20000221

Rising trend maintained

on cotton market

SHAFI AHMAD SYED

KARACHI: Rising trend in cotton prices was halted for a short while but it continued thereafter during the week ended on February 19, 2000.

The spot rate of short staple Niab was raised by 57.50, that of Sindh's superior type K-68 was reduced by Rs 28.75 and Pakistan's best MNH 93 closed with neither gain nor loss at Rs 2120 all with sales tax.

WORLD SCENARIO

New York cotton futures in the ultimate analysis were marginal gainers. In the early session spot March was up 0.29 cent to 57.26 cents a pound after trading between 59.10 and 55.65 cents a pond. The may contract was up 0.47 to 59.36 cents. In fact, the market opened on softer note but rose on buying by small speculators, the market awaited spec/hedge report later spec/trade sales sent futures down. Traders said that March/May spread was active spec selling March and buying May. Turkey was cited top participant. Towards closing, early trade buying gave the market the needed boost, besides weekly cotton export sales data shipment at 154,700 running bales (R.B), 18 percent down.

The market is to remain closed on Monday, in addition to two weekly holidays on Saturday and Sunday. Therefore, buying extended. The weekly NYCE spec/hedge data: net long standing of 44.1 percent.

May contract went up by 1.82 cents to 59.75 cents in trading range of 59.80 and 57.93 cents. Spot March jumped 1.62 cents to 57.09 cents a pound. Other months closed 1.30 to 0.20 cent better.

NEXT SEASON OUTLOOK

Coming cotton season may bring happiness for cotton growers. The government is contemplating to buy cotton, obviously at some economic level. The more vivid picture may emerge in cotton trade policy in March next.

Until recently, when a number of growers' own group and bodies have sprung up they were weekly supported and represented by the ginners.

The government intends to pay the difference how, it is not known if growers are denied by the buyers. However, whether the system would works remains to be seen There are varied and divergent interests to work for their own benefit. So far, the governments have fouled to formulate any fool-proof system.

GOVT'S APPROACH

Reports say the government would approach the relevant cotton men for the March policy. A couple of years back, support prices were announced by the government but in physical business they carried no sense. In practice, prices remained victim to buyers' or sellers' whims. If phutti was bought at much below the support price no one was there to ensure justice. It should be for the govt of the day to ensure that no participants in the business are made hostage of the circumstances by other groups.

EXPORT DUTY

Some representative trade bodies, like Council of Textile Associations Bedwear Exporters Association etc cried hoarse for taking back the export refinance facility on cotton yarn. The facility was initially to end in December 1999 which continued and officials took no note of it. Probably commerce minister assured Heimtextil participants in Germany to withdraw the facility. Nearly same people gained assurance once again from the finance minister in Karachi recently to the effect. But it was as blind a promise as was that of commerce minister's when the promise will be fulfilled was not clearly stated.

According to them, orders secured in Frankfurt some weeks back have turned unprofitable proposition. The yarn prices have multiplied and rendered unfeasible for value-added industry. The result is that the exporters and manufacturers of the value added products are now demanding duty on export of yarn. The govt has no doubt learnt about demand but has been keeping the issue in cold storage.

TCP DOES IT

The TCP succeeded in selling some 38,000 bales for export at 41 cents to 44 cents a pound. The government has probably been encouraged, as it desires to continue buying cotton in the next season.

However, mention needs to be made of Pakistan Readymade Manufacturers and Exporters Association which said that it would welcome the sale of lint by TCP locally. It aspired that exporters of value-added products would get raw material at cheaper rates. Not many have endorsed the view so far!

The latest: Commerce Ministry has rejected the idea to sell lint locally.

TAIL PIECE: The exporters of value-added products have in a desperate bid, called for duty-free import of cotton yarn. The convener of Council of Textile Associations, S M Rizvi, said that exports remain stuck up at $5.5 billion. He suggested export earnings could get a boost if (1) yarn is allowed without advance IT deduction and (2) refinance facility is withdrawn on various counts of cotton yarn. The government may be probably looking into suggestions!