Cotton prices jump again following massive rains and floods-Texglobe

LAHORE (August 06 2010): After calming down during the last fortnight of the previous month, lint prices have leapt up again due to fears that the worst rains and floods seen since the past eighty years in Pakistan may have damaged the standing cotton crop (2010-2011) in meaningful numbers.

The monsoon rains are still continuing to pour their fury over a vast area throughout Pakistan and consequently the swollen rivers remain a credible threat to the cotton fields, particularly in the riverine tracts where cotton has been sown. It is too early to say how much damage to the quantity or quality of cotton has been inflicted due to the severely inclement weather, but some damage is bound to accrue. Therefore, lint prices have risen by Rs 300 to Rs 400 per maund (37.32 Kgs) in Sindh since the past one week, and have also escalated by about Rs 500 to Rs 600 per maund in the Punjab.

Besides the heavy downpour and the colossal flow of water in the rivers which situation has not yet subsided and is expected to continue with forecast for further rains, calamity has struck Karachi where sectarian violence has taken a critical turn threatening not only the country's largest metropolis, but also the body politic of Pakistan. Upto now, Pakistan is facing its worst situation in many a year with 152 citizens including several children and women killed last fortnight in an Airblue plane crash which smashed into the Margalla hills in Islamabad, about 1,000 peoples having being killed or drowned by the rains and floods, and now nearly 100 people having lost their lives in the ongoing Karachi mayhem. The killing of the constabulary chief Safwat Ghayyur in a suicide bombing in Peshawar has further aggravated the situation.

The point is that with displacement of more than 3,200,000 people in the flood striken areas till now in the Khyber Pakhtunkhwa (KP) province, the loss of infrastructure by the collapsing of bridges, roads and inundation of several cities and thousands of towns and villages, business has been hurt badly. Floods have already ravaged and now threaten the towns and cities in Punjab including many cotton growing areas like Muzzafargarh, Taunsa Sharif, Layyah, Dera Ghazi Khan, Alipur, Fazilpur, Kot Mithan, Rahimyar Khan and Mianwali.

Rains continued to pour not only in Rahimyar Khan and Sadiqabad, but they extended over the cotton belt stretching from Khanewal to Sahiwal. In Sindh, besides fearing the rage of the mighty river Indus which is flowing with extra fury, rains are also being reported from lower Sindh in areas like Badin, Kunri, Kot Ghulam Mohammad and also Sanghar and Mirpur Khas. This situation is not only likely to compromise output of cotton during the current season (August 2010-July 2011), but is also likely to effect the quality of lint.

Very initial reports, however, suggest that a loss of cotton output of 500,000 domestic size bales may have been suffered from an earlier total output projection of 13.5 to 14 million bales for the current cotton season on an ex-gin basis. Any quality loss to the output will have to be accounted for separately. Rough estimates suggest that till now the cotton economy, including growers and the loss of precious fibre, cottonseed, edible oil and its by-products may have suffered an estimated loss of upto Rupees ten billions due to the rains and floods.

Seedcotton (kapas/phutti) prices ranged higher and were obtaining between Rs 2550 to Rs 2650 per 40 kgs in Sindh, while they were said to have extended from Rs 2800 to Rs 3100 per 40 kgs in Punjab on Thursday. Lint prices reportedly ranged from Rs 6100 to Rs 6200 per maund (37.32 kgs) in Sindh and they were said to have ranged from Rs 6700 to Rs 6800 per maund in the Punjab. The price tone of cotton in the evening was described as being tight.

With mills stocks of cotton depleting day by day and supply becoming more and more difficult, prices are expected to remain firm for the time being. Till the 1st of August 2010, however, the Pakistan Cotton Ginners Association (PCGA) has reported record seedcotton arrivals of 267,389 lint equivalent bales of domestic size from the current (2010-2011) season. Henceforth, seedcotton arrivals may be hampered due to the ongoing rains and floods in several cotton growing areas.

Ready cotton sales reported on Thursday from Sindh were 100 bales each from Shahdadpur and Tando Adam at Rs 6100 per maund (37.32 kgs), and also 200 bales from Shahdadpur and 400 bales each from Tando Adam and Sultanabad at Rs 6200 per maund according to the quality. In the Punjab 400 bales from Bahawalnagar were said to have been sold at Rs 6750 per maund, while 400 bales from Gojra sold at Rs 6800 per maund.

On the global economic and financial front, earlier this week the equity markets were moving up on encouraging automobile sales and better banking performance. However, consumer confidence is failing continuously, The Japanese economy remains fragile, the United States economy is not reviving satisfactorily as consumers refuse to spend and unemployment figures remain dismal.

Thus we see that unemployment figures remain painfully high in most of the leading economies. Moreover, gross mismanagement of the economies of Spain, Greece, Portugal, Italy, Ireland, and several other countries are building a social unrest bordering on anarchy which contagion in Europe and elsewhere is likely to thwart any early global recovery. If added cuts in government expenditures are made, several countries could face a socioeconomic implosion with fearful circumstances.

Now with repreference to reported distress sales of properties in the United States, Germany, Spain and elsewhere, it is feared that economic recovery, if any, will be painfully slow and will also take its toll on the deprived populace. It appears that despite some economic betterment here and there, the process of full recovery remains slow, sluggish and fragile.