Cotton market remains steady

Barring a short-lived spike early this week which later petered out, cotton prices have more or less remained steady over the past one week or so. Some volatility creeps in and the market becomes fidgety due to uncertainty bred by rains and floods of gargantuan proportions which have created chaos and havoc over a large part of the country since last one month.
Now massive floods are passing through lower Sindh where they are creating mass damage and dislocation to people and property as never seen before. It is hoped that some of this calamity may ease by the next week or so but the after-effects of massive rains and consequent super floods in the main rivers are likely to leave their treacherous after-effects for generations to come. With the aforesaid scenario, cotton plantation of the current crop (2010-2011) has also been sizably damaged.
At today's reckoning, a loss of 1.5 to two million domestic size bales may have occurred in the prevailing season (2010-2011) in Pakistan hopefully still leaving 12 to 12.5 million bales to be harvested this season on an ex-gin basis. Earlier in the season, it had been hoped that Pakistan would reap anywhere from 13.5 to fourteen million local size bales of lint this year.
Mills in Pakistan are expected to consume between 15 to 15.25 million domestic size bales this season (August 2010 - July 2011). An estimated 2.3 to three million domestic size bales will have to be imported during the season to meet the shortfall. Traders said in Karachi on Thursday that about one million bales (170 Kgs) of imported cotton may already have been booked for import till now. Main suppliers of this cotton are said to be India, The United States, Brazil and West Africa. Some of this cotton has been bought by Pakistani mills on an "unfixed" basis.
Seedcotton (Kapas/Phutti) in Sindh reportedly ranged from Rs 2800 to Rs 2900 per 40 kgs on Thursday, while in the Punjab the seedcotton prices were said to have ranged between Rs 3000 and Rs 3100 per 40 Kgs, according to the quality. Lint prices in Sindh reportedly ranged from Rs 6350 to Rs 6400 per maund (37.32 kgs), while in the Punjab they are said to have ranged between Rs 6700 to Rs 6800 per maund, according to the quality. Thus overnight rates were almost maintained.
In ready sales on Thursday, 1000 bales of cotton from Sanghar in Sindh were said to have materialised at Rs 6350/Rs 6400 per maund (37.32 kgs), 800 bales from Mirpurkhas were sold at Rs 6375/Rs 6400 per maund, 1000 bales from Shahdadpur were sold at Rs 6400 per maund, while 800 bales from Tando Adam were sold at Rs 6400 to Rs 6450 per maund.
Brokers said in the evening that Pakistani mills were active in negotiating and also buying reasonable quantities of imported cottons from different origins. With a bumper cotton crop in India during the current season, the president of the Cotton Association of India, Dhiren Sheth, is reported to have said that India can comfortably meet a sizeable quantity of Pakistan's demand for cotton as India is reaping a record harvest following the monsoon rains. Government in India has allowed exports of cotton to resume come October, both through Wagah border and Karachi/Port Qasim.
Imported cotton is very expensive, particularly since New York Cotton Futures (ICE) are looking for a firm footing reference December, 2010 contract. Therefore, short-term shortage may keep cotton prices in the higher range despite dismal reports of economic performance in the United States, slow down of economic performance in China and fears that the Eurozone may sooner or later be infected by the American malaise.
On the global economic and financial front, if there was any doubt that America would sooner or later enter into a double dip recession, that impression has now been shattered. Reports now confirm that new house sales in the United States have slumped to their lowest level in July, 2010 in nearly half a century. Also, old house sales are also faring no better. Coupled with this dreaded news, the fall in orders for durable goods compounds the economic pain of America. Low consumer spending and high unemploy of nearly 9.5 percent are also compounding the economic woes of America.
Further bad news comes from China where the economic growth rate is slipping. In Ireland, the Anglo Irish Bank is reported to be in trouble. Recently, the Eurozone was showing some promise of improvement. But with many home owners in the United States being obliged to go for foreclosures despite easier mortgage terms offered by the government, the economic condition is facing further erosion. One may thus conclude the with several problems of new housing sales in the United States, high unemployment rates and lack of consumer confidence, coupled with sluggish economic performance in China, Eurozone is bound to be adversely effected because large exports from Europe are destined to America.
Similarly, exporting countries in Asia Pacific Region like Australia, Singapore, South Korea and others rely on Chinese purchases of their goods and materials, which could diminish and thereby cause trouble to the Asian economies. Therefore, once again the specter of another global recession has raised its ugly head to put the entire world trade and business into a tailspin.