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Cotton prices record sharp rise after Eid

SHAFI AHMAD SYED

KARACHI: Cotton prices maintained surge in the post-Eid sessions which did not abate even by Indian decision to put ban on import of Pakistani cotton during the week ended on January 15, 2000.

Substantial rise was effected in all the three quoted varieties spot rates. The Niab opened at Rs 1209 and ended at Rs 1391; K-68 started at Rs 1,581 and closed at Rs 1,696; and MNH 93, from Rs 1,619.75, wound up at Rs 1,740, with ST.

WORLD SCENARIO

Cotton futures in New York sustained rise during the week. March rose by 1.56 cents and May gained 1.38 cents.

With the exception of occasional upset such as opening session, rally continued on speculative and fund buying support.

Futures on Monday suffered small losses on modest local and trade selling as the market corrected after rallying strongly over the past few session. Constant sharp rally made people look for correction.

The weekly NYCE spec/hedge report said spec funds were holding a net long position of 16.1 percent. Several members expected that the USDA would follow the lead set by Bejing when it slashed its forecast of 1999 crop to around 17.0 Ñ 17.5 million bales (480 lbs).

Towards the close, the cotton futures recorded seven months high. March cotton edged up 0.37 cent to end at 55.12 after ranging between 55.85 and 54.65 cents a pound. May rose by 0.30 cent to 56.25 cents. However, market sources believed that spot March cotton may go through a brief pull back and then resume its charge to higher ground.

The NYCE will resume session on Tuesday instead of Monday, due to Martin Luther Kings holiday.

CELEBRATION

Exception for an initial stock and disappointment over India's decision to ban import of Pakistani cotton, there was general celebration here. However, Karachi Cotton Association (KCA) held a meeting to register a protest against India's decision which it claimed was violation of international contracts.

Exporters with orders from India said India itself would be a loser in the ultimate analysis. They were of the opinion that Pakistan's cotton is in demand and international prices are rising.

They said if cotton was infested with bacteria, Pakistan would not have harvested a bumper crop.

In the meantime, DMR continued to print contracts related to India. According to reports India is to buy in the region of 60,000 bales.

EXPORTS

Export registration reached 409,085 bales last week, with week's share at 53,646 bales. Pak cotton was carrying some virus, which could damage their own crop. However, people at large are taking it in another way.

There was market gossip that India would have to take back the notification banning imports. Indian agents who arranged contracts were disturbed at the development. Some talked about alternative measures to ensure India accepted the deals.

Exporters of cotton said India would not get cotton that cheap Ñ at Rs 1100 to 1300. They hoped to get higher price for the cotton which India was unwilling to import. They put the quantity at around 2,50,000 to 300,000 bales.

APTMA TIGHTENS BELT

The consumption of cotton by mills is expected to stretch to 9.2 million bales due to a couple of factors. Relevant circles think revived mills as also the existing ones would consume cotton more because of the favourable price line. Beside this, according cotton experts, spinners are trying to have their own "buffer stock." They thin cotton may not be a bumper crop next season and hence won't be available so cheap.

Aptma even showed inclination to buy cotton from the TCP which so far has in its inventory some 400,000 bales out.

However, some knowledgeable sources raise their brows over the enhanced figure of consumption which ruled around 8.5 million bales last year. Some sources hinted that the industry was going to consume 7,50,000 bales instead of 700,000 bales.

PLEA FOR MARK-UP CUT

A call for two percent cut in mark-up by producers/exporters of the value-added goods was made last week. They said that cut in mark up, as it would, greatly relax investors in industries.

The PRGMEA and PBEA chiefs thought the SBP move would help the exporters to stay in market. However PBEA was more emphatic on waiving the mark-up altogether. It would make Pak exports competitive, it said.

COTTON POLICY

Farmers Association of Pakistan chief Malik Afaq Tiwana talking to pressmen at Lahore revealed that federal agriculture minister Shafqat Jamote had agreed to announce cotton policy by March.

Tiwana said a policy as early would save the industry from crisis-like situation as in 1999. The policy should make clear provision for the exports of surplus cotton, he added.

Tiwana said Jamote would put up the case to the cabinet meeting. He hope things would go growers' way as far as possible.

TAIL PIECE: Pakistani exporters of textiles and fabrics must have felt greatly relieved on Indian decision. The Indian decision has been called "Delhi's mala fide intent to malign Pakistani bumper crop in the international markets."

Whether third country option offered to Pak exporters by importers of India would go some length to console sufferers was unclear. Pakistan is mulling to take the matter to WTO so that India is punished for violating global contracts.

However, spinners may have rejoiced a bit the Indian decision was unlikely to digest report from Frankfurt that export finance facility maybe withdrawn. But it apparently seems not now and the target of $9 billion may be achieved. But the report is likely to create ripple among strong spinners lobby.