Cotton prices follow tighter trajectory

DR ZAFAR HASSAN

Cotton prices
Cotton prices

Higher price advices from New York cotton futures (ICE) due to perceived shortage of tenderable cotton, lower crop assessment of the new Pakistani crop (August 2013 – July 2014) and profitable condition of most of the domestic textile industry have lumped together to increase lint prices. Slower arrivals of seedcotton over the past few days and increasing export inquiries for Pakistani cotton have pushed cotton prices to a higher plane.

October 2013 contract on the New York cotton futures moved up to 87.30 cents per pound on Wednesday guiding global prices of the fibre to a higher level. Mills in Pakistan are generally happy with their performance and are thus bidding for cotton at even higher levels, but the ginner does not always oblige. Thus yarn prices are reported to be quite stable under the present circumstances.

Recently, a meeting of the Cotton Crop Assessment Committee (CCAC) was held in Islamabad under the chairpersonship of Rukhsana Shah, the Secretary of the Textile Industry Division, which determined that the projection of the current cotton crop (August 2013 – July 2014) in Pakistan would be 13.25 million bales (170 Kgs) ex-farm basis instead of the earlier projection of 14.1 million bales. Representatives of Punjab and Sindh governments gave their assessments of the new crop.

Water shortages at the sowing time are said to have resulted in lower plantation of the cotton crop (2013-2014). In the Punjab, 5,766,082 acres have been sown instead of the targeted area of 600,000 acres achieving 96 percent of the cotton sowing target. In Sindh, an area of 140,793 acres out of the targeted area of 160,615 acres have been sown, which is 88 percent of the target area. Besides government functionaries, including officials from the provinces, representatives from the All Pakistan Textile Mills Association (APTMA), Pakistan Central Cotton Committee (PCCC), Trading Corporation of Pakistan (TCP), Pakistan Cotton Ginners Association (PCGA) and other stakeholders were also present.

Due to oversold position of cotton, new sales of seedcotton are scarce. Therefore, in Sindh the price of seedcotton (Kapas / Phutti) has risen to the range of Rs 3150 to Rs 3200 per 40 Kgs on Thursday. In Punjab, seedcotton prices obtained between Rs 3050 Rs 3100 per 40 Kgs, according to the quality.

Lint prices in Sindh ranged from Rs 6,600 to Rs 6,625 per maund (37.32 Kgs), while in the Punjab they also ranged from Rs 6,600 to Rs 6,625 per maund in a visibly tight market. About 40 to 42 ginning factories are pressing the new crop (2013-2014) in Sindh while in the Punjab about twenty factories are ginning the new crop daily. Exporters are said to have sold nearly 25,000 bales of cotton till now. A sale of 400 bales from Khanewal in Punjab has been reported at Rs 6,600 per maund in the ready market. Reports indicate that cotton prices have risen sharply in India which is also increasing the price of cotton in Pakistan.

On the global economic and financial front, the International Monetary Fund (IMF) cut the world economic growth forecast for 2013 and 2014 and also warned against elongated period of recession in Europe. In recent weeks, selective improvement in certain sectors like housing has been reported, but the IMF also lowered its economic forecast for the United States of America.

In recent weeks, what has cheered the equity markets in the United States is the belief that the Federal Reserve of the United States would somehow continue to provide monetary stimulus which includes keeping the interest rate close to zero which was fixed in 2008 after the recession started at the end of 2007. The investors believe that such encouragement by the Federal Reserve would keep the equity markets in a buoyant mode.

As duly discerned by the IMF, global economic growth has been cut for the fifth time since last year due to a definite downfall in the emerging markets, together with a deep entrenched recession which is plaguing Europe since the past many years.

Hitherto, the emerging markets including the BRIC countries were thought to provide a much – needed fillip to the global economy, but the emerging markets are sinking into deeper trouble to sustain their own economies and are thus in no position to bring down the global recession. Thus Brazil, India, China, Russia and South Africa are showing dismal economic performance and appear in no position to push up the global economic performance.

The astonishing decline in China’s exports and the plunging Indian rupee, besides protests in Brazil and South Africa. All go to show that the BRIC countries are in no position to prop up other economics around the world when they are themselves in serious financial, speculative and social predicaments. China itself is said to have warned of a seriously negative outlook of its trade terming it is as “grim.” An unexpected fall in its June shipments is construed to hurt its exports seriously. Such a slide in Chinese exports is feared to slow down its economic growth largely.

In the Eurozone, Germany and France do not get along well regarding major economic issues facing the zone. The two leading Eurozone economies are not on the same wavelength when discussing the major issues being faced by the single currency conglomeration of countries. On the other hand, protests continue to show the economic discontent in Greece due to large unemployment there In Spain, the more than record 25 percent jobless rates is creating social unrest which could turn chaotic. Thus the equity markets around the world do not reflect the true economic disarray, discontent and hopelessness which many people are confronting in most parts of the world. The global macroeconomic content seems enormously faulted and shattered. Courtesy Business Recorder

Published in ZaraiMedia.com

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