Cotton prices on the ready market were steady on Thursday despite an extended holiday weekend when closures will include the 5th and 6th of December 2011 due to Moharram holidays. New York cotton futures prices (ICE) oscillated like a pendulum on a grand father's clock, up today and down tomorrow.
Our market eyed the announcement made earlier by the ginners that they would shut operations by the 10th of this month unless the government picks up their unsold accumulated cotton at higher prices as today's lint rates are below their parity.
Actually, traders said in Karachi that Sindh cotton was mostly battered by rains and was thus selling at a discount. Punjab quality is mostly better. President Asif Ali Zardari is already said to have told the ginners that the spinners had picked up cotton at Rs 14,000 per maund (37.32 Kgs) earlier in the season and thus there appeared no rationale to induct the Trading Corporation of Pakistan (TCP)to lift cotton at this juncture. Spinners said that local yarn market was weak and foreign textile prices were also on the weaker side.
It is expected that about 9.8 million lint equivalent bales of seed cotton of domestic size will have arrived into the ginneries by the first of this month, viz. December 1, 2011. It is being presently estimated that during the current season (August 2011-July 2012) the total output could range from 13 million to 13.5 million domestic size bales on an ex-gin basis. Domestic mills may use up between 13.5 million to 14 million bales this year, while the exporters may ship any where from half a million to one million bales. Mills may import one million to 1.5 million bales this season.
A senior cotton merchant and a former Chairman of the Karachi Cotton Association (KCA), Nadershaw Kabraji, said we started off from hoping to achieve an output of sixteen or seventeen million bales, but quality has suffered a lot. He felt that one basic problem was with the inappropriate seed supply as the seed quality had become weak by overuse. He also said that high micronaire of our cotton was a problem for the spinners. He praised the cultivators in India for nearly tripling their output and also appreciated the good fibre characteristics of Shankar-6 cotton from India. It thus appears that seed production, classification, sale and distribution in Pakistan needs rehabilitation on a speedy basis. It may be added that this year China is also facing some quality problems in its cotton.
According to Cotton Outlook, in its latest report, the Cotton Corporation of India places seeds cotton arrivals from the 2011/12 crop by November 27 at the equivalent of 4,310,000 bales (170 Kilos) of lint, which is 25 percent less than a year earlier. That difference is unchanged from a week earlier.
On Thursday, the grower was selling his seedcotton sparingly. Seedcotton (Kapas/Phutti) prices in Sindh ranged from Rs 1,800 to Rs 2,300 per 40 Kgs, while in the Punjab they were said to have ranged from Rs 2,000 to Rs 2,500 per 40 Kilogrammes. Lint cotton in Sindh sold from Rs 3,700 to Rs 5,200 per maund (37.32 Kgs) according to the quality. In the Punjab, cotton prices reportedly ranged from Rs 5,100 to Rs 5,400 per maund in a steady market.
In ready sales, 400 bales of cotton from Nawabshah in Sindh sold at Rs 4,400 per maund (37.32 Kgs), while 1,000 bales from upper Sindh sold at Rs 5,150/Rs 5,250 per maund. In the Punjab, 1,000 bales from Harunabad sold at Rs 5,100 per maund, 800 bales from Fort Abbas sold at Rs 5,100/Rs 5,150 per maund, 3,000 bales from Khanewal sold at Rs 5,200/Rs 5,300 per maund, 2,000 bales each from Khanpur and Rahimyar Khan sold at Rs 5,300 per maund, while 400 bales from Rajanpur sold at Rs 5,400 per maund.
On the global economic and financial front, continued problems plagued the economies of various countries around the world. Leading economies around the world saw their prospects seesawing due to different types of news here and there. Mutual trade talks were held this week between the leaders of United States and the Eurozone countries but to no avail. Global equity markets mostly shot up at midweek due to meetings of the Eurozone bigwigs who proposed to cobble together a programme to overcome its problems. However, president Obama advised the Eurozone leaders to put their acts together quickly to surmount the continuing fall in economic performance.
The Eurozone is now approaching Japan and China for assistance in economic and trade matters to forestall any further downturn in its economy. However, more people in Japan are losing their jobs and the Chinese economy is also slowing down. With the Japanese economy fading and the Eurozone appearing to run out of options to reduce its slow growth, the United States is also faltering in its economic recovery.
The United Kingdom has entered a state of desperation as two million or more employees of the public sector went on strike against pension reforms which aim to delay or reduce payments to the employees by the government as it to be on a spree to cut payments and implement austerity measures. The protestors feel that the UK government is penalising them by diverting their hard earned wages and emoluments to pay for the losses of recalcitrant banks, businesses and private sector operatives who have recklessly and indiscriminately squandered money lent to them in trust and good faith.
Countries like Greece, Portugal and Egypt have already earned "junk" status for their financial sovereignty and even the United States, the United Kingdom, Italy, France and Belgium are facing further downgrading of their financial status. For instance, the Fitch rating agency is worried that the recovery hopes in the United States are fading. India's growth has also fallen to a two year low level.
This week there were also news that Frau Merkel of Germany and Monsieur Sarkosy of France wanted to change the Eurozone charter. This initial news saw equity values plunge on the Eurozone equity markets. While the International Monetary Fund (IMF) was preparing for a bailout programme for Italy, the Organisation of Economic Co-operation and Development (OECD) predicted that the United Kingdom and the Eurozone were shipping into an inevitable recession.
However, equity markets mostly shot up at midweek when major central banks including those of the United States and the United Kingdom decided to put up a programme to provide money for growth and development which should forestall any further fall in economic growth around the world. However, such belated programmes are unlikely to invigorate the recession which has caught most of the world in its firm grip. Then the far flung wars in Afghanistan, Iraq, Egypt, Libya, the Mediterranean and North African regions are also casting their negative fallout on the deflating global economies.
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