Due to Muharram holidays on the 16th and the 17th of December, 2010 followed by the weekend, condition here on the cotton market is quite lackluster and the lull in business is expected to spill over into next week. Business is likely to resume at the beginning of next week but dull conditions may continue till after Quaid-e-Azam's birthday (25th of December, 2010) which is also Christmas day.
Traders added on Wednesday that due to accounts closing at the end of the current calendar year ie December, 2010 when all the banks recall their short term loans, the cotton market is mostly not expected to brighten up before January, 2011. Some of the mills feel that cotton prices have risen too much and yarn buying has been slow so that they may wait for the time being before making any long term purchases. The mills want to see some definite direction in cotton prices before taking any longer position for the time being.
Mills say that yarn enquiries from China had gone down over the past fortnight and only small enquiries have appeared again from China, even that at relatively lower prices. Local yarn market, however, remains uninspiring. Traders said, however, that though the underlying sentiment of cotton prices remains steady but due to a spate of holidays and paucity of credit, these factors inhibits any large scale indulgence in cotton purchases.
Brokers said in Karachi on Wednesday that March, 2011 prices on the New York futures (ICE) had shot up to US Cents 144 per pound on Tuesday, prices which seemed to vie for the historically high level attained by the then benchmark December, 2010 contract on November 10, 2010 at 157 cents per pound. However, on Wednesday afternoon (Pakistan Standard Time March 2011 futures had relented nearly three cents per pound.
According to cotton merchants in Karachi, Indian cotton export policy remains fluid and uncertain. The official meeting which was supposed to have been held on last Monday (13th December, 2010) to decide on the future of cotton exports from India has reportedly been shifted to the 23rd of December, 2010. Therefore, cotton prices are reported to be easier on the domestic market in India till any workable revised export policy is enunciated and announced.
Reports emanating from India add that out of the 5.5 million bales which were registered earlier for export, only upto two million bales are said to have been shipped and the fate of the balance of the quantity is either lying in limbo or the contract/s stand frustrated.
There were reports that some Pakistani mills had settled by accepting eighteen cents per pound as compensation for non shipment of cotton by Indian exporters, where as other mills from Pakistan are said to have rejected such offers and are claiming the receipt of such cotton purchased by them.
In the domestic market, hardly any business was reported till Wednesday afternoon as mills were bracing to close their units on the eve of the Ashura holidays. Moreover, shortage of gas and power supply have accentuated with the advent of winter. Mills are very frustrated with these developments and are protesting against the utility shortages all over the country.
Current cotton crop (August 2010-July 2011) promises to yield between 10.5 million to 11 million domestic size bales on an ex-gin basis. Domestic consumption being projected between 14.50 million and 15 million local size bales, Pakistani mills need to import from 2.5 million to three million bales (170 Kgs) this season (2010-2011).
Generally speaking seedcotton (Kapas/Phutti) offering prices in both Sindh and Punjab reportedly ranged from Rs 3,900 to Rs 4,200 per 40 Kgs, while the idea of lint prices in Sindh and Punjab ranged from Rs 9,000 to Rs 9,500 per maund (37.32 Kgs) in an insipid market. Brokers said that some sellers appeared on the market but there were no buyers in view of the holidays. A lone sale of 400 bales of cotton from Rahimyar Khan in Punjab was reported at Rs 9,200 per maund.
Reports said that cotton cess has been increased from Rs 20 to Rs 50 per bale (400 lbs) at the 79th general body meeting of the Pakistan Central Cotton Committee (PCCC). However, the ginners claim that they have not been consulted on this increase. Both Chairman of Pakistan Cotton Ginners Association (PCGA) Masood A. Majeed and vice Chairman Nawab Shehzad Ali Khan said that the Government should consult all the stakeholders. However, a PCCC spokesman claimed that the All Pakistan Textile Mills Association (APTMA) had been consulted so that the revenue generated would go to agriculture research to increase the quality and output of cotton in the country.
On the global economic and financial front, there was a continued flurry of activity on the equity markets which continue to post gains over the past several months despite negative signals from several sectors such as strong protests against austerity measures around the world, slower economic recovery in most of the western countries and large unemployment plaguing most of the countries in Europe and in the USA.
No doubt the European Union has created an emergency fund to bail out failing economies, but fears of continuing economic downturn and uncertainty remain. The American president is extending tax cuts beyond January 01, 2011 and the Japanese government is reducing corporate tax by five percent, but equity markets in the Far East again went down on Wednesday. In any case, nobody seems to know where the money spent on bailouts or to give tax cuts will come from to reduce the already gigantic government deficits which have been accumulated and are now snowballing dangerously.
Large scale protest marches by millions of workers are continuing in Europe and elsewhere against austerity measures. Recent riots in Rome are a case in point. A recent survey of businessmen in the United Kingdom shows that they are quite pessimistic regarding any improvement in the economic condition. The Japanese economy is again contracting.
Thus most governments are in a state of dilemma about their next step. On the one hand they have no money to give more bailout or tax concessions. On the other hand, the sinking economies in many parts of the world are facing increasing unemployment which is coming close to breeding anarchy and social chaos. Thus the governments remain between the devil and the deep blue sea. Such a situation is leading to an impending socio economic disaster in many parts of the world.
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