Prices stay stable on cotton market

December 14, 2012


Cotton Market

Thursday saw local lint prices stay stable and steady with some reports also indicating an improvement by Rs 25 to Rs 50 per maund (37.35 kgs) in some classes of cottons. Moderate rains in several parts of the cotton belt, end of nearly eleven days of transporter’s strike which had halted traffic, better payment receipts after the end of strike and continuing better prices of yarns and other textile products have all influenced fibre prices favourably.

Seedcotton (Kapas / Phutti) prices on Thursday reportedly ranged from Rs 2,400 to Rs 2,750 per 40 kgs in Sindh, while in the Punjab they are said to have extended from Rs 2,500 to Rs 2,800 per 40 kilogrammes as per quality. Lint prices in Sindh were said to have ranged from Rs 5,300 to Rs 6,000 per maund (37.32 kgs), while in the Punjab they are said to have prevailed from Rs 5,750 to Rs 6,050 per maund. One report also indicated cotton price idea at Rs 6,100 per maund.

On Wednesday New York cotton futures prices were reported to have hit a six-week high level as investors decided to pick-up cotton as closing stocks in the United States were said to have become tighter. Rise in New York futures prices over the past several days imparted steadiness to the local market.

Yarn and textile exports from Pakistan have resumed after the transporter’s strike which ended recently. Thus demand for yarns and other textile products remains quite positive. Therefore it is presumed that cotton and textile business will function again at an appreciable pace. However, gas and power shortages in the country are a bane to the normal functioning of the economy, particularly hurting textiles which is the largest industrial activity in the country.

Business activity may slow down again during the next two or three weeks’ time with the approaching of yearly accounting exercises and closings at the banks, Quaid-e-Azam’s Birthday, Christmas and the New Year. Cotton prices are all moving up steadily as interbank rate of the Pakistani rupee is said to have gone down to Rs 97.50 against the US Dollar, which is very low. A depreciated rupee helps in textile exports but cotton imports become dearer.

In domestic cotton sales reported till the evening on Thursday, 600 bales of cotton from Sarari in Sindh were said to have been sold at Rs 5,725 per maund (37.32 kgs), while 1600 bales from Upper Sindh reportedly sold at Rs 6,000 per maund. In the Punjab, 1200 bales from Bahawalpur were said to have been sold at Rs 5,850 / Rs 5,900 per maund (37.32 kgs), while 1000 bales from Khanpur and 2000 bales from Rahimyar Khan both were reportedly sold at Rs 5,950 / Rs 6,000 per maund in very steady market.

On the global economic and financial front, two issues remain in the limelight. The prime issue is the discussion in Brussels by the European Union finance ministers who are said to have reached an agreement to create the institution of a supervisor who would oversee the workings of all the state-run-banks In the Union.

The second significant issue is that of the policy of the US Federal Reserve regarding the pumping of more money into the banking system and keeping the interest rate near zero and also in turn thus supplying money into the market at large to prop up the economy. Federal Reserve has decided to continue the easing of money supply to try and stem the downturn in the American economy, particularly the unemployment problem.

The finance ministers of the European Union bridged the gulf working towards an agreement to create a supervisor for the EU banks after France and Germany softened their stances and thus the EU could strike a deal towards the formation of a Banking Union by providing sweeping powers to the European Central Bank (ECB). Federal Reserve is opting to increase money supply till unemployment goes below 6.5 percent.

Initial reports indicate that several details are still to be sorted our before the proposal to install a supervisor for the ECB is put into practice. Thus several questions remain to be answered in this regard. What appears imperative, however, is the need of a massive overhaul of the European Banking system before a single supervisor is put in place.

There also remains the question as to where the ECB supervisor will be based. This issue may become contentious as the supervisor working under the ECB could conceivably be stationed at Paris or Frankfurt – or possibly elsewhere. Also, the question arises as to what would be the effect of the creation of the supervisor on the British Banking system operating in London with a global reach. The idea of the supervisory job would be as a watchdog to avert another banking crisis.

Regarding the decision of the US Federal Reserve, its chairman Ben Bernanke is taking the cue from the Congress. As supervisor, the ECB should be able to coerce banks to issue more capital in time of need. To avert the impending economic disaster, President Barrack Obama and the US House of Representatives Speaker John Boehner have held closed door meetings to ensure that America does not fall off from the “fiscal cliff” which appears at the end of the current year, viz. 31 December, 2012. No clear signals have yet appeared whether an agreement will be reached by the Democrats and the Republicans in the United States to keep the business of US government functional after the 1st of January, 2013.

Pending any resolution of the “fiscal cliff” problem, investors and equity holders remain muddled regarding the possible outcome. Thus the global share prices on the leading bourses remained volatile without finding a clear direction. Other awaited news includes announcements by the US government this week regarding reports on jobless claims, retail sales and producer prices. Till that time, nervousness prevails.


Courtesy: BR

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More