Tightness grips cotton market

Though not quite unexpected, tightness has gripped the domestic cotton market since the beginning of this week. Specially, the cost of good quality cotton has risen sharply. It is now estimated that about six hundred thousand bales of cotton from the current crop (August 2017/July 2018) is lying unsold with the ginners from which hardly 160,000 bales (155 Kgs) are of better quality.
The scramble to buy is mostly concerned with the better quality of lint lying unsold with the ginners. The interest of mills to buy does not extend too much for the lower grade of lint lying unsold in the market. Traders said in Karachi on Thursday that besides the domestic cotton, the prices of global cottons are also on the high side. Improvement in yarn prices and textiles in the local market is also said to be pushing upon cotton prices domestically. The ex-gin price of grade three cotton went up last Wednesday and also today viz. Thursday it went up by Rs 100 per maund each raising it to Rs 7100 per maund (38.32 Kgs).
It is presently being projected that the current cotton crop in Pakistan (August 2017/July 2018) would range between 11.5 to 11.6 million bales (155 Kgs) from which the domestic mills will pick up between 14 to 14.5 million bales. Mills may import between 2.5 to three million bales while the exporters could ship from 150,000 to 200,000 bales. There is not much seed cotton left with the ginners, particularly in Sindh. Anyhow, for the small quantity of seed cotton still available in the market, in Sindh the prices are said to have ranged from Rs 2400 to Rs 3100 per 40 Kgs, while in the Punjab the seed cotton prices reportedly ranged from Rs 2600 to Rs 3100 per 40 Kgs on Thursday, as per quality.
Lint prices started increasing from last Monday and are essentially maintaining their tempo. In Sindh, its prices on Thursday are said to have ranged from Rs 6000 to Rs 7600 per maund (37.32 Kgs), as per quality. In the Punjab, lint prices reportedly ranged from Rs 6200 to Rs 7400 per maund depending on the quality.
On the global economic and financial front, it is generally believed that many leading and emerging economies are performing well after a ten year downswing in most parts of the world. The lead to revival of economies around the world has been provided by America by showing that the worst is over since the Great Recession of 2007/2008 and the American economy is doing very well with higher employment, sales, increase in the Gross Domestic Product and better exports.
The catch is that the Federal Reserve in America, the Central Bankers in the European Union, the United Kingdom, Japan, China and elsewhere have pumped colossal amounts of monies into their economies which have now to be retrieved. There lies the catch. Be damned if you do and be damned if you don't.
The ball is now in the court of Jerome Powell, the newly appointed Chief of the American Federal Reserve Bank. As time moves on, the Federal Reserve is crystal clear that the American economy is in good shape and it is time to increase the interest rates during the current year on three if not four occasions.
Jerome Powell was due to give his testimony to the American Senate on Thursday and with the pile of bonds the Federal Reserve must offload, panic had gripped the stock market earlier this week as markets got jittery this week and gold fell to its lowest level this year.
In his testimony to the Congress last Tuesday, Jerome Powell stressed the point that the American economy had strengthened and thus the interest rates needed to be adjusted upwards. The fear of rising inflation in America is providing fears to the corporate sector that the interest rates need upward revision.
The results of these developments are that equity markets in the U.S.A., Europe, the United Kingdom have become very jittery. The investors on Wall Street believe that any quick inflation spike in the American economy will incite the Federal Reserve to increase the interest rates speedily.
The result of these developments is that the Wall Street went into a turmoil recently. The outgoing month of February, 2018 has seen increased fear and uncertainty in the American economy. It is generally believed that Federal Reserve Chairman Jerome Powell is confident that the forthcoming years would be good for the American economy. However, some investors remain doubtful and fear that the fall in equity prices in February 2018 was not an occasional event but possibly the start of large correction.