Wheat: Wheat prices in the international markets have been up nearly 30 percent since January 2012, with the major increase witnessed in the month of July. The mid-July rally owed itself to the drought in grain-producing states in Midwest America and fears of a Russian embargo on wheat exports due to unfavourable weather conditions in the Black Sea region.
This has led the World Bank and the FAO to raise alarms over risks to global food security. Last week, the International Grains Council-an association of major grain producing nations and regional blocks-lowered its forecast of wheat's global carryover stocks by 15 million tons to 183 million tons by the end of 2012-13-a four-year low. The supply side is expected to remain a major price determinant in the future.
Yet the international wheat prices came down in the week ending August 3, 2012. The US hard red wheat was trading for Gulf delivery at $354 per ton, down from $370 per ton as on July 27. Similarly, the EU wheat (France Grade-1) declined to $316 per ton on August 2, from $328 per ton on July 27. News of some rainfalls in the US Midwest along with resumption of Russian exporting activity is said to have caused this slide. The prices of maize and barley also receded during the week.
It remains to be seen which direction the wheat prices take, as that would have a direct bearing on the domestic market as well. The July rally had caused domestic exporters to scramble for purchasing wheat to fulfil export orders that were to lock in handsome premium over the domestic prices. A lull after the storm is reported in the domestic wheat trade in the face of retreating international prices.
Provisional Customs trade statistics indicate that Pakistan's recorded wheat exports in June totalled $14.14 million to various countries, mainly Afghanistan, the UAE, Sri Lanka and Madagascar. The figure for July is not available yet, but it should be much higher. Meanwhile, the negotiations on the Iran-Pakistan barter deal (exchanging wheat for fertiliser and iron ore) are yet to yield any meaningful result.
Sugar
The week ending August 3, 2012, saw an increase in sugar's wholesale price. In Jodia Bazaar, Karachi, the wholesale price ranged between Rs 51 and Rs 52 per kilogram; rising a single rupee over the course of the week. Almost a similar increase was seen in Lahore's Akbari Mandi where the wholesale price ranged between Rs 52.2 and Rs 52.6 per kilogram.
Though there is no official word yet, the Trading Corporation of Pakistan was supposed to complete its procurement target of 0.2 million tons by July-end. It had already procured nearly 70 percent of the quota as of July 26, at a price of Rs 50.51 per kilogram. As of July 30, the TCP stocks are shown at 0.292 million tons.
International sugar prices continued their downward trend last week. As of August 2, the October contracts for London No 5 sugar came down to $610.5 per ton, and December's contract also declined to $589.9 per ton. Meanwhile, white sugar in the spot market was trading a little above $620 per ton as of August 1, showing a firm decline in spot prices of over $630 per ton seen last week.
Cotton
Cotton prices in the local market remained largely unchanged at the end of the week with ginners said to be holding back on stocks, which managed to reign in any steep price decline. According to market sources, nearly 10,000 bales of cotton changed hands at the close of business on Friday, trading for between Rs 5,525 and 5,700 per maund.
Continued interest by mills was another factor which managed to offset any more slide in prices amid uninterrupted Phutti arrivals this week. With ginning factories in Punjab and Sindh pressing around 25,000 to 27,000 bales daily, ginners were said to be under considerable pressure to lower their asking rates, however, their resistance to do so ensured that the official spot rate remained unchanged at Rs 5,550 per maund.
Amid forward buying by mills, seed cotton prices in Sindh reportedly ranged from Rs 2,600 and 2,650 per maund, gaining Rs 50 over Thursday's average price. While in Punjab, the same factors lead to the prices for the lower variety riding by Rs 100 to sell at Rs 2,500 per maund whereas the better quality sold for Rs 2,550 for the same denomination, up by Rs 50 from Thursday.
On the international front, on Friday cotton futures settled at a 2-and-a-half month high with speculation bolstering up optimism after US Labour Department's release of statistics which affirmed that US payrolls were on a rise. While cotton prices are expected to remain high in coming days at the head of the surge in commodity prices off the back of the economic data released by US government, the optimism is unlikely to be very long lasting.
With global cotton trade estimated to fall by 18 percent to 7.6 million tons in 2012-13, high levels of stock world-wide are going to weigh on cotton prices around the world. Similarly, on the local front, the levels of seed cotton arrivals have been consistently pressurising prices and if there is a break in demand from mills, there is a likely chance that ginners will break under the pressure and resort to panic selling.
Rice
Market activity has been very quiet in the last week, with little or no trade reported. Interest from the Middle East has waned completely whereas there has been some interest from Africa as well as border trade with Iran to sail Pakistani exporters through the week.
Thus prices have softened somewhat, especially for the IRRI-6 variety which fell by $10 and was quoted at $460 per ton in the international market. Same was the fate for Super Kernel Parboiled Basmati which was quoted at $1,170 per ton, down $10 from last week according to data supplied by Jackson Son and Co.
In the meantime, concentration has mainly been focused on the new crop, nearly 70 percent of which has been planted after a delayed monsoon held back the planting schedule. Overall market expectations about the new crop, however, remain optimistic amid reports that the monsoon rains this season are unlikely to cause the rampant destruction that was caused by the flooding in 2010 and 2011.
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