Cotton prices tumble sharply

Both seed cotton (Kapas/Phutti) and lint prices fell sharply this week because of reports that no perceptible damage of any large size has occurred to the current crop (2014/2015) due to large rains in Pakistan which also fell on the areas forming the cotton belt. Moreover, large size of cotton output projected in major cotton countries like China, India and America has pressurised cotton prices notably. Chinese policy to sell cotton to its domestic mills cheaply and import less cotton this year has also dampened the demand of the fibre largely.
In Pakistan, the incoming Eid-ul-Azha festival on or around the 6th of October 2014 will dampen cotton and textile activity. Moreover, Punjab All Pakistan Textile Mills Association (APTMA), Chief S. M. Tanveer has warned the government that disconnecting gas to Punjab textile mills in winter would be ruinous for the industry. This week witnessed a drastic fall of about Rs 200 per 40 kgs in the prices of seed cotton (Kapas/Phutti), while lint prices fell sharply by Rs 350 to Rs 400 per maund (37.32 kgs). The Karachi Cotton Association (KCA) has also decreased the ex-gin price of grade three cotton from Rs 5,500 per maund fixed on last Saturday (September 20, 2014) to Rs 5,050 per maund today (Thursday).
Seed cotton prices on Thursday reportedly ranged from Rs 2,300 to Rs 2,450 per 40 kgs in Sindh, while in the Punjab they are said to have also obtained lower from Rs 2,200 to Rs 2,450 per 40 kgs, according to quality. Lint prices in Sindh are said to have ranged from Rs 5,000 to Rs 5,200 per maund (37.32 kgs) on Thursday, while in the Punjab they reportedly extended from Rs 5,150 to Rs 5,250 per maund, according to the quality.
Though the current cotton crop in Pakistan (2014/2015) may still yield around 13.5 to 14 million bales (155 kgs), the qaulity could be impaired. However, it remains rather early to say if the quality of the current crop would be affected measurably due to the recent ravaging rains and ferocious floods which occurred during the monsoon season in Pakistan.
In ready cotton sales reported till late Thursday afternoon, 600 bales from Mirpurkhas in Sindh reportedly sold at Rs 5,000 per maund (37.32 kgs), 1,000 bales from Shahdadpur sold at Rs 5,000/Rs 5,100 per maund, 1,000 bales from Upper Sindh sold at Rs 5,150/Rs 5,200 per maund and 1,000 bales from Khairpur sold at Rs 5,200 per maund.
In the Punjab 1,000 bales from Harunabad sold at Rs 5,150/Rs 5,200 per maund, while 500 bales from Rajanpur were said to have been sold at Rs 5,200 per maund in a weak market. On the global economic and financial front, basic weakness continued to emerge and plague any quick fix solution to the world's basic economic health. China's economic growth continued to slow down, the Eurozone remained subdued in an economic quagmire, while in the United States of America any real recovery remains a distant dream because of the persistent high unemployment and a very weak wage growth.
In China, factory activity remains rather slow so that there remains a hope that higher stimulus is needed to pull up the economic activity further. China's weakening labour market remains a cause of continued concern with the authorities. Chinese economy may just be ambling along but lacks the desired momentum to propel it into any notable or desirable economic growth.
With so many leading global economies interlinked with each other, any slack in a leading economy or economic zone sends its ripples to several other parts of the world. Slowdown in the Chinese economy, growth and expansion of political activities of IS in the Middle East, or the continuation of the Ukraine problem inevitably impacts the economic workings in the Eurozone and America, and vice versa.
In the Eurozone, the investors are not borrowing enough money so that inflation is low in many countries prompting the European Central Bank (ECB) to keep a loose lending policy "for long time" to come. ECB president Mario Draghi declared in Paris this week that loose monetary policy will be kept as long as the target of higher inflation upto two percent is not achieved. Ultra-low inflation is being blamed for keeping economic activity in the Eurozone stagnant.
On it's part, the World Bank has warned that Russia's economy would stagnate over the next two years. World Bank fears that the cost of the Ukraine crisis to Russia denotes a pessimistic view of its economy. World Bank believes that economic sanctions increased by Europe and the United States on Russia will take their toll in keeping the economy subdued.
In view of these global geopolitical and financial constraints, the World Trade Organisation (WTO) has forecast that "global goods trade will grow less than hoped this year and next (2014 and 2015), and factors including regional conflicts and the Ebola outbreak are putting a quick return to stronger growth at risk". Thus any hope earlier forecast by leading world trade and economic bodies have now been revised to project global economic despondency to last several more years to come.