Cotton: Prices picked up vigour on the cotton market this week as mills were busy trying to get their hands on the finer varieties that are soon set to disappear from the market. The official spot rate gained traction, going up to Rs 6,100 during the week, while demand from millers sustained amid a pull from higher yarn prices and the general positive sentiment prevailing in the fiber market at the moment.
Thus phutti prices in Sindh reportedly fluctuated between Rs 1,800 and Rs 2,800 per 40 kg while they remained higher up north where finer varieties have been going between Rs 2,000 and Rs 3,000 per 40 kg. Lint prices meanwhile have been on the higher side in Sindh, where they are said to have ranged between Rs 4,600 and Rs 6,500 per maund as of Friday.
Meanwhile, cotton futures- which had been propelled upwards to the biggest monthly gain in nearly two years- slid this week after US sales data revealed order cancellations by China. The abandoned deals- some 11,100 bales that were cancelled by the Chinese buyers for the first time in nearly 6 months- pushed down the most-active March contract on ICE Futures down 0.01 cent, to settle at 82.95 cents per lb on Thursday.
Globally, near term trend on the cotton market is set to be decidedly bullish as cotton prices are expected to climb up to an average price of 80 cents/lb as Beijing's stockpiling policies distort prices despite the presence of more than enough global inventories.
Although it has been estimated that the cotton acreage in Brazil and Australia is also set to go down by nearly 30 percent year-on-year, these may not create any significant erosion of ending stocks, and as of now Chinese policies remain the biggest determinant of the direction in which cotton prices will head in the last leg of the 2012-13 marketing year.
Rice
Rice stocks in the Asian market have weighed heavily on global prices this season despite the fact that reduced production and low carryovers have continued to effect supplies in the northern and southern American markets. The Asian rice giants meanwhile continue to grapple amid themselves for export orders as prices continue to trend lower than last year.
Prices for the Pakistani variety have shown some slippage this week as the benchmark 5 percent white rice sloughed off $5 from last week. Fluctuating between $425 and $420 for a larger part of the season, prices for the Pakistani varieties have been however much firmer as compared to the Vietnamese varieties this week, which continue to slip. The week saw the Vietnam Food Association setting a minimum rice export price for 5 percent broken at $410/ton in order to nudge prices upwards, however whether or not it manages to find buyers at this price remains to be seen.
Wheat
The upward ride of Wheat prices hasn't witnessed any respite for past few weeks despite PASCO's announcement to provide an additional 0.6 million tons wheat to the millers. This week too, wheat prices remained aloft, with wholesale prices lingering at Rs 3500 per 100 kg and flour available in the open market at Rs 39 - 45 per kg.
Correspondingly, bakery items such as bread, rusk and buns also took a significant price jump. Chapatti and naan sellers also lifted prices by Re1 per piece followed by Rs 3 per piece surge in taftan and sheermal prices.
PASCO claimed that it will start providing wheat to millers at the rate of Rs 2865 per 100kg bag. After slotting in the transportation charges, wheat will be available to millers at the rate of Rs3100 - 3200 per 100kg bag, which is symptomatic of the fact that wheat prices hovering at Rs 3500 per quintal, will not take a breather any time in the ongoing year. In fact, prices are expected to shore up further as the support price set for the new crop is 14 percent higher than the previous price.
Informed sources said that currently the country has over 5 million tons available, with 2.2 million tons available with PASCO, 2.1 million tons with Punjab Food Department and 0.7 million tons with Sindh food department. This quantity is more than enough to feed the country until after March, when the new crop will be harvested. However, due to lack of governance, there is an induced shortage in the country.
On one hand, government food departments are blaming millers for hoarding and unlawful sale of this commodity to Afghanistan which, according to them, is the main reason behind the wheat shortage in the country, millers are indicting food departments for the same.
Resultantly, commoners, who have always been the victim of the ceaseless tussles between the government agencies and millers, have suffered a huge price surge since December last year.
Talking about the FY13 wheat production estimates, industry insiders underpinned that the production of wheat is expected to remain under 24 million tons in the ongoing fiscal year, despite crop's area of cultivation increasing by four percent. The rise in wheat support prices during November 2012, enticed many farmers to cultivate wheat; however, wheat sowing beyond the ideal sowing period would take its toll on the yield which is expected to decline by 15 percent YoY.
However, India, the world's second largest wheat exporter, is considering allowing additional wheat exports to cut huge stocks at government warehouses and make room for the new season's harvest. Reportedly, India's wheat exports will surpass 6 million tons on the back of firm global prices.
On the global front, the US hard red wheat for Gulf delivery settled on $350 per ton, on February 2, 2013, as against $305, a year ago. While the EU France grade-1 wheat clocks in at $343 per ton, as against $282 per ton, last year.
Sugar
Sugar prices didn't witness any notable movement during the week, lingering at Rs 49 - 50 per kg in the wholesale markets across the country.
The export side witnessed some progress this week as SBP is given the target to monitor the export of 1.2 million tons of sugar. However, the long-awaited export deal with Tajikistan has further delayed whereby the country now requests the supply of sugar in three tranches of 10,000 tons each.
On the payments front, sugar millers are directed to formulate required arrangements to make payments to farmers. To overcome liquidity constraints, the government decided to provide a subsidy of Rs1.65 per kg to the local sugar mills through TCP.
Experts believe that sugar prices are expected to shrink by Rs 1 - 2 per kg, as the exports deals start materialising whereby, millers will get an inland freight subsidy and a considerable FED reduction. Besides, cane crushing, many sugar mills are also looking into power generation initiatives, given the government increases tariff to at least 11.1 cents per KWH, compared to 9.28 cents per KWH, currently set by Nepra.
All the mills have an internal power generation system which they utilise to meet their own energy requirements. Reportedly, the sugar industry has the capacity to generate 3000MW of electricity through 12 million tons of sugarcane waste, bagasse, produced annually. However, currently, only four mills out of 82, are supplying electricity to the national grid.
Global sugar prices are forecasted to surrender by 19% in 2013 as supply remains well above the demand, according to Rabobank. Rabobank reports that world-wide sugar prices which averaged at $24.6 per lb during Q1 of 2012 are expected to drop $20 per lb by Q1 2013.
Talking about the international prices, March 2013, No 11 raw sugar contract at ICE settled at 18.89 cents/lb while No 5 December white sugar contract at LIFFE was traded at $502.50/ton as of February 02, 2013.
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