Pakistan:Prices sag on cotton market

A sagging tendency on the cotton market was pronounced on the domestic market which was also in line with the global reduction in cotton values in recent sessions. A clearly negative scenario on the global economic front seems to have induced decline in fibre prices which should also depress yarn prices. Weather forecast for Pakistan for the coming days is for dry condition throughout the country for the coming period.

These developments should augur well for the Pakistan textile industry in the long run. However, quality problem of cotton would nag the Sindh styles quite noticeably but Punjab output for the current season (August 2011 - July 2012) is likely to provide good grades of fibre. Better ideas of quality regarding the Sindh output may not be forthcoming before the first week of October, 2011. Local yarns are selling at lower rates and the global prices of yarns are also reported to have become depressed.

With dry weather now obtaining in most parts of the country, it is hoped that the cotton economy from field to fibre may attain some sort of normalcy soon. However, the chronic irritants like shortage of gas and power may continue to bother the industry for the foreseeable future.

Total cotton output for the current season (2011-2012) in Pakistan is expected to vacillate between 12 million to 13 million domestic size bales. It may take some more days before the normal transport in Sindh is restored to enable a visit to the cotton belt to formulate a better cotton output estimate once the rain water is reduced or removed. However, Punjab is promising to deliver anywhere from 10 million to 10.5 million domestic size bales.

Mills consumption during the current season in Pakistan is expected to range from 13 million to 13.5 million bales of local size. Exports may be projected between 0.5 million to one million bales while imports could range from one million to 1.5 million bales.

A modicum of calm has pervaded the cotton and yarn markets where wait-and-see philosophy seems to have entered the thinking of the mills. New York cotton futures market (ICE) also seems to be testing the bearish side of the market in view of the global economic gloom. The interesting thing to watch now is whether the cotton futures will puncture the dollar a pound barrier to more southwards. Presently the tone of cotton prices appear to be on the negative side.

Seedcotton (Kapas / Phutti) prices in Sindh reportedly ranged from Rs 2,000 to Rs 2,600 per 40 kgs and between Rs 1,800 to Rs 2,800 per 40 kgs in the Punjab according to the quality. Lint prices also moved much lower this week and were ranging from Rs 5,300 to Rs 6,300 per maund (37.32 kgs) in Sindh and from Rs 5,800 to Rs 6,400 per maund in the Punjab.

Cotton rates in Pakistan have fallen by Rs 400 to Rs 1,000 per maund (37.32 kgs) since the last ten days according to the quality. Cotton price sentiment reportedly remained weak till Thursday afternoon. In actual cotton sales on Thursday on the ready market, 200 bales of cotton from Moro in Sindh reportedly sold at Rs 5,500 per maund (37.32 kgs), 200 bales from Kandiaro sold at Rs 6,000 per maund, 200 bales from Rohri and 400 bales from Khairpur district sold at Rs 6,300 per maund each and 400 bales from Khairpur sold at Rs 6,400 per maund in a weak market.

On the global economic and financial front, leading economies slipped into deeper trouble which was confirmed by an almost unilateral decline in equities around the world. Not only is there no concerted or co-ordinated effort on part of the leaders of the larger economies, there appear to be clear signs and signals that the interests of nationalism are clearly taking priority against any palpable efforts towards united goals and a sincere attempt to put the global economy back on the rails.

Too much mathematical jargon and undue reliance on economic models and latter day econometrics has replaced old time economic wisdom in trying to tackle the global economic malaise. No selfless economic solutions are being methodically proposed or put forward to remedy the worsening world economic structure. Precious time and money has been wasted over the past three years by the managers of the global economy, whoever they may be, so that no fundamental steps or ways and means have been either enunciated or developed to resuscitate the global economy. Even the two major economic blocks, viz the United States and Europe, are often working at cross purposes to find credible solutions to rehabilitate the global economy.

The problems of the global economy are emerging to be deeper than were being envisaged by the global leaders. Topmost financial institutions like the International Monetary Fund (IMF) and the World Bank, besides the Federal Reserve of USA and the European Central Bank are now warning of the severe risks and pitfalls of the current state of the global economy unless something radical is done soon to stop the global economic mess from slittering further into a slough of despond.

What has come to the forefront in recent years is the surprisingly unsatisfactory distribution of wealth in the United States, United Kingdom, Germany, Italy, France where the Gini factor is showing a sizeable maldistribution of wealth leading to major socio-economic malcontent even in the richest nations in the world. In this connection, IMF Managing Director, Christine Lagarde said recently that meaningful aid, trade and investments were required to pull up the poor people in the less developed countries. Unless a larger measure of social justice is built up in any economic formulation to re-energise the global economic formulation, prevalent economic thinking and philosophy are unlikely to revive the economic system now suffering unprecedented global downturn.

On Wednesday, it was reported that the Federal Reserve in USA would counter grave risk facing the American economy by reducing long-term borrowing costs and promoting the housing sector. In the richer countries, more negative news came up this week to signify the faltering economic setput around the globe.

For instance Moody's cut the ratings of three leading American Banks, namely Bank of America, Wells Fargo and Citigroup. Moody's fears that in case a bank fails it could carry the contagion to other banks if the US government doest not come to its rescue or bails it out, which appears unlikely under the present circumstances. Most markets around the world were down, both commodities and the equities which lost values in big measure. In fact commodities like coffee, sugar and cotton lost notably. Any early revival is presently being seen with skepticism.

United States stocks prices fell flat at midweek, the United Kingdom blue chip index came down as investors became nervous, the Hong Kong stocks were at their two-year low levels while the Indian shares also plunged. Investors remained unconvinced that propping up the markets by the Federal Reserve by printing more dollars can tackle the root problems of what is now being termed as a "jobless recovery" where equities appear to show an economic recovery but unemployment and poverty are continuously rising and spreading. The same problem of economic stagnation seems to have engulfed the United Kingdom economy where deficit figures continue to add to the gloomy outlook where as the Bank of England remains poised to pump more money into the UK economy.

In conclusion, the leading businessmen, bankers and economic managers have failed to find a silver bullet to bring back the global economic misery back to normality. The turmoil on the equity markets got worse this week. Significant downside risks to the global economy have raised their ugly heads. It appears that due to the unsatisfactory performance of two of the largest economic blocks, namely the USA and Eurozone, a deep recession if not a depression may be faced soon around the world.