Within the last couple of weeks or so, Pakistani mills have reportedly purchased around one million bales of cotton, both imported and from the local market. With whopping yarn sales, particularly to China, but also including other destinations, domestic mills went on a buying spree of cotton to hedge their yarn sales, some of which may be for forward months running into the first quarter of January, 2013.
Furthermore, lint prices for the finer grades which reportedly reached a recent peak of Rs 6,250, some say even Rs 6,300 per maund in a few instances, have now relented by about Rs 200 or even Rs 250 per maund giving impetus to the mills to carry on their larger purchases of cotton for the time being.
Cotton output for the current season (August 2012 - July 2013) has been scaled down by both official as well as private traders by about one million domestic size bales. Also, because this Friday (November 9, 2012) has been declared a national holiday on the occasion of the Iqbal Day, mills felt the urge to build up larger inventories to foreclose shortage of cotton at a later stage in the season. Poor weather has resulted in lower estimated output this season because of lower anticipated yields per acre. Yields of cotton per acre also suffered because of the lower strength of cotton plants because of disease and shortage of water in some areas, thus reducing the overall cotton output in Pakistan.
As a consequence, it is now projected that lint output this season in Pakistan is likely to range between 13 to 14 million domestic size bales on an ex-gin basis, while the lifting by the domestic mills is likely to be higher from 14.5 to 15.5 million bales. Exporters may ship between half a million to one million bales, while mills may have to import between 1.5 million to two million bales this season.
The undertone of domestic cotton prices is barely steady because presently easier sentiment prevails on the cotton market. This is also due to the fact that mills have made forward purchases from such origins as the USA, Brazil, India, Greece and other sources.
Generally speaking, the seedcotton (Kapas / Phutti) prices on Thursday reportedly ranged from Rs 2,550 to Rs 2,700 per 40 kgs in Sindh, while in the Punjab they are said to have ranged from Rs 2,550 to Rs 2,750 per 40 kgs. Lint prices in Sindh are said to have ranged from Rs 5,600 to Rs 6,000 per maund (37.32 kgs), while in the Punjab they were said to have ranged from Rs 5,750 to Rs 6,000 per maund.
In Sindh styles, 400 bales from Sultanabad sold at Rs 5,650 per maund, 200 bales of cotton from Shahdadpur reportedly sold at Rs 5,700 per maund (37.32 kgs), while 400 bales from Khairpur are said to have been sold at Rs 5,900 per maund. In the Punjab, 1,000 bales of cotton from Bahawalpur reportedly sold at Rs 5,800 per maund. 200 bales each from Bhakkar and Mianwali sold at Rs 5,900 per maund, 400 bales from Khanpur sold at Rs 5,900 / Rs 6,000 per maund, while 400 bales from Mianwali and 1,000 bales each from Dera Ghazi Khan and Rajanpur sold at Rs 6,000 per maund.
On the global economic and financial front this week, some major business and political considerations put sizeable pressure on stocks prices. Thus Asian markets have been falling since the last three days while bourses in Europe and United States have taken cue from their Asian counterparts and have thus also suffered remarkable and a record fall of equity prices in some instances which has depressed the entire business and manufacturing enterprises around the world.
The sorry state of politico-economic affairs in Europe continue to haunt the global economic condition universally. Despite the affirmation of the Greek parliament to go in for a third bailout package with its concomitant hardships and austerity measures, the people at large in Athens and elsewhere are protesting violently. The Greek people are going nowhere as far as their economic and financial condition is concerned. Hardly a couple of days passed after the re-election of president Obama in the United States that the global economic community faces an unprecedented hopelessness due to the failure of all the measures taken hitherto by the IMF, the World Bank, the European Central Bank and the likes thereof.
Spain at the eurozone periphery has seen twenty percent of its economy wiped off till now. The German economy continues to slow down despite its pre-eminent position around the globe, only after the United States and China. Change in Chinese political leadership is on the anvil with the 7 day five-yearly Communist Congress in session. China is presently facing a decrease from its dizzy double digit economic growth which it saw just a few years ago. Now Chinese economic growth has come down to a lower level ranging from an estimated seven or 7.5 percent. However, Chinese GDP may henceforth range only from 5 to 5.7 percent due to global competition which has become a hurdle for its hitherto sterling economic performance.
The historic election of President Barrack Obama to another term in office at the White House clearly shows that the fundamental plank of American politics remains democracy. The persistence and perseverance of President Barrack Obama have clearly paid off. However, as soon as the presidential elections were over, Americans saw a phenomenon looming large on the economic horizon, viz the "fiscal cliff".
The "fiscal cliff" refers to the withdrawal of public money being spent by the government of United States to subsidies social sector, boost up failing banks and subsidise public welfare and other methods to pull up the sagging economy. Fiscal cliff just means large spending cuts in addition to the imposition of higher taxes. The legislative cover is expiring by the end of this year and the United States government should effectively phase out these public expenditures totalling about Dollars seven trillions over the next ten years. This is a frightful proposition.
The result is that a somber mood extends from one side of the world to the other because unless the US Congress extends the permission to the government to continue public expenditure to prop up the failing American economy, a global recession of historic propositions looms large in the foreseeable future. Namely, coming January 2013, the economic deluge encompassing the entire world. With this grim scenario, the apprehensions are not unwarranted. However, the classic observation may be reported here: "Be damned if you do, be damned if you don't".
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