There has been no marked movement in sugar's ex-mill and wholesale prices at the start of the Ramazan season. In Jodia Bazaar, Karachi, the wholesale price was Rs.51 per kilogram, whereas in Akbari Mandi, Lahore, the wholesale price ranged between Rs.51 and Rs.51.50 per kilogram.
Meanwhile, the Trading Corporation of Pakistan (TCP) has been building its sugar stocks. In its drive to procure up to 0.2 million tons of sugar by July 31, the TCP had purchased over 0.137 million tons of sugar from local mills at a cost of nearly Rs.7 billion, according to recent news item in this newspaper. Remaining quantity is expected to be completed by the deadline, at the same price of Rs.50.51 per kg.
Sugar is said to be available in good supply, owing to an estimated 4.6 million tons production in 2011-12, against a demand of 4.2 million tons. Therefore, in the short term, wholesale prices are expected to remain stable. The exports were allowed back in February, but, due to continuing insignificant and unattractive price margin between local and international prices, sugar exports have remained lackluster thus far, still below 50,000 tons.
The international sugar prices showed a downward trend over the week. As of July 26, the October contracts for London No. 5 sugar settled at $615.5 per ton, and December's contract settled at $598.30. Meanwhile, white sugar in the spot market was trading in the range of $630 to $640 per ton internationally.
Wheat
The rising international prices of wheat have had a major impact on local wheat trading. Factors like severe drought in America's mid-west and lingering concerns that Russia might curtail its wheat exports owing to worsening crop conditions in the Black Sea region, have sustained the wheat rally.
The booming international prices have led to a wheat-buying frenzy locally as the exporters have been buying heavily from the open market. The prices of flour have also increased. During the week, the wholesale wheat prices in Karachi surged to Rs.27.75 per kilogram, against a high of Rs.26.75 per kilogram last week. The wheat dealers are looking to cash in on this wheat rally by locking in export orders at prevailing high prices.
Meanwhile, the provincial food departments are supplying only to the flour mills at subsidised flour prices in Ramadan, and are scheduled to start supplying to the open market by the month of September. While the 2011-12 wheat harvest was sufficient to meet local demand and an exportable surplus also exists, there is a looming concern that a heightened exporting activity might disturb the domestic market equilibrium.
There is no significant development on the Iran-Pakistan barter deal under which Pakistan would supply Iran one million tons of wheat in exchange for fertiliser and iron ore. From the looks of it, the back and forth between the two countries' officials will likely continue for some more time.
Rice
Prices for Basmati Old remained stable over the course of the week in Punjab, selling for Rs.8,500-10,000 per 100 kilogram in Akbari Mandi Lahore. Similarly, prices for Basmati New also remained range bound, selling for Rs.7,000 to Rs.8,000 per 100 kilogram. However, prices in Sindh remained slightly higher, with the finest variety of old Basmati selling between Rs.9,000 to Rs.10,500 in Jodia Bazar Karachi, according to traders.
During the last week, wholesale prices quoted both in the local and international markets saw an increase amidst decreasing supply. The lockdown on border trade with Iran due to US sanctions was expected to bring a major setback to the prices of Pakistani basmati; however, these have remained firm in light of the fact that supply of Super Kernel Basmati is expected to remain low in the coming season as a result of low acreage planted.
Trade on the international front remained subdued this last week with some demand coming from the East African market, which, according to sources is likely to rise towards the end of Ramadan.
Overall, at this time of the season the quality of Pakistani rice stock is typically poor, with high level of contamination increasing the cost of sorting, which is then passed on to the end customer. This coupled with expected increases in demand and depleting supplies is expected to push up rice prices further in the coming weeks.
Cotton
The yielding prices witnessed as a result of continuous seed cotton arrivals have overall improved the cotton trading in the last week. The market has seen some active demand with over 12,000 bales having changed hands at the close of business on Friday as a consequence of mills showing fresh interest in buying stock at attractive prices.
Seed cotton prices in Sindh are said to have ranged from Rs.2,600 to Rs.2,650 decreasing by Rs.50-100 over last week - while in Punjab they fell by Rs.300-400, selling at from Rs.2,100 to Rs.2,400 per 40 kilograms, as of Thursday. Lint prices also went down further, selling for Rs.5,600 to Rs.5,650 per maund in Sindh, while in Punjab they reportedly ranged from Rs.5,500 to Rs.5,600 per maund.
The official spot rate on Friday, however, remained unchanged from the day before at Rs.5,600, after witnessing a sharp decline during the middle of the week as a result of increased arrivals after light showers in Sindh and Punjab.
Although a number of factors including weather are going to be the determinants of the total volume produced during this season, the current arrival trends show that this is going to be a bumper year for cotton. While steady supply is likely to put pressure on prices in the coming week, an expected increase in mill buying is speculated to rein in prices and keep them from falling too steeply, according to market sources.
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