Sugar: Sugar has become pricier following government announcement of sugar exports up to 300,000 tons. The wholesale prices of sugar in Jodia Bazaar, the main wholesale market of Karachi, ranged between Rs 5,100-Rs 5,200 per 100kg during last week. The effect was more pronounced in Lahore where wholesale rates of sugar have been seen in the range of Rs 5,200-5,300 per 100kg. The wholesale prices are clearly on a two-month high.
The next season sugar production is expected to be on the higher side. The Federal Government seemed to bet on that while issuing fresh export permits. The direct impact of the exports announcement is that sugar prices at all levels - ex-mill, wholesale and retail - are rising in the market, even though there is ample stock to last till fresh season output arrives.
Sugar still offers a favourable differential between local and international prices to local exporters. However, that differential has been narrowing down lately. The international sugar futures took a steep slide last week, as there are forecasts of sufficient supplies with no immediate demand concerns. White sugar's benchmark no. 5 contract (for March delivery) on LIFFE declined to $554.4 per ton on October 11 owing to selling pressure, compared to $586.1 per ton on October 4.
Similarly, the March contract for No 11 raw sugar on the Inter-Continental Exchange closed at 20.47 cents per pound on October 11, compared to 21.64 cents per pound on October 4 - thanks to an upbeat update on Brazilian harvest.
Wheat
Wheat's wholesale trading is still under pressure as less than sufficient supply is said to be available in the open market. Wholesale prices have soared above Rs 3,000 for a 100kg bag, and may even go higher if more supplies are not made available by the provincial food departments. The wholesale and retail prices of flour have also been increasing accordingly.
In the international market, wheat did not show any major upward movement for most of last week, but increased on Friday after the United States Department of Agriculture released a gloomy wheat outlook for the next season. The US hard red wheat for Gulf delivery closed at $381 per ton on October 11, up from $371 per ton on October 3. The EU wheat (France Grade-1) had also improved to $345 per ton from $341 per ton during the period.
The USDA report lowered the global wheat production forecast for 2012-13 by 6.2 million tons, owing to lower production from Australia, Russia, and EU-27. Global wheat trade will continue to be under pressure as global exports are also lowered by 4 million tons.
The two wheat futures listed above, along with various regional futures and spots, are significantly up compared to the same period of last year. A year ago, the US wheat was trading at $294 per ton and the French wheat at $265 per ton, according to the International Grains Council. Reduced output from the US, Russia and other major exporters sent the wheat prices North over the course of last six months.
Cotton
Prices for cotton in the market began mounting up on Monday, but eased down mid-week as phutti arrivals picked up pace once again, prompting ginners to sell at slightly lower rates. Consequently, trading improved, with some 25 to 30 thousand bales changing hands on Thursday, selling between Rs 5,475 and Rs 5,800.
Although there has been much speculation that traders are trying to hold back selling to raise prices, the official spot rate this week has already gone up Rs 225 from last week to Rs 5,575 and what with the weak economic scenario and global cotton stockpiling concerns, prices are not expected to climb much more than the current levels.
Therefore, with arrivals expected to pick up pace in the coming week, ginners will likely want to sell the excellent quality cotton at the current price levels before the Eid holidays slow down things. Moreover, there are also indications that mill buying may peter out in the coming week, which will hurt the ginners sitting on their stock in anticipation on a much higher hike.
How the local market plays out in the coming days remains to be seen. However, the global market front has been predominantly subdued throughout the season, with increased availabilities and mounting carryovers hurting global price prospects. And this week was no better as the prices took a further plunge with USDA's estimates of global stockpiles reigniting concerns about the increasing demand-supply imbalances.
The data predicts production in US, China and India to go up and with weakening demand from China being a major culprit, all time high forecasts for 2012/13 global ending fiber stocks have been chalked out in the third month running. Consequently, NYCE's most traded December contract went down by 2 percent on Thursday, settling at 70.71 cents per lb, down 1.39 cents from the previous day according to Reuters.
Rice
Arrivals continued to remain few and far between this week with harvesting in Sindh still not fully underway as farmers wait for their standing crop to dry out sufficiently. Although harvesting in Punjab is now on track, this delay is hurting exporters who are continuously struggling to get hold of good quality dried out rice in enough quantities to fulfil their dispatch promises for October and November.
According to sources, the timing is all wrong as once dried out arrivals start hitting the market, buyers and sellers will become mired in logistic issues. With Eid-ul-Azha just around the corner, truckers will be prioritising on moving animals and moving the rice crop is expected to take a back seat at least until after Eid. Not only is it going to hurt exporters who are expected to fulfill their contracts to Chinese buyers, but also likely to impact local price and availability dynamics.
Moreover, the delayed harvests will mean that very soon, crop from Indian and Vietnamese origin are going to flood the market and put pressure on Pakistani exporters who usually have enjoyed a small window of opportunity to sell off their early arrivals without competition from the two giants. The one saving grace may be that the Indian crop may also be delayed due to the late monsoon showers, but otherwise, Pakistani rice exporters are in for a few tough weeks.
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