotton locally, prices would again

distabilised and come down to unacceptable level for ginners.

However, according to reports, Commerce Minister Razak Dawood had rejected the spinners' plea saying next policy would be announced in March next.

CROP SIZE

As the season's end is approaching, the size of the crop is being presented in various ways, as usual. The ginners recently said they have already, received 9.4 million bales predicting that four/five lakh bales more might arrive.

The crop assessment committee has increased its estimate 10.7 million bales ex-farm and 10.2m bales ex-ginned.

The question arises how much should be set apart for export.

So far, private sector exporters have registered 453,402 bales, after cancellation of contracts of India. The TCP has procured nearly one million bales, out of which it has made payment of over five lakh bales. It has already sold 34,000 bales of Alaqa and Afzal to US, UK and Italy, and has invited more bids.

The speed with which exporters are registering contracts, it is likely that they may go to around a million.

It is necessary to feed local mills which claim 9.2 million bales consumption. The figure is disputed by exports who put consumption at 8.5 million bales. In the meantime, they have bought 7.2 million bales. The spinners need to buy all the stuck up stock with the ginners. The two sides of the picture appear, one rosy, and the upsetting. How the trade ends up would be watched keenly.

WHO GAINED

At this stage, the controversy about a bumper crop has almost ended. Now the question is being raised as to who has gained from bumper crop. Mostly it is said that spinners have been the ginners.

The latest out burst has been from Pakistan Hosiery Manufacturers Association (PHMA) which has urged the government to restrict export of yarn. Hosiery Manufactures assert that they are supplied yarn at higher prices than they should. Besides, ancillary industry has to bear the brunt of acquiring dyes and chemical at exorbitant prices.

If further urged the government to save the downstream textile units from turning uneconomical. The high prices of yarn, it alleged, are due to manipulation by the spinners who bought around eight million bales cotton at less than Rs 1,500 per maund.

APPREHENSIVE GINNERS

Ginners have been constantly in touch with the authorities to seek mercy from them. Only recently they met the commerce minister to inform him about spinners move to let them down. In statement released the other day, the ginners have not made it clear as to what commerce minister had said. This could have made easier the attitude of the authorities. Any way, ginners were successful in telling the minister that they must be saved, and as also the growers, if any bid is made to dump cotton at the ginneries. In the meantime, spinners are holding a meeting on February 21, what is the meeting for is not clear. But something of serious nature would be taken up.

TAIL PIECE: The growers are not still out of morass. Understandably, they had entrusted some phutti to the ginners. The government had intervened and allegedly it asked the ginners to fix rate of the deposited phutti after January 24, 2000. But the growers allege that ginners did the same way back in November 1999. The rate was low at Rs 360 per 40 kg. The growers complained that ginners were deducting 3.5 to 4 kg of phutti per sack of 3 maunds. The growers sought help to settle the issue at reasonable rate.

However, in recent weeks some solution of such problem was reported. The issue has lingered or for long. It need solution.