World moving towards deeper economic downturn: cotton trade, textile industry can face great difficulties

In tune with the glum global economic sentiment which has spread wide around the globe, cotton prices and those of textile goods in our market remained slow and sullen with only sporadic business activity. With a stalling Chinese economy, a quickly falling economic growth rate in India, Greece and Spain continuing to remain in the economic doldrums and France in a disturbed polity, commodities including cotton gave no clear clue as to where they are headed.
Besides the quick declining Indian economy and fears of the dire straits of Spanish finances leading to one of worst fall in Asian equities at mid week, there are increasing signs and signals now that the global economic recovery is tottering in no uncertain terms. Consumers of cotton around the world are amply aware that China is holding large and surplus cotton stocks and the arrival of new crop (2012-2013) cotton in the northern hemisphere is on the anvil. Therefore, the undertone of cotton prices remains bearish at almost all origins.
Despite the fact the Pakistani rupee is at its historical low at a reported Rs 94.7 per one American dollar and only about 200,000 bales of cotton bales remain unsold with the ginners, lint rates remain unchanged with sparse reported activity. Local lint prices in Sindh are said to be ranging from Rs 4,500 to Rs 5,700 per maund (37.32 kgs) in a listless market. The reported styles from Punjab also remained unchanged in the range of Rs 5,000 to Rs 5,700 per maund with limited activity on Thursday.
Thus since the last fortnight, cotton trading in the current crop (August 2011-July 2012) has reduced to small numbers. Regarding the new crop, in the absence of official figures, private production idea for the new crop (August 2012-July 2013) is being projected between 14 to 15 million domestic size bales on ex-gin basis. Mills may consume between 14 and 15 million bales next season. Most sowing is complete except in some areas. Weather changes could alter the balance of cotton output and its consumption in Pakistan. A few observers do believe that Pakistan could produce up to 16 million domestic size bales given conducive weather. Shortage of irrigation water has been reported in certain areas but there remains a possibility that this difficulty may be surmounted with more water supply later on. In fact, weather pundits have predicted large cloud formations in the western direction and also from the traditionally eastern direction with the incoming monsoon season.
Traders said in Karachi that China was not buying cotton at present and was in fact delaying its traditional purchases. In Pakistan, new crop cotton (2012-2013) could start arriving in July 2012 in small numbers. Even otherwise, there is no demand for cotton exports or for yarns. The federal budget for Pakistan for the fiscal year 2012-2013 is reported to be announced today and the trade policy later on, which announcements should provide a clear picture of the cotton and textile situation soon.
On the global economic and financial front, a plethora of bad news from north, east, south and west has inundated the world and sent many sections of trade, industry and finance into panic. The centre of all the major economic and financial trouble remains in Greece, but Spain, Italy and France from the major European players and lesser entities like Portugal, Iceland, Ireland and Cyprus are also on the same band wagon.
The trouble which started with the economic and financial prodigality, nonchalance, political licentiousness and related shenanigans in the peripheral countries of Europe has now sent its ripples not only to the core countries on the continent, but to all the corners of the world. Despite many patchup, bandaid and short-term measures taken by sundry organisations like the World Bank, the IMF, G-10, G-20, BRIC countries and the likes thereof, the universal economic and financial rot refuses to go away. Infact the global economy seems destined to move into disaster zone as no considered, coherent or cohesive economic remedies have been proposed till now to do away with this seemingly unmanageable state of affairs.
It is significant to note, however, that in all this sorry scheme of things, Germany seems to have remained unscathed and immune: Thus Deutchland uber alles. It seems that Germany is not only frugal and conservative with its economic practices, it is certainly more inventive, efficient and efficacious in its sundry enterprises.
Be that as it may, the problem of Greece and France with their muddled politics and economic philosophies spread fear and caution around the world. At midweek, the very thought of Greece exiting the Eurozone sent shivers in banking circles around the world. Moreover, joblessness, a shaky banking industry and slowing down of growth rates in several countries around the world have shaken any remaining belief that the global economic downturn will stop any time soon.
The disturbed and disruptive economic scenario prevailing presently around the world hardly promises or portends any early remedy or rehabilitation. If anything, this week's economic news have explicitly spelled out the deep and dark condition in which the global economy finds itself.
A few reports from here and there should suffice to demonstrate the dire economic circumstances in which we are engulfed. Moreover, it may be reiterated that no cohesive, comprehensive or consensual formula or policy has yet been evolved to deal with the unprecedented economic menace being currently faced by the world at large.
It has been reported that France had more jobless people in April, 2012 looking for employment than at any time during the current century. Month after month, the unemployment figures have kept rising in France. Most commodities from crude oil to cotton, copper, rubber, palm oil, gold, coffee, tea and milling wheat have fallen this week to new low price levels. Asian equity markets are at their lowest in three months.
India's growth has fallen tremendously and is at its lowest level since 2003 at 5.3 percent. This has sent a type of panic amongst the global economic observers. Widening trade gap and low investments have been cited as the reasons for India's rapid economic decline.
In Brazil, the central bank is expected to cut its benchmark interest rate to a reported low of 8.5 percent from nine percent which would be a seventh straight cut because the policy makers want to provide a means to stop Brazil's receding economy. In China, the economy is growing at its lowest rate in 13 years. Japan's economy weakened in April, 2012, the weakest level this year.
All these negative developments show that instead of recouping, the world is moving towards a deeper economic downturn which promises to extend to several years before it improves to return to normalcy. Cotton trade and textile industry may face similar difficulties in tandem with the global economic freefall facing us.