On the approaching Eidul Azha which will be celebrated during the last week of this month, cotton buyers have started building their inventories to keep their mills running till the end of this month. Dwindling supply of transportation and closures on approaching holidays have built up a bullish sentiment in the ready local market even though the general condition of cotton on the international market is lackluster and the local yarn prices are sluggish.
Traders said in Karachi that there was increased demand for cotton because both the mills and the exporters were buyers on Thursday. It is foreseen that the domestic cotton prices will remain firm till the end of this month. Thereafter, the demand and supply phenomenon is likely to guide the market. Weather in the cotton belt has been on the cold side though it should be warmer for the crop development at this stage. Due to reported increase in the number of ginning factories, the ginners are presently said to be competing for the purchase of seedcotton.
Apparent shortage of seedcotton (Kapas / Phutti) is resulting in rise of the domestic prices. However, a better visualization of the current crop size (August 2015-July 2016) will most likely be available by the end of this month or in earlier October, 2015. General idea of seedcotton (Kapas / Phutti) prices from Sindh was said to be from Rs 2400 to Rs 2450 per 40 Kgs, according to the quality. Punjab seedcotton prices reportedly ranged from Rs 2300 to Rs 2450 per 40 Kgs on Thursday. In Balochistan seedcotton prices were said to have extended from Rs 2550 to Rs 2600 per 40 kilogrammes.
Ginned cotton prices in Sindh were generally said to have ranged from Rs 4750 to Rs 4800 per maund on Thursday, according to the quality. In Punjab they were said to have ranged from Rs 4825 to Rs 4900 per maund in a firm market. In ready business transpiring on Thursday, 600 bales of cotton from Hyderabad and 1000 bales each from Mirpurkhas and Shahdadpur in Sindh, all were said to have been sold at Rs 4750 to Rs 4800 per maund (37.32 Kgs), while 400 bales from Nawabshah and 600 bales from Tando Adam reportedly sold at Rs 4800 per maund each.
In the Punjab, 600 bales of cotton from Harunabad were said to have been sold at Rs 4850 per maund (37.32 Kgs), while 1000 bales from Khanewal were said to have been sold at Rs 4850 / Rs 4900 per maund. In Balochistan, 200 bales from Uthal were said to have been sold at Rs 4800 per maund, while 400 bales from Vinder were reportedly sold at Rs 4800 to Rs 4850 per maund in a firmly held market.
Amin Hashwani, Chairman of Karachi Cotton Association (KCA), has expressed his deep concern against the proposal being considered by the government to procure Seed / Lint Cotton at high prices to support the growers. Hashwani stated that any unnatural intervention by the government through the Trading Corporation of Pakistan (TCP) will be inefficient, impractical and counterproductive which will fail to benefit the growers.
KCA is of the view that the most efficient way to compensate the growers facing adverse conditions would be to provide a direct subsidy on the basis of acreage sown, as is practised in other countries. This would not only ensure direct benefit to the growers without any middlemen or malpractice but will also help to minimize the losses to the government. To procure seedcotton by the TCP and have it processed in hundreds of ginning factories is cumbersome, impractical and exposes to systematic corruption and mismanagement.
The KCA strongly suggests to the government to allow free market mechanism to function without government's intervention to ensure price levels that will benefit all the stakeholders. On the global economic and financial front, several developments around the world have shattered the earlier dream at the beginning of the current calendar year that economies around the world were on their way to resuscitate and rehabilitate themselves and gradually leave behind their sick condition which commenced with the Great Recession of 2008. Alas, that was not to be. Not yet.
The main hurdle in the ways of global economic rehabilitation turns out to be the Chinese fall in growth and its unmanageable banking, housing and growing risks of deflation. The result is that several economists believe that hard landing of the Chinese economy is inevitable. The result seems to be that China is leading the world towards a recession. If Chinese economy continues to slide, it is certain to drive the rest of the world into a recession.
A record fall has occurred in Chinese foreign reserves. The effect of the Chinese eroding economic activity has created a volatility in the world equity markets which are moving up and down continuously since more than a couple of months instilling fear and a sense of uncertainty in the global investors. The ill effect of China's wobbly economy has travailed far and wide. One day the world's bourses appear bubbling with uncommon zest and zeal, the other day they sink to deep depression. With the continuation of the unbating Chinese economic malaise, economies in many parts of the world are faltering relentlessly.
The United States has just recorded a fresh fall in equity values which has influenced the rest of the world adversely. The American Federal Reserve continues to face a dilemma whether to raise interest rates forthwith or put off raising the interest rates to a later date as a declining global economy threatens to plunge the growth rate far and wide. In the meantime, the global equity markets are behaving crazily with wide fluctuations and speculative frenzy. It has been stated that the investors have been taken for a wild ride this summer.
July 2015 has been a seek month in manufacturing in the United Kingdom. After shooting up earlier in the week in line with the global rally which failed recently, the US Stocks have since them retreated. Standard and Poor's has relegated the credit rating of Brazil to junk status. Thus Brazilian stocks have thus gone below the investment grade. Moreover, if the United States increases the interest rates next week, not only would Chinese economic performance slide sharply but it would drag the rest of the world with it. Most investors have presently turned a deaf ear to the Chinese announcement that it would stimulate economic growth.
Commodity prices around the world continue to erode substantially. This development has seriously hurt countries like Brazil, Russia, Australia, India, China, Canada and New Zealand. The growing refugee exodus from Syria, North Africa and Middle East countries into Europe is escalating uncontrollably. This development is presenting multifarious problems in Europe and extends to the United Kingdom. It is likely to escalate into a catastrophe. Thus global economic problems are continuing to escalate and are also increasing in complexity. Presently, there appears little hope for the foreseeable future that the massive uncertainty and volatility of the world markets will calm down.
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