Lean business on cotton market ahead of Eid holidays

July 25, 2014

DR ZAFAR HASSAN- BR Report
cotton-market2014

Cotton market faces prolonged closure beginning this weekend extending practically to the beginning of August 2014 due to the Eid-ul-Fitr holidays notified by the government from the 29th of July to the 1st of August 2014. Including the pre-Eid and post Eid weekends, the cotton market, indeed all business activity in Pakistan, will remain mostly closed till the beginning of August 2014.

Some mills bought moderate quantities of cotton over the past week or so to fulfill their immediate needs. In consonance with the bearish global trend in cotton such as in the United States, China and India, Pakistan fibre prices also conceded considerable decrease in seedcotton (Kapas/Phutti) as well as lint cotton prices over a week or so. Seedcotton (Kapas/Phutti) prices reportedly decreased by Rs 300 to Rs 400 per 40 Kgs., while lint prices are said to have suffered a decline of Rs 300 to Rs 400 per maund over the past one week’s time. Thus seedcotton prices in both Sindh and Punjab are said to have prevailed from Rs 2800 to Rs 2900 per 40 Kgs, while the lint prices ranged from Rs 5800 to Rs 5850 per maund (37.32 Kgs) on Thursday. Cottonseed (Binola/Kakra) prices are said to have decreased from Rs 1500 to Rs 1200 per maund losing nearly Rs 300 per maund to reported imposition of sales tax on cotton cake (Khali) which the ginners are resisting to pay. The Karachi Cotton Association (KCA) has reduced the ex-gin price of grade three cotton from Rs 6150 fixed on last Saturday to Rs 5800 a maund on Thursday, a decline of Rs 350 per maund.

Monsoon rains have started in recent weeks in Pakistan in modest quantities in both Sindh and Punjab which should be beneficial to the standing cotton crop. More rains are expected to follow which in reasonable quantities would be beneficial but excessive downpour could damage the crop.

Thus there was scant buying by the spinners this week but a few exporters probed the market. Some spinners fear that excessive sprinkling of rains could drench the cotton so that the quality of lint may suffer. Therefore, spinners are now restraining themselves from post Eid buying to avoid receiving any rain drenched cotton.

Because yarn prices are generally dull in both local and international markets, mills in Pakistan are buying their cotton requirements cautiously. Thus the domestic cotton market is essentially quiet. Deliveries of earlier purchased cotton may continue for the next couple of days and then the holiday mood ahead of the incoming Eid-ul-Fitr will prevail. Due to the impending holidays, transport to haul cotton from the ginning factories to the textile mills will not be available within a couple of days or so.

In ready sale, 400 bales of cotton from Sanghar in Sindh sold at Rs 5800 per maund (37.32 Kgs), 200 bales from Tando Adam sold at Rs 5850 per maund, while 200 bales of cotton from Chichawatni in Punjab sold at Rs 5900 per maund. On the global economic and financial front, the stubborn investors trust their fund managers that recovery, that hard to catch economic phenomenon which is absent in most of the countries, is just around the corner. Hence the blind faith of the investors in their fund managers and hedge funds which continues to prop up the stocks markets.

Thus this week again the shares prices in several regions and countries mostly moved up despite a number of obvious difficulties facing the global economy over the past six years. Never has the world seen such a deep-rooted collapse of business, banking and industrial infrastructure since the Great Depression of 1929. Several factors have accumulated to ensure further decline in the global economic architecture which has reached all the corners of the globe. It is a foregone conclusion that untold millions of people around the globe have been ravishly devastated and unemployment has ballooned to colossal proportions. As has been referred by some economists, today we continue to suffer widely from The Great Depression of the 21st Century.

Again and again we are reminded by the likes of The International Monetary Fund (IMF) that in the United States the economy has not really recovered. This week the IMF again lowered the US economic forecast for 2014 following the sharp contraction due to a severe winter during the first quarter.

From Lehman Brothers to the bank of the Vatican, and indeed in all banking and brokerage institutions around the world, particularly in the Western World including Europe and also in the “shadow banking” in China, the revelations into their unethical and also criminal activities is phenomenal.

Argentina is again said to be mired in banking defaults, the Ukraine political flashpoint remains disturbing for the global eco-political peace. South Korea, an exemplar economy over the past several decades is reported to be preparing a stimulus package for its economy.

Once again the consumer confidence in the Eurozone has reportedly fallen much more than anticipated. This news does not bode well for the recovery of the zone which can be seen from the recent data released by the European Commission. Then there are those observers who have stated that the meltdown of the markets in 2008-2009 “was the institutionalized fraud and financial manipulation”. As a result, large amount of unemployment around the world and falling living standards are deemed to put the “entire structure of international commodity trade in potential jeopardy”.

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