Cotton: At the cotton market prices remained steady again this week; spot rate stayed put at Rs 6,900 for a third week running. Sources maintain that trading has generally remained cautious in the last few days as an uncertain climate seemed to hang over the textile sector over the sales tax imposition by the Federal Board of Revenue.
However, activity picked up slightly towards the end of the week as mills were driven out of cover to make purchases to fulfil short-term obligations.
Additionally, a report by Pakistan's Cotton Ginners Association (PCGA) revealed that an unsold stock of some 693,191 bales is left with the ginners, which, at the tail end of the season, should mean that a final price rally might be on its way.
On the international front, prices were hemmed in once more as a lackluster US government export data weighed in on the broader commodity market. Subsequently, the Thomson Reuters-Jefferies CRB Index, fell for a fourth straight session as a depressed US jobs data added to woes.
ICE cotton too fell further during the week, shedding 1.7 percent over last week. The most active May cotton contract on the futures settled at 86.79 cent/lb on Friday - the sharpest single-day decline in the spot contract in more than two weeks.
Overall, cotton prices in recent months have remained strong despite the forecast that global surplus is set to hit a record level by the end of the current crop year ending in July.
The slippages seen in fiber futures in the last two weeks therefore are predicted to be just a small hiccup as the bullish sentiment shall prevail on the market as more than half of the global surplus stock is set to be bought by China - effectively disappearing from the market and thereby keeping trade-able supplies tight.
Rice
With sales of 72.6 million tons recorded in January 2013 alone, Chinese purchase of long grain white rice of Pakistani origin has kept dispatches up this season. Prices on the whole have not budged from their positions earlier this month, with the benchmark 5-percent-broken rice going north of $420/ton in the international market.
According to data released by the Pakistan Bureau of Statistics, exports of Pakistani Basmati, which had declined by more than 30 percent in the first half of current fiscal year, are also on the rise again. Owing to the narrowing difference in parity with the Indian variety, exports during January were up by 15 percent year-on-year.
With total rice exports in FY13 having already scaled the $1 billion mark, a strengthening Basmati moreover is going to further cement the exporter's position which has been weakened by the loss of the crucial Iranian market. Apart from China, the Middle East and Western Africa remain key buyers of Pakistani rice this season.
Overall however, global trade this season is set to remain depressed. With ample availability of stocks, rice trade is expected to decline by 5 percent in 2013 as demand from Asia and Africa continues to dip. Exports from the leading South American suppliers are also expected to again decline year-on-year.
Wheat
Wheat prices continue to shed weight as new crop makes its way into local markets. Having already lost upwards of Rs 400 per 100 kg bag in the last two weeks, prices are set to soften further as provincial food departments offload their stock at the same time.
Public sector procurement meanwhile remains on track as federal agencies go about their way to purchase the targeted 9 million tons of wheat from farmers around the country.
Over the last 4 years, the government has more-than-doubled support prices in a bid to transfer benefits to farmer and at the same time ensuring that production targets remained on track. However, the government's decision to raise support prices at par with international rates this time around will do little to support output as the announcement came when sowing season was almost finished.
Consequently, a massive decline in cultivation area ensued and sources in the industry report that the decreased acreage will most likely result in a gap of some 1.5 to 2 million tons in production targets.
Meanwhile forecasts of a recovery in global wheat production remain firm as the harvested area for 2012/13 season is slated to have reached a four-year high. The biggest recovery in yields is expected in Europe - where aggregate plantings are up by 3 percent year-on-year in response to higher prices which have encouraged farmers to shift from other grains to wheat.
The IGC GOI wheat sub-index consequently is down 2 percent month-on-month, pegged down by the improving prospects for 2013/14 output in the USA, which have strengthened off the back of showers in previously dry winter wheat areas in the Americas.
Sugar
The forecast of global supply glut courtesy of exportable stock in Brazil has kept a lid on prices this week. With the largest producer of the commodity in the world leading from the front, global surpluses are set to remain high the second year in running as production fast outweighs consumption in crucial markets.
Consequently, prices, which have slid to the 17 cents/lb range, just might edge a bit lower over the course of the next weeks. At the moment, however, prices seemed to have gained some steadiness after the news of a monetary policy overhaul in Japan hit the market. After falling to a session low of 17.50 cents/lb, the May raw sugar futures consequently rose by 0.17 cent to settle at 17.67 cents/lb on Wednesday.
In the meantime, sugar prices in local wholesale markets remain range bound as the commodity was reportedly trading for between Rs 51- 52/ kg in Akbari Market Lahore on Friday. Overall, trade prospects also remain damp due to depressing price trends in the international market.
Although the government has come up with a number of incentives - including the inland freight subsidy to push up exports, exporters' margins are going to remain thin in the current pricing situation.
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