Cotton prices on both the New York futures market (ICE) as well as domestic market slumped further across the board to present a clearly bearish picture. New York futures rates were all obtaining below one dollar a pound on Thursday evening Pakistan time. The December, 2011 contract was ruling around 98.59 cents per pound having lost U.S. Cents 2.16 per pound.
Domestic cotton prices for the new crop (2011-2012) slipped down further on Thursday and were obtaining in Sindh from Rs 5,400 to Rs 5,500 per maund (37.32 Kgs), while in the Punjab they reportedly ranged between Rs 5,600 to Rs 5,700 per maund in ready business. Now nearly 125 factories are ginning the new crop cotton in Punjab while about fifteen factories are pressing the new crop in Sindh. Crop condition is usually being described in very optimistic terms.
It may be recalled that during the last season (August 2010 - July 2011), cotton rates at the beginning of the season started at Rs 5,600 per maund (37.32 Kgs) but rose exponentially to Rs 14,000 per maund on the 7th of March, 2011. Today prices of new crop (2011-2012) Sindh styles are obtaining between Rs 5,400 and Rs 5.500 per maund which are below last year's (2010-2011) lowest cotton rate of Rs 5,600 per maund.
Sindh seedcotton (Kapas/Phutti) rates are ranging from Rs 2,500 to Rs 2,600 per 40 Kgs, while in the Punjab they are obtaining between Rs 2,500 to Rs 2,600 per 40 Kgs according to the quality. About 15,000 bales are being ginned daily in both Sindh and Punjab. Growers and most traders expect new crop (2011-2012) cotton in Pakistan to range from 15 million to 16 million domestic size bales subject to clear weather.
On a more conservative note, we may assume next years (2011-2012) cotton output in Pakistan to range from Rs 13.75 million to 14 million domestic size bales on an ex-gin basis. Mills consumption may be projected between 14 million to 14.5 million bales of cotton while the imports by the mills could range between half a million to one million local size bales.
The most serious issue confronting the spinners is the lack of sale or turnover of yarns in both the domestic and the foreign markets. The utter lack of global demand for yarns is very disappointing. This situation could bring down cotton prices further and both yarns and raw cotton may start accumulating in larger quantities. The growers in Pakistan who planted very enthusiastically for the new season (2011-2012) in view of the excellent prices that received for the outgoing season (2010-2011) may soon become despondent.
Some reports appeared during the early part of this month that the government may introduce a scheme to lift about two million bales of cotton from the market to stabilise the prices, however, Government being short of funds, it may be difficult for it to implement such a programme.
In the evening, a sale of 200 bales of cotton from Sultanabad in Sindh was reported at Rs 5,400 per maund for delivery on the second of August, 2011, a new low level for the new crop. Then 200 bales from Mirpurkhas and 600 bales each from Shahdadpur and Sanghar sold at Rs 5500 per maund.
In the morning 200 bales from Bahawalnagar in Punjab sold at Rs 5,650 per maund, 200 bales from Chichwatni sold at Rs 5,700 per maund (37.32 Kgs) while 400 bales from Khanewal reportedly sold at Rs 5,750 per maund. New crop cotton prices have lost about Rs 3,300 per maund within a month.
On the global economic and financial front, things worsened all round during the week. On the forefront, the Greek socio-economic disaster continues to wallow in utter pain and penury. Almost two years approaching since the emergence of the Greek economic and social fiasco, the country is still smouldering in an unending misery. All the leaders of the Eurozone have proposed and also enacted various propositions during this period but to no avail.
It appears that no unstinting or duly considered or unequivocal solution has been offered to Greece upto now, only half-hearted measures have been proposed which have totally backfired. The significance of Greece in the current context is not simply that of a medium sized country on the periphery of the richer northern states of Europe, it symptomises the importance of the overall Eurozone community which may fall apart if the leaders of the zone continue their dithering and half-hearted measures which at best remain lukewarm. Instead of approaching the problem in the spirit of "All for one and one for all", the approach to rehabilitate the economy and finances of Greece remains insufficient, belated and thus ineffective.
The fundamental problem of the Eurozone is that besides Greece, Spain, Italy, Ireland, Iceland and Portugal have similar economic and financial problems. It is therefore easy to see why delay in solving the Greek economic and social problems will certainly have a domino effect on the peripheral economies of the Eurozone. And then the Greek problem will enter the heart of Europe in the centrally positioned and richer countries.
With United States lawmakers desperately trying to find a compromise between the incumbent Democrats and the opposing Republicans to extend the August 2, 2011 borrowing deadline by which the American Government may spend beyond U.S. Dollars 14.3 trillions, any failure to do so would compound the global economic condition hurling the leading economies like the United States, the United Kingdom, Germany, France and most others into a double dip recession. In such an eventuality, it may take the world, possibly with a new design and orientation, some two or more decades to regain normalcy. Because no country can remain an island to itself in these our times, countries such as China, India, Brazil or the Russian Republic may also suffer a long period of slump in our globalized world.
Eurozone leaders were meeting in Brussels this Thursday to sort out the causes of the Greek economic and financial tragedy. Also mooted were ideas to include private banks to share some of the burden to ameliorate the misfortunes of Greece brought about by their politicians and generals over the past decades. Good luck to all who are trying to save the Eurozone economic collapse, and in turn the global economic superstructure built at the Breton Woods in 1944. Alas we have no Lord Keynes to guide us on these grave and burning financial and economic issues enabling us to remove the world closer to a more functional and effective and equitable system.