Prices display firm posture on cotton market

May 23, 2014- BR Report

DR ZAFAR HASSAN

Cotton Market
Cotton Market

Cotton prices on the domestic market have displayed a firm posture since the last fortnight as unsold ready stocks from the current season (2013 / 2014) are just around a couple of 100,000 bales. Ginners are said to be tight sellers because new crop cotton (August 2014 – July 2015) will trickle in sometime in mid – July in Sindh and Punjab harvesting may no commence before August 2014.

Therefore, even though the lint prices are steady but mills are also not rushing in to buy cotton because their yarn prices have not risen commensurately, while business volume reportedly remains restricted. Chinese buyers of cotton yarns are offering lower prices for Pakistani yarns which are not helping the domestic spinners.

Cotton output during the current season in Pakistan (2013 – 2014) is likely to provide 13.6 million bales (155 KGs) against the projected mills consumption of 14.5 to 15 million bales. Therefore, domestic mills may end up importing 1.5 to two million bales of cotton for the current season. Power and gas shortages continue to pester the domestic textile and allied industries resulting in sizeable productive capacity lying idle whereby unemployment and export earnings are suffering immensely.

Reports appearing in the media indicate that exports of textile goods for the month of April 2014 decreased by 14 percent as compared to the same month during the previous year (April 2013). Thus Pakistan is not in a position to fully capitalise on the General System of Preferences (GSP) Plus status bestowed by the European Union for exports from our country. Besides lack of gas and power, increasing political turmoil and sectarian violence, and also escalating lawlessness in the country, the economic activity is suffering immensely.

The general price idea of lint for the current crop (2013 – 2014) from Sindh reportedly ranged from Rs 5600 to Rs 6800 per maund (37.32 KGs) while in the Punjab the lint prices were said to have ranged from Rs 6400 to Rs 7000 per maund in a steady and stable market on Thursday.

On the global economic and financial front, turbulence and volatility remain the essential features on the equity markets, even if they have achieved record or near – record heights. The element of global economic uncertainty remains intact because many features in most of the economies remain negative.

For instance, news of British economy making improvements are heard now and then but we must heed the strong warning given last week by the Governor of Bank of England, Mark Carney, that there remains a palpable risk of a housing bubble and has been quoted by the news agency Reuters as saying that the “Bank of England was looking at new measures to control mortgage lending amid a shortage of home building”.

The report further goes on to say that the British housing market has “deep, deep” structural problems, chief among them being insufficient construction of new homes as Carney is reported to have told Sky News. Last Tuesday Australian shares were reported to have tumbled at the beginning of the week having been pulled down by bluechip and mining stocks in subdued trade as futures prices of Chinese iron ore and steel had plumped.

Reuters also reported from Dubai that its shares index suffered its biggest drop in eight months. Likewise, other Gulf markets suffered a similar fate. Analysts said that due to uncertain global economic recovery and slowdown in China and the Middle East, the investors felt jittery.

Last Monday Hong Kong stocks also went flat even if Wall Street emitted a positive signal. However, a sell – off in China went viral and besides Hong Kong where the Hang Sang index went down, Shanghai also emitted negative signals where fears of oversupply of apartments and tight credit policy forced the developers to slash prices.

Though some positive signals of economic improvement were being received from Germany, Japan and Great Britain, the American economy continued to drag down in the current quarter. Besides the Eurozone peripheral countries like Greece, Spain, Portugal and Italy which remain in the doldrums, now the reports that the economies of America and France are flat is creating concern around the world.

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