Cotton: Trading activity on the cotton market remained lackluster this week as power outages in Punjab paralysed much of the industry. With millers continuing to remain on the sidelines, the official spot rate of ex-gin grade three cotton has subsequently lost even more ground, coming to rest at Rs 6,560 at the end of the week.
On the whole, sources reveal that despite depleting stock ginners are said to be sitting on less than 300,000 bales as of this week- prices have not realised their potential as buyers remain wary of the local and international volatilities in the cotton market.
Additionally, the bearish disposition of the market is also very likely due to the upcoming elections which will see heightened security concerns put a dampener on business activity. With things remain murky on the yarn market amid weakening global prices of raw and spun fiber, this trend is very likely to continue, at the very least until the market picks up post-elections.
Likewise, on the international front, the ICE cotton fell over one percent on Thursday with speculators liquidating positions amid news that Beijing was to start laying off some of the state reserves that have been mounting all year.
With the state offering up to 4.5 million tons of high quality fiber from its stockpiles, mill demand for foreign fiber from China is very likely to go down further in the coming days.
The Chinese reserves -which are set to gobble up half the global production this year- have on the whole been the biggest factors which have contributed in the speculation driven buying that has characterised major shifts in the cotton fiber market in the last few months.
Consequently, a dampening in world prices is likely to ensue as the tightened supply scenario eases and the market is flooded. Already mirroring these fears, fiber remained a major underperformer in the commodity market this week.
Additionally, the most-active July futures on ICE Future shed some 1.4 percent on Thursday, settling at 85.40 cents/lb despite US government export sales of cotton hitting a 2 month high note this week.
Wheat
As the government drive to procure wheat gears up, sources have reported that this year's support prices are likely to be a major incentive helping to net in farmers and decrease the role of the Arhtis. However, the issue of whether or not the procurement centers will be able to handle the flood of arrivals is another matter.
Talking to BR Research, Chairman of Pakistan Agri Forum, Dr Ibrahim Mughal also reiterated this point, citing the need to set up additional procurement centers in Punjab that could facilitate the farmers and help the government meet its revised target of acquiring 4 million tons during the season.
In the meantime, as the country waits for the new crop to hit the market, summer harvests in a large part of the world have already been completed, with global wheat supplies showing small fluctuations as supplies in smaller markets build.
World wheat trade for the July-June marketing year is up 1.6 million tons this month on the back of additional exports from European quarters. As domestic wheat prices in Russia and Ukraine continue to decrease, export sales from the region are stated to climb by some 0.7 million tons during April as import goes down due to unfavourable price differentials.
Additionally, wheat dispatches destined for UAE have also picked up as re-export of flour from the country to neighbouring countries in the region picks up. India remains a key seller in the Asian region as Pakistan wheat exports shed 0.2 million as a result of uncompetitive prices as compared to India according to USDA's Wheat outlook for the month.
On the futures front, wheat largely exhibited mixed signals this week as weather factors affected production forecasts in different US states.
As a consequence, CBOT May wheat fell 6 cents on the week to $7.09/bushel whereas MGEX May wheat gained 18 cents, closing at $8.26/bushel amid concerns about crop health in the northern American plains.
Sugar
Sugar prices this week remained unchanged in Akbari mandi Lahore, as the glut in supply continues to put a lid on things for the medium term. The TCP in the meantime has resolved the payments to the millers, paying off Rs 17 billion to 70 local sugar mills after procuring 330,000 tons of sugar during its procurement drive.
This week, global trade of sugar has again remained sluggish as building supplies have cast a gloom on prices even as demand continues to wane.
While projections vary, the general consensus remains that the second consecutive global sugar surplus will leach away between 2 to 8 percent from international prices within the first three quarters of the year. Moreover, a subdued demand for Brazilian ethanol also weighs heavily on the market, where some analysts are predicting that prices may fall as low as 15 cents/lb.
During the course of the week, Sugar futures fell to the lowest in almost 33 months on speculation that rain will further boost the Brazilian crop. As a consequence, raw sugar for July delivery at the ICE Futures shed 1 percent to settle at 17.61 cents/lb on Thursday.
Rice
The rice market again showed little volatility as prices continue to remain range bound. Over the course of the last few weeks, the largest fluctuations in prices have come largely at the hands of Thai aromatics and Vietnamese long grain varieties that have shed and consequently strengthened in the international market.
In the meantime, quotations for Pakistani rice varieties remain largely unchanged once more. Currently, the Indian 25 percent benchmark rice is quoted at about $385 - $395 per ton, at about a $20 per ton premium over Pak 25 percent variety which is managing to sustain buyers on this account.
However, Indian exports of agricultural products, especially rice have outpaced many other giants in the region. While the slash back in Thai long grain rice prices was expected to put a dampener on Indian exports, the country has managed to capture a major market in the form of Iran, with which a bi-lateral Rupee payment arrangement has helped the country offset weaker demand from African quarters this season.
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