Cotton market comes under pressure

July 19, 2013

DR ZAFAR HASSAN

Cotton Market
Cotton Market

After remaining mostly steady to tight since the beginning of this month, cotton prices came under pressure on Thursday conceding Rs 100 per maund (37.32 Kgs) in Sindh and about Rs 50 per maund in the Punjab. Seedcotton (Kapas/Phuti) prices also lost nearly Rs 50 per 40 Kgs. This follows a reported agitation by the ginners against the growers in Sanghar in Sindh for charging higher seedcotton prices.

However, the seedcotton prices were now reported to have ranged lower from Rs 3100 to Rs 3200 per 40 Kgs in Sindh and also from Rs 3100 to Rs 3200 per 40 Kgs in the Punjab. Also, the gas and power supply to the mills, particularly in the Punjab, remains short even after the induction of the new government of Nawaz Sharif about a month ago. Observers said it would take more time before age-old problems of utility supplies are rectified.

Another noteworthy factor is the fall of the value of the Pakistani rupee to an all time low against the United States dollar having dropped to Rs 102/Rs 103 against the greenback. This occurrence should make imported cottons more dear though finished goods like yarns and madeups export may gain due to this development. Other news indicated that new crop cotton (2013-2014) from Sindh possesses very good quality with staple length upto 1.08 of an inch and appreciable improvement in grade and micronaire. Some of these qualities are said to be close to the Indian Shankar style but Sindh cotton has more moisture and trash.

Textile markets are also said to be generally remunerative so that most subsectors of the cotton economy from field to fabrics are doing fairly well. Cotton yarns are also said to be doing well which means that cotton business should continue to pick up over the coming weeks and months.

Lint prices from both Sindh and Punjab reportedly ranged lower from Rs 6675 to Rs 6700 per maund (37.32 Kgs) in a comparatively easy market. Besides the traditional slow down during the holy month of Ramazan, the approaching Eid-ul-Fitr after about three weeks could slow down business and manufacturing activity.

It was reported on Thursday from Karachi that 400 bales of cotton each from Mirpurkhas and Tando Adam in Sindh, 600 bales from Shahdadpur and 1,000 bales from Sanghar all sold at Rs 6700 per maund (37.32 Kgs). In the Punjab, 200 bales of cotton from Chichawatni were said to have been also sold at Rs 6700 per maund. Brokers said in the evening that three factors could strengthen the domestic cotton prices, namely the incoming monsoon rains in case their spell is prolonged, building up of inventories before the incoming Eid-ul-Fitr early next month, and the depreciation of the Pakistani rupee against the United States dollars. Presently the market is weak.

On the global economic and financial front, it is well established that under the present dispensation the United States, Eurozone and China form the tripod on which rests the essential economic stability of the global economic performance. A dash of Japanese input, some contribution from the BRIC group of countries and a modicum of inputs from Australia, Canada or South Africa would normally be expected to give added pace of growth.

However, notwithstanding a modest improvement in the United States which may or not be able to remain sustained, the other major contributories like the Eurozone or China are definitely slipping in their economic activity. Furthermore, the BRIC countries are also facing headwinds and are fast entering into the doldrums. Even if some marginal economic growth is appearing on the American landsape, its whopping unemployment and slowing down of several sectors remain sore points.

Three seemingly large bubbles appear on the global landscape which could trigger a sudden downfall in business and banking activity and possibly create chaos around the world. First, any negative news of widespread proportion may result in a dizzy crash of the equity prices around the world which are presently ruling at mega high levels. This is possible, if not imminent, because the economic fundamentals remain very weak and treacherous.

Secondly, China’s impending property bubble shows how fickle the investors are who go on increasing the property prices in a speculative frenzy. A large section of Chinese people are engrossed in property activity for trying to make a fast buck. Moreover, with slowdown global activity, the many medium and middle class industries in China are closing down due to overcapacity. Factory closure in China could create ripples around the world due to Chinese economic slowdown.

Thirdly, the Eurozone, arguably the epicentre of global growth, is going from bad to worse economically. Numerous protests continue to be held regularly in Greece, Spain, Portugal, Italy and elsewhere due to increasing cuts in Government spending and prolongation of economic woes and miseries. Political wrangles following economic and business stringencies in many Countries are taking their harsh toll as confidence in the existing socioeconomic dispensation is waning and withering.

Therefore, under these dire and dreadful circumstances, there hardly appears any credible hope of a new dawn on the global economic horizon. Even the so-called “Arab Spring” is turning into an autumnal nightmare. It thus appears difficult to foresee any early revival of the global economy in the foreseeable future. Any reported improvement periodically has been short-lived and lopsided over the previous few years. Courtesy

Published in ZaraiMedia.com

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