Cotton market in weak mode
DR ZAFAR HASSAN
Cotton Market: Domestic cotton prices have entered a weak phase due to relatively dull New York futures due to dullish global prices, post-election blues in Pakistan and strong stringency in the local currency market. Thus the current pace of ready cotton business is slow but may pick up after a week or ten days.
The reported business volume is also comparatively small. Moreover, yarn prices are also said to be on the lower side and thus textile business is said to be slow. Therefore both raw cotton market and yarn businesses are said to be lackluster. It appears that many mills have covered themselves till the arrival of the new crop (August 2013 – July 2014), a small amount of which may trickle in during end of June or early July 2013.
Planting of early sown cotton crop is likely to be complete in about another three weeks in Punjab, while in Sindh it is also progressing well. Current cotton crop (August 2012 – July 2013) is selling variously between Rs 5,400 and Rs 6,400 per maund (37.32 Kgs) according to the quality. Sales of cotton are mostly sparse and occasional.
In a recent report from trade circles in Karachi, it was learnt that an Indian company had recently sold upto 3,000 tons of American upland new crop cotton (2013-2014) 41-4-36 G5 at 850 points on New York December 13. Textile circles said that about 200,000 spindles are being steadily added to Pakistan’s spinning capacity. Moreover, several spinners, including the larger groups are said to be adding additional back process to enable them to spin coarser counts of yarns.
There is belief in industrial circles that the new government of the incoming prime minister Nawaz Sharif will add power generating capacity in Pakistan in the not too distant future. This season’s (August 2012 – July 2013) mills cotton consumption is being envisaged at 15.5 million domestic size bales (155 Kgs). Furthermore, it is presently being projected that mills consumption during the next season (August 2013 – July 2014) is likely to increase to 16 million domestic size bales (155 Kgs).
On the global economic and financial front, the spotlight this week was on Ben Bernanke, the Chairman of the Federal Reserve in the United States. In his recent speech, he appeared quite ambivalent. Some people interpreted his speech to mean that the quantitative easing would continue so that the stocks and shares prices hit the roof and created new records, particularly in the United States. Thus after closing at record levels last Tuesday, the next day the US stock market futures prices started to fall. A number of observers were of the view that shares prices had risen to unduly high levels and Bernanke could yet raise interest rate this coming June (2013) which could lead the equity markets for a major correction viz. a sizeable fall in prices. Thus several investors could be inclined to book their profits leading to a major correction in equity prices.
No doubt the shares prices in the United States had also risen last Tuesday by strong reports concerning the housing industry and increased consumer confidence. The subsequent decline in US stock markets futures also influenced the equity markets in Europe, Germany, France, the Far East and elsewhere.
Indeed it has just been reported that the American economy grew at a relatively slow pace during the first quarter than was envisaged earlier. Moreover, claims for unemployment benefits are said to have risen last week signifying a weakish US economy. Thus any economic recovery in America remains sluggish. Other trouble spots in the global economy remain in Japan which has not yet turned the corner.
Thus its shares prices have plummeted sizeably. Furthermore, figures from the industrial sector in the eurozone show that consumer confidence fell last month as shown in a report of the European Commission. Some observers and analysts are now saying that economic problems will start mending after 2014. However, if previous experience over the past five years is any guide, eurozone is unlikely to extricate itself from its economic mess in the foreseeable future. Cotton market
The same dismal story regarding unstable economies in most parts of the world continues to rail the business, banking and the industrial world. If you look at Brazil or India, no light seems to appear at the end of the tunnel. A London report recently stated that any proposal by the European Central Bank to cut interest rates below zero would impart an added blow to the money market funds already suffering in a low rate environment.
In summing up the situation, we are facing a threatening possibility during the forthcoming summer in case the US Federal Reserve, the European Central Bank or the Bank of England try to stifle the large and almost assured supply of almost interest free money to the global banking system and in turn to investors and public welfare institutions at large. Business Recorder