COTTON: Local cotton prices have become softer this week as trading remained largely subdued. Sources report that mills bought sparingly during the course of the last few days in anticipation of possible disruptions in business activities during the upcoming elections.
Moreover even spinners are on the fences about maintaining large inventories as yarn prices have taken a setback on account of weakening international raw cotton prices . As a consequence, the official spot rate this week slipped down by Rs 100 to hit Rs 6,800- the first change in more than three weeks.
On the whole, Phutti prices shed nearly Rs 500 per 40 kg bag whereas lint prices slipped by Rs 300 per maund during the week in the open market. Nearly at the tail-end of the season, ginners are said to be holding on to the dregs of the better variety of cotton at the moment and the slippage in prices displayed this week is likely to be momentary period of dullness.
Prices on the global front exhibited a somewhat similar lackadaisical trend as the New York futures took a hit during the week on account of USDA reports forecasting an increase in global inventories of fiber. The fiber price rally- that has been largely speculator driven- has overall lost major momentum in the last few weeks as mills withdraw from purchases.
Reuters reports a 10 percent decline in the May NY cotton futures, which fell from a one year high of 93.93 cents/lb in the space of one month, closing at 84.66 cents/lb on Thursday. Moreover, the July cotton contract on ICE Futures US also fell by 0.74 cent, to settle at 86.74 cents/lb on Thursday.
Rice
Movements in export prices have again remained range-bound this week as small positives were seen in prices for Thai fragrant varieties, whereas long grain white rice and Parboiled rice from various origins retained earlier rates.
The extremely competitive trading environment has overall kept a lid on rice prices in the international market this season as the Asian rice giant grapple amongst themselves for orders. With the global rice trade set to go down by 5 percent year-on-year, global carryover stocks with major importers including India and Thailand continue keeping things in check and there is little to no indication of any significant price movements taking place in the medium term.
Pakistani rice in the meantime remains strong. Export demand for the weakening Basmati has also picked up recently and sources report that Sri Lanka has surfaced as a significant buyer of the variety this season. For the non-Basmati varieties China remains a strong destination, however Vietnam has also risen in the ranks within the last two months and its lower priced varieties have reportedly shifted some Chinese orders away from the Pakistani exporters.
Amongst other news, the week also saw Vietnam jumpstart parboiled rice production in a bid to join the thriving, under represented market. Making up one fifth of international rice trade, the parboiled variety trades for as much as 50 percent higher than long grain white rice in the international market. Currently India and Thailand remain the largest exporters of this processed variety.
WHEAT
Wheat prices continue to soften in the local market as anticipations of a bumper crop fuels expectations despite the fact that the new as yet to hit the market. Going between Rs 2900- Rs 3000 per 100 kg in Akbari Mandi, prices in Punjab however are still slightly higher than Sindh as sources report that harvesting in Punjab's plains will start later than usual on account of sporadic rains that continued late into March.
According to USDA forecasts, Pakistan's wheat production for MY 2013/14 is set to tip at around 24 million tons, up three percent from last year, but still four percent below MY2011/12's record production of 25 million tons.
And if last year is any indication, driving demand from the private sector should strengthen further this year. With the higher international wheat prices making exports an attractive prospect, dispatches are slated to go up to 0.9 million tons during the upcoming marketing year sources report.
On the one hand, while this driving demand will mean for a much better return for farmers, it will also mean that the government might run into some difficulty meeting its procurement targets.
In the meantime, world wheat inventories are also expected to fall to 162 million tons, from nearly 179 million tons in the previous season. The heftiest portion of this decrease will originate in the Russian region, whereas, Australia, Egypt and Europe are also expected to close the season with smaller carryovers. At the current forecast level, the world wheat stock-to-use ratio would decrease to 23.4 percent, down from 26.1 percent in 2011/12.
Additionally, he US hard red winter wheat is also running into trouble as falling temperatures in the plains damage the plantations.
The worries about the state of US crop have thus brought up futures on the commodity markets. Additionally, on Thursday there was news that China had made its largest purchase of US hard Red Wheat in the last nine years, consequently, MGEX May spring wheat gained 17.25 cents taking prices to $8.06/bushel at the close of business.
SUGAR
Although prices are currently range bound, a recent USDA foreign agriculture services report cites concerns that the ECC's decision to provide an inland freight subsidy as well as lowered excise tax may mean that local supply will suffer as exports hike.
Despite the pressure on international sugar prices, the aforementioned policies have indeed helped exports- which albeit slow have been consistently on the rise during the last month according to sources exclusive to BR Research.
According to a number of estimates, the total sugar supply for the marketing season amounting to 6 million tons whereas consumption is estimated to be around 4.4 million tons during the period. With export targets of around 1.2 million tons, this will leave ending stocks of some 400,000 tons, which are enough to supply local demand for a total of 40 days.
The lower than average annual ending stocks are also likely to affect prices and coupled with the governments step- which has been cited as an effort to make Pakistani exports more competitive in the market- may put significant pressure on local supplies in the medium term.
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