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Cotton prices on recovery course

RECORDER REVIEW

KARACHI: Cotton market absorbed the shock, coming in the wake of the Japanese government decision to impose anti-dumping duty on exports of Pakistani yarn, and affably accepted positive factors which rekindle some hope in the proceedings. A signal that Taiwanse weavers and spinners extended open-hearted support to Pakistan exports during the crucial talks whether to follow the Japanese line or not, and the news that South Koreans have no such plans on the cards put cotton prices on a recovery course during the week under review.

Practically, all external factors have prompted the buyers to forget, for the time being, what happens tomorrow, and take full advantage of the opportunity that was knocking at their doors. No wonder that over 15,000 bales cotton changed hands during the hectic week, highest quality in the past some weeks, despite the fact that there was an overnight jump of Rs. 150 to Rs. 200.

The local official rates, reflective of the trend, soared by Rs. 75, in two jumps, towards the close of the week.

The Taiwanese and South Korean developments proved quite reassuring which fully manifested in the spinners enthusiam to buy available lots - local and imported. However, new crop Niab's rates were revised twice during the week pushing its price to Rs. 1950. The two current varieties stayed put at their opening level, that is, K-68 at Rs. 1975 and MNH-93 at Rs. 1990.

INTERNATIONAL PRICES

On the international market prices live was firm and moved in narrow range, but towards the end the prices closed two limits up. Traders said bulls jumped into the market following fund-buying, breaking happily a 40-day average. The ruling October, therefore, was shown closing on Thursday at 78.75 cents a pound, the December at 76.65 cents and March at 77.00 or around. The prices began their week's journey at 74.70 cents for October, December at 72.35 cents and March at 73.30 cents a pound.

ENTER NEW CROP

The ginners must be thanking external signals, which helped them in erasing their deeply-rooted disappointment. Their bid to push prices of lint, the market sources said, had failed more than once. When the new crop Niab was launched, in early August, it was practically put on test and the big question was whether it would sustain the jump of Rs. 75. But the very next day the cosmetic hike was washed off. Similarly, on the other occasions prices were also tested but they could not hold on the burden they were supposed to have shouldered.

The weather - a fair weather so far - has played its role in keeping the size of the prices in check. It has been very kind, as the weather pundits and the cotton experts, confirm it. When the rains was desired it came, and as far as the cotton crop was concerned, it helped plants grow unharmed. Any bid to mix up rains with the devastating floods was rejected by the condition on ground. Although, Japan had imposed anti-dumping duty on Pakistan yarn but Taiwan said it was not in a hurry. Similar messages were received from South Korea and Turkey. This pushed the prices but there was no flare-up and the rise in prices was progressive and very well-disciplined.

PHUTTI PRICES

The growers, market sources say, are now in safe hands. Their leaders, since last years, have guided them to a good harvest. Growers have been active in adjusting phutti prices earning as much profit as they deserve. Previously, the growers, claimed, the entire cake was allegedly taken away by other people. At the beginning of the new season phutti was being sold around Rs. 800 per 40 kgs. But it was cut to just Rs. 700. It would attained its original mark towards the close of the week at Rs. 800. Hence the rise in cotton prices, has been seen during the last two weeks.

In the developing situation the forecast from different quarters about this year's cotton production is in the neighbourhood of the government target at 9.5 million bales - more or less one million bales above our needs. Whether exports and imports of cotton will go as during the current season will have to be seen. But exports must be regulated and strictly a surplus. We must have some left over as "buffer stocks" just for the rainy season.

HEDGE TRADING

For a few days in the week cotton prices heavily fluctuated. Such rise and fall are not abnormal in business. The traders claim that fall or rise could be well-managed if hedge-trading is given a chance to play. The KCA is in the frontline fighting for the resumption of hedge trading, actively supported by KCBA President Hanif Maniar and Secretary Nasim Usman. A green signal here is impatiently awaited from Islamabad.

The textile industry needs government attention to keep alive this biggest foreign exchange earning sector as well as employing the largest number of workforce. The crisis has deepened as, of the 457 textile mills, 125 have been closed. This sector's prime concern is rising prices of cotton and lack of proportionate rise in the local and international yarn prices. Lately, the rise in power charges, Sales Tax, Income Tax, excise duty, turnover tax and interest rates have added fuel to fire. But, as the sources close to cotton trade suggested, spoon-feeding of any sector must be discouraged. Under WTO competition will be keen and on quality. "Besides, spinners should spin higher counts rather than stick to manufacture 20 and 21 counts yarn."

TAIL PIECE: The Cotton Export Corporation (CEC) is criticized for one or the other reasons. But this time "the Federal Anti-Corruption Committee" in its report on allegations against CEC held its chairman responsible for a loss of Rs 481.722 million. In its report the committee said that Syed Abbas Hussain Shah was resisting the inquiry and he was also responsible for preparing a fake agency agreement. "The trade awaits eagerly to know the fate of the inquiry and final outcome."