This week the domestic cotton prices suffered some losses in a quiet market displaying indifference of the spinners. Lint prices are said to have conceded Rs 200 to Rs 300 per maund (37.32 Kgs) within one week. It could be a measure of correction but it remains to be seen if lint prices will gain soon. Presently, spinners are only buying sparingly.
Even though the ginners now probably have less than 600,000 bales of unsold cotton from the current season (August 2012-July 2013), the mills have their own dynamics and are reportedly mired in several of their own problems. Due to lower prices on the New York cotton futures market (ICE), sizeable reduction in power supply to Punjab, disputes and disagreements with the tax authorities and paucity of funds with the spinners, fears of possible disruptions during the scheduled general elections in Pakistan (11 May 2013), domestic mills are presently reluctant to build larger inventories. Till the evening, only a sale of 1400 bales of cotton from Burewalla was reported at Rs 6.300/ Rs 6,400 per maund.
Yarn prices are also said to have become weakish possibly due to lower demand and decrease in cotton prices following a correction in cotton prices. Both Sindh and Punjab cotton are today said to be ranging from Rs 5,700 to Rs 6,700 per maund (37.32 Kgs) in a dull and quiet ready market.
Seedcotton (Kapas/Phutti) prices are said to have gone down by Rs 400 to Rs 500 per 40 Kgs. while its quantity is depleting in the market at the tail-end of the current season. Seedcotton (Kapas/Phutti) prices in Sindh weakened to range from Rs 1800 to Rs 2400 per 40 Kgs, while in the Punjab they are said to have ranged from Rs 1800 to Rs 2500 per 40 Kilogrammes. Perhaps all these developments arose out of the need to undergo a corrective requirement and therefore the physical cotton may not be so bearish.
Therefore prices of physical cottons may still be stable after the recent phase of correction and it may not be too bearish after all. New cotton crop in Pakistan (August 2013 - July 2014) may face some problems, particularly in Punjab. The early varieties of cotton are already being sown in Sindh. Because of availability of more water, and less attractive rates and outstanding dues of sugarcane growers owed by the sugar mills, the growers in Sindh are keen to sow cotton instead of sugarcane. However, in the Punjab the new crop (August 2013-July 2014) sowing is being delayed due to cold climate and rains occurring in the cotton belt there.
On the global economic and financial front, equity markets on most bourses hit new highs with many surpassing record levels. The result of increasing money supply by the Federal Reserve Bank in the United States, the European Central Bank and now the Japanese Central Bank have left no stones unturned to flood the money markets with unprecedented supply. The equity values are thus enjoying their hey-days as never before. However, we must not ignore the fact that many countries in the Eurozone, the United States, Japan, India, China and others still have pestering economic problems so that many observers and analysts do not see an early global economic recovery.
A Reuters report datelined Brussels informed recently that the European Commission has warned of the deepening economic problems of France, Italy and Spain and added that "Slovenia must take urgent steps to avoid the risk of a wider destabilisation across the eurozone".
This early warning is said to have come from the European Union after they recalled the earlier economic chaos and fiasco which were suffered by Greece, Ireland and Portugal which initiated the Eurozone debt crisis in the first instance. The European Commission now seems more worried by the macro economic imbalances in Italy and France.
Under these circumstances, global economic growth will be moving at a snail's pace, if at all. However, according to a news item emanating from New York, the International Monetary Fund (IMF) is still advising the central banks to continue with their easy monetary policy.
The Managing Director of the IMF credits the policy makers for having pumped in large sums of money into the monetary system which is said to have kept the economic system moving. However, the boss of the IMF, Christine Lagarde, has said that though the financial conditions were improving, these improvements were not having any positive effect on the real economy.
Indeed with all the prevalent economic difficulties engulfing the world in real time, it is difficult to project any improvement in the foreseeable future. In this regard, the World Trade Organisation (WTO) has recently observed that following unrelenting gloom in Europe, it must slash its global commerce growth estimate for the second time and reduce it further to 3.3 percent this year.
Fear abounds that China's export demand will falter following reduced demand from Europe. Indeed one report indicated that the rating agency Fitch has cut down China's credit rating. Besides the low economic performance, the political impasse which is continuing in Italy following the elections in February 2013, is seriously undermining the socio-economic base of the world's eighth largest economy. Thus the health of the most of the economies around the world remain fragile.
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