Cotton prices may appear to be stalled in their present groove, but they continue to maintain and manifest a steady disposition. Lint values are presently perched at historically high levels with keen buyers for high quality fibers which continue to attract premia.
A remarkably rehabilitated spinning industry, quite well maintained prices on the New York ICE cotton futures market, lower value of the Pakistan rupee against the United States dollar and net deficit domestic cotton crop have collectively pulled up cotton prices by Rs 900 to Rs 1,000 per maund (37.32 kgs) since the beginning of October 2009.
There may be some slowdown in cotton procurement and lifting in the market due to approaching birthday of Qaid-e-Azam, the founder of Pakistan, on the 25th of December 2009, which is coincidentally also Christmas day celebrated in many parts of the world. The 27th of December 2009 is also likely to be Ashura day so that business activity will dwindle or close during that period. Moreover, the year end blues coupled with banks strictness to consolidate their balance sheets dampens business and industrial activity for some course of time.
Otherwise, after incurring losses over the past few years, spinning industry in Pakistan is in a flourishing form. The apparel industry and end users of yarns like weaving are highly critical of what they claim to be very high prices of domestic yarns coupled with its short supply.
In retort, Chairman or All Pakistan Textile Mills Association (APTMA) Anwar Tata held a press conference recently and elaborated that increase in lint prices and other inputs are responsible for increase in yarn prices and that due to resumption of idle spinning capacity there is no shortage of yarns in the country. APTMA sources have pegged this year's cotton consumption at 15.5 million local size bales.
It appears that the apparel and end users of yarns are making a case for some sort of a rebate for the value added exports products because they had apparently made some long term export sales, but no sooner that concessions are given to the apparel and finished textile goods industry, they may fitter down to the spinners and therefore we may go back to square one.
We must also bear in mind that the Pakistani rupee has slithered close to 84.50 units per United States Dollar with propensity to depreciate further. Therefore, it seems difficult to see how goods and commodity prices will go down in Pakistan in any appreciable way.
Mills continue to lap up lint purchases relentlessly. Last week a leading spinner is said to have picked up lint from middle Sindh stations like Nawabshah, Jhol and Shahdadpur at Rs 4,400 to Rs 4,450 per maund (37.32 kgs) described as being khora (seedstuff) quality.
Therefore, lint prices are generally steady to stable at their peak levels though business volumes have reduced due to impending holiday closures. Generally speaking, seedcotton (Kapas/Phuti) prices continued to maintain their record levels ranging from Rs 2,150 to Rs 2,300 per 40 Kgs in both Sindh and Punjab. Lint prices in both Sindh and Punjab reportedly ranged at their highest levels from Rs 4,300 to Rs 4,500 per maund (37.32 Kgs) according to the quality.
It is estimated that seedcotton (Kapas/Phutti) equivalent to about 11.5 million domestic size bales will have arrived at the ginning factories all over the country by the middle of this month. From this quantity, about 9 million bales will have been lifted by the mills in Pakistan, while the exporters are expected to have picked up nearly 700,000 bales by the 15th of December 2009.
Thus the ginning factories will be left with about 1.8 million bales in both loose and pressed form though some of this quantity may have been bought by the mills but not yet lifted. It is estimated that at present seedcotton equivalent to 60,000 or 70,000 bales is arriving at the ginning factories daily. Lint output in Pakistan this year is now being estimated around 13 million domestic size bales on an ex-gin basis.
In ready cotton business reports available till the evening, 1,600 bales of cotton from Shahdadpur in Sindh sold at Rs 4,350 to Rs 4,400 per maund (37.32 kgs), while 1,000 bales from upper Sindh (K-68) were said to have been sold at Rs 4,500 per maund. In the Punjab, apparently 200 bales of lower grade cotton from Multan sold at Rs 4,325 per maund, 1,000 bales from Liaqatpur sold at Rs 4,450 per maund while 2,000 bales from Rajanpur and 3,000 bales from Rahimyar Khan both sold at Rs 4,500 per maund.
This week saw a wave of terror in several cities of Pakistan. The carnage conducted by suicide bombers killed many people in Lahore, Multan, Peshawar and Quetta killing and wounding hundreds of innocent people and their families. As a result, all Pakistanis have become more resolute to wipe off this chain of carnage and barbarism being unleashed by the Taliban and other radical groups who are not supported by the people of Pakistan.
On the international economic and financial front, we are slowly but surely drifting towards a point of no return. Over the past several years and decades, we had put the Doha Round of talks on the back burner and also shoved issues like climate change, nuclear proliferation and speculative business and banking practices under the carpet. Moreover, conducting wars on terror in Iraq and Afghanistan without the will or commitment to pursue them wholeheartedly appear to be ab initio losing propositions.
Be that as it may, again United States, Great Britain, Japan, Greece, Ireland, Turkey, Russian Republic, Spain and several other countries are suffering another set back which promises to plunge the world into a deeper double dip recession. The recalcitrant bankers in the USA, UK and elsewhere continue to conduct their casino-like operations and are awarding bonuses to themselves unconcerned about the welfare or well being of the people or the governments of their country.
With such goings on it is hard to see how the leading economies and their lesser fortunate compatriots in the poorer countries will rise again to normalcy. Recently, United Kingdom has slammed a one time fifty percent tax on bank bonuses and also got together with France to enunciate a global policy to rein in the bankers to placate the general public, but it seems to be a case of too little and too late.
Somehow, the sprightly performance of the ICE cotton futures on last Wednesday seems out of sync with the global fear of further economic and financial setbacks which have remerged recently. But then the business fundamentals of cotton shortages around the world and a desire to use cheaper quality textile products may keep the textile industries of China, India, Pakistan, Bangladesh, Vietnam and elsewhere above board for the time being.
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