Persisting drought in large of cotton tracts in Taxas, disbelief in latest United States Department of Agriculture (USAD) report on higher supply, carryover of cotton and lesser consumption in the 2011-2012 season, and now the sizeabale floods in Sindh and southern Punjab in Pakistan have pushed cotton prices on to a higher plane. Thus a rebound on the New York cotton futures prices (ICE) above one dollar is presently holding ground.
Some improvement in yarn and made-up goods has been reported here and there, but it is nothing to write home about. With global economies still going through some of the worst times in recorded history, it is difficult to envisage any large improvement in cotton offtakes at present. Over the recent past, cheaper polyester staple fibre (PSF) prices have also forestalled any dramatic improvement in cotton prices as witnessed during the early part of March, 2011. But fibre prices over the past week or ten days have tended to stabilise in Pakistan and even recorded some relative improvement.
The prominent story this week has been about the recent rains and floods over several parts of Pakistan However, a far as cotton dynamics are concerned, rains have fallen severely in Lower Sindh in the districts of Badin and Hyderabad and partially effected the quality of cotton in a few areas of southern Punjab All in all, lint output in lower Sindh in such areas as Badin, Mirpurkhas, Tando Allahyar, Tando Muhammad Khan regions may have lost an estimated three hundred to four hundred thousand local size bales while also causing quality loss to the lint. In southern Punjab, any significant loss in cotton output due to the rains or floods have not been reported, but quality of cotton in certain areas may have been compromised leading to lower grades and possible dullness in the colour of the lint. Punjab cotton may have suffered only in areas which are under harvest.
Generally, it is still believed that Pakistan should produce 15 million or more domestic size bales during the current season (2011-2012). However, the monsoon rains and consequent floods are still with us at least till the middle of September, 2011.
Partial strike by the ginners protesting against the 3.5 percent withholding tax still is continuing but it is hoped that something will be finalised soon so that all the ginning factories will start functioning with full force. In the mean time, with the approach of the Eid-ul-Fitar at the end of this month, transport will become scarce and so some business in ginning is being carried out so that the domestic mills may be enabled to continue their post - Eid spinning operations without any interruption. However, beginning next week, business is likely to slow down due to approaching holidays. On a conservative basis, we may presently deem the total cotton production in Pakistan during the current cotton season (2011-2012) may range between 14 million to 14.5 million domestic size bales on an ex-gin basis. Consumption by mills may also range from 14 million fourteen million to 14.5 million domestic size bales. Exports may range between one million to 1.5 million bales. Imports during the current season may range from half a million to one million bales in a market expected to remain in a steady to tight zone.
Sales of ready cotton reported till Tuesday afternoon included 400 bales of cotton from Shahdadpur and 600 bales from Tando Adam in Sindh both at Rs 6,400 per maund (37.32 Kgs). In the Punjab, 400 bales from Kabirwalla reportedly sold at Rs 6,800 per maund in a tight market. Spinners fear that any further rains could delay the arrival of the crop.
Generally speaking, seedcotton (Kapas/Phutti) prices ranged from Rs 2,700 to Rs 2,800 per 40 Kgs. in Sindh, where as is the Punjab they reportedly ranged from Rs 2,700 to Rs 2,950 per 40 kilogrammes. Lint prices in Sindh generally ranged from Rs 6,350 to Rs 6,400 per maund. Ginned cotton prices in the Punjab are said to have ranged from Rs 6,500 to Rs 6,800 per maund (37.32 Kgs) according to the quality.
In other news, textile industry has hailed its chairman for having been honoured by one of the highest civil awards, Hilal-i-Imtiaz, by the government of Pakistan. Gohar Ejaz has been lauded by the All Pakistan Textile Mills Association (APTMA), of which he is the chairman, for his valuable service and dedication for the textile industry of Pakistan.
Industry circles have appreciated the idea of Ijaz A. Khokar, Chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) for proposing the idea of establishing a Federation of Pakistan Textile Industry (FPTI). A roundtable conference was held for this purpose on last Monday hosted by PRGMEA. Besides the members of PRGMEA, representatives of Pakistan Cotton Ginners Association (PCGA), All Pakisatn Textile Mills Association (APTMA), Pakistan Yarn Merchants Association (PYMA), The Karachi Cotton Association (KCA) and Pakistan Textile Exporters Association also attended the conference and endorsed the idea to set up a Federation of Pakistan Textile Industry.
On the global economic and financial front, prospects of any early recovery or rehabilitation in the United States, Europe or Asia got gloomier. At first, there was a brief cheer when German Chancellor Angela Merkel and French President got together in a meeting to devise ways and means to put longer lasting mechanisms to deal with the economic problems of the Eurozone as how they emerge. However, soon the euphoria vanished when some negative news appeared on the markets. The proposal to float Euro bonds failed to inspire the markets.
To begin with, German economy grew only by a tenth of one percent over the last quarter. Furthermore, the influx of capital moving into Switzerland by capturing the Swiss Francs as a safe haven inundated the market so as to shoot up the value of the Swiss Francs to the utter detriment of the export sector of Switzerland. Thus the German economy which appeared as a model to the Eurozone and its capacity to bailout the peripheral economies like Greece suffered a shock of sorts. Similarly, The Swiss economy is also facing a downturn in its exports, one of its major economic plank, and thus may go down sizably. The strength of the Japanese yen continues to remain a major deterrent to its exports. The United Kingdom, in the meanwhile, continues to suffer from its socio political difficulties of major proportion as the lower and the middle class of its citizens have rebelled against the condition of the extremely poor populace on the one hand against the pomp and circumstance of the ultra rich of its society on the other.
Thus with an ailing Euro, economic hardship in Germany, Switzerland and Japan due to different reasons, the prospects for an early global recovery have been pushed back further. China will also suffer an adversity sooner or later and its prime buyers of goods and commodities in the USA, Europe or in Asia will become cash-starved due to the various difficulties. The scheme of the European leaders to tax the banking transactions is also facing serious objections.
Therefore, most everything in the leading economies of the world is facing uncertain times. United States is already known to suffer massive unemployment which refuses to recede. Eurozone economies, one and all, are getting sicklier. The German and Swiss economies are likely to become fragile under the weight of the widespread economic downturn around the world.
Under these circumstances, one would not blame the German consumers who have started spending less and less. Moreover, there is political resistance amongst its populace to help the weaker Eurozone economies while its own economy has now shown a slowdown during the last quarter. Therefore, this week has shown that the economic weaknesses prevalent in the peripheral economies of Europe like Greece, Spain, Portugal and Italy have now travelled to Germany, Switzerland and France.
With the Eurozone in increasing crisis, it is difficult to perceive how the proposed common Eurozone bonds to assign collective responsibility to tackle economic sickness over a broad spectrum of countries will work. Thus the idea of the richer economic entities like France and Germany to go to the help of needy members of the Eurozone appears unlikely to work and has already been rejected by the people of the Zone.
Protests are being held in Spain against a proposed visit by the Pope which will entail big expenses by the state while the commoners are suffering large scale inequities and deprivations.
Thus we see that the engine of growth in Europe, namely Germany, has now been hit with an economic slowdown, and the Eurozone appears to be going out of control. The German tax payers are asking increasingly as to how much more Germany will have to pay to prevent the Eurozone from scattering. The ultimate question which has now arisen is that with the floundering of the Eurozone economy, will it throw the American economy into another recession.