Fast depletion of current cotton crop, general rise in cotton futures prices in New York (ICE), increase in yarn and fabric prices and decisions to suspend 7.5 percent duty concession on yarn exports in India coupled with a proposal to apply prohibitive export duty on raw cotton there have all bunched together to again propel domestic lint prices to record levels achieved earlier during the first week of March (3rd March 2010).
Thus domestic cotton prices have become very tight despite widespread power load-shedding and tight gas supplies to the industrial consumers at large. These developments portend closure of some spinning capacity in Pakistan at least for the forthcoming two or three months after which new crop (2010-2011) is expected to trickle in at an early date due to unprecedented high cotton prices and continuing demand of the commodity from the spinners.
In fact, some observers are even willing to scale down domestic cotton consumption for the current season (August 2009-July 2010) from earlier estimates ranging from 15.25 million to 15.50 million domestic running bales to about 14.75 million bales now.
With cotton from neighbouring India having become almost unviable and other styles from different origins also having reached mostly uneconomic levels, import of cotton into Pakistan is becoming more and more difficult.
Unfortunately, some domestic spinners are also complaining that cotton shipment from India variously estimated between 200,000 to 225,000 bales has been withheld and the likelihood of its dispatch to Pakistan has become very doubtful. Seedcotton (Kapas/Phutti) equivalent to hardly 6000 to 7000 bales from the current Crop (2009-2010) may have been left with the grower. The total cotton output for the current season (2009-2010) in Pakistan is now expected to be 12.7 million running bales on an ex-gin basis.
With hardly any seedcotton (Kapas/Phutti) left in the market, its notional price ranged roughly between Rs 2,100 to Rs 2,400 per 40 kilogrammes. Lint prices in both Sindh and Punjab were generally reported to have ranged between Rs 5,400 to Rs 5,800 per maund (37.32 kgs), with a couple of transactions having also materialised at Rs 5,900 per maund but on one month's credit basis.
Thus lint prices rose to historically high levels and remained perched there with hardly any laxity perceivable due to acute shortage of fibre supply. Indian cotton prices remaining very tight due to reasons aforesaid, there hardly appears any possibility for cotton or yarn prices to recede to lower levels at present.
Therefore, a few of the weaker mills may have to close down for a couple of months and await arrivals from the new crop (2010-2011). New cotton crop is expected to arrive modestly in June 2010 in Punjab while Sindh styles may follow suit during the end of July 2010. Lower Sindh cottons may even come earlier in such stations as Pangrio, Tando Ghnhan Mohammed, Tando Mohammad Khan, and in the Badin district in general.
Planting for new crop cotton (2010-2011) may increase anywhere from five to ten percent A considerable quantity of cottonseeds of BT variety will also be now officially allowed to be sold to the growers by the private sector and also some public sector agencies for the first time in the history of Pakistan.
This step should boost cotton yields and provide larger output during the forthcoming season. Regularisation of growing BT cottons to some extent should provide discipline and also improve marketing techniques and also put much needed responsibility on the cottonseed suppliers.
Ready cotton sales on Thursday included 100 bales from Nawabshah in Sindh at Rs 5,640 per maund (37.32) and 200 bales from Shahdadpur at Rs 5,700 per maund. In the Punjab, 900 bales of cotton from Khanpur reportedly sold at Rs 5,700 per maund, while 400 bales from Mailsi and 600 bales from Khanpur both sold at Rs 5,900 per maund but on one month's credit basis.
On the international economic and financial front, equity markets continued to show the usual exuberance they have been emitting since the last fifteen months or so. However, the basic fault lines in the global economic system won't go away. Many problems of fundamental significance remain unresolved and appear likely to raise their ugly head any time in the foreseeable future.
The Euro remains weak and vulnerable bearing down heavily on the Eurozone economy. It has now been revealed that in fact the Eurozone economy failed to grow during the last couple of months during 2009. It is now being stated in official circles in the United States that the American economy has "a log way to go" before it becomes fully functional again.
The Greek economy is growing grimmer by the day as it is being held in ransom by both domestic and foreign speculators. Some investors are even reported to be moving out of Greece. Even many depositors are reported to be pulling out their money from the Greek banks. This is putting the Euro under new pressure. Greece facing a financial crunch.
The British economy is already very fragile. Now the fear is that the general election scheduled to be held next month in Britain is likely to bring about a hung parliament. Therefore, the prospects of forestalling further downturn in the British economy have become slim.
American leaders are visiting China these days to persuade them to make the yuan more flexible. Basically, China is not a money manipulator. What is needed is that the Western powers should increase their economic efficiency, pull up their productivity, end banking speculations and also provide freer access to several commodities grown in South America, Africa and Asia to revive the global economy.
The most fearsome prospect lurking on the global economic horizon remains the possibility that under the prevailing circumstances the leading nations may adopt protectionism to avoid their domestic industries from going down the drain further to save further increase in their unemployment figures.