Due to a sharply lower cotton output this year (August 2015 / July 2016) of only about 9.8 million bales (155 Kgs) against the earlier projection of upto 15 million bales, domestic prices over the past several weeks have remained steady though turnover has been relatively slow due to the highly depressed condition of the domestic textile industry. International cotton prices, however, are mostly subdued.
As per its fortnightly seed cotton (Kapas/Phutti) arrivals report for the current season (2015/2016) till the 15th of February, 2016, the Pakistan Cotton Ginners Association (PCGA) said the ginning factories received 9,687,118 lint equivalent bales. From this quantity, the domestic mills are reported to have lifted 8,329,763 bales. The exporters have picked up 358,418 bales, while a quantity of 998,937 bales is still lying unsold with the ginners in both loose and packed form.
Seed cotton prices in Sindh generally ranged from Rs 1600 to Rs 2800 per 40 Kgs while in the Punjab they reportedly ranged from Rs 2000 to Rs 3000 per 40 Kgs. Supply of seed cotton is now dwindling in the market. Lint prices in Sindh are said to have ranged from Rs 4600 to Rs 5550 per maund (37.32 Kgs) in a slow but steady market. In the Punjab, the lint prices reportedly ranged from Rs 4600 to Rs 5600 per maund, as per quality. Even though the cotton crop is sizeably short in Pakistan this year (2015/2016), there has been no commensurate rise in lint prices because the textile industry is in bad shape due to high cost of inputs and several fiscal and other advantages being enjoyed by regional competitors.
Cotton consultant Naseem Usman has criticized the lack of attention of the government, cotton scientists and official organisations towards the betterment of the cotton crop which is generally being ignored and is suffering over the past several years due to low quality and very short output this year. Naseem Usman has said that the cotton economy is the backbone of Pakistan's economy and thus it needs the foremost attention of the government. Otherwise, next year's crop will also suffer in a big way.
Several mills are reported to be using imported cotton and yarns, mainly from India, Even lower grade yarns are reportedly being imported from India. Therefore, the prices of local cotton yarns are not so good, though some enquiry for yarn has emerged in the local market recently. Export enquiries for yarns are said to be few.
Sale of 400 bales of cotton from Hingorja in Sindh was reported at Rs 5225 per maund (37.32 Kgs), while 400 bales of cotton from Yazman Mandi in Punjab was reported to have been sold at Rs 5325 per maund on Thursday. Moreover, 600 bales from Mianwali sold at Rs 5475 per maund and 1000 bales also from Mianwali sold at Rs 5480 per maund.
On the global economic and financial front, a curt warning was issued by the Organization for Economic Cooperation and Development (OECD) this week calling for world leaders to tackle the slowing global growth. According to the British Broadcasting Corporation (BBC), the OECD has cut its global economic forecasts for 2016. The global growth forecast which the OECD had made last year was for an economic growth of 3.3 percent which has now been curtailed to just three percent.
OECD has further commented that trade, investment and wage growth are all very weak and the current monetary policies being carried out by the central banks are insufficient to stimulate global growth. OECD has also stated that simply relying on monetary policies would fail to put the global economic growth on track. Only a collective global programme will be able to promote economic growth around the world.
Economic growths from China and Japan to Germany and the United Kingdom have all suffered a fall which is restraining the global growth to increase any time soon. Even the recent meetings of the United States Federal Reserve have expressed worry about the global economic slowdown.
Other economic data around the world continues to be depressive. For instance, the Japanese exports have fallen since the past four months. The role of the larger banks around the world remains under scrutiny due to their large indiscretions over the past many years. There are also plans in the offing to cut the larger banks into smaller entities.
Early this week, the equities in Japan plummeted five percent which was the worse weekly drop since 2008. Oil prices also fell earlier this week despite the deal between Russia and Saudi Arabia to freeze their crude output at current levels. In Brazil, economic activity reportedly fell for the tenth straight month in December, 2016 clearly indicating that the recession in the largest Latin American country is continuing unabatedly.
Speculation continues regarding the possibility of the United Kingdom leaving the European Union which has created much volatility on the stock markets. Thus Britain's leading share index FTSE faltered and fell on Thursday ending a four day winning streak. Moreover, major mining stocks also fell considerably to impact the British markets considerably. The Japanese economy also shrank during the fourth quarter of 2015 making it Japan's second quarterly contraction during 2015. China's exports and imports both tumbled in January, 2016 further pushing down the world's second largest economy. Thus no improvement can be seen in the global economy in the foreseeable future.
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