Cotton: Cotton prices in the local market softened towards the end of the week as the Dollar slid slightly against the Rupee. Consequently, the steady mill buying decreased as textile mills went to the sidelines as a stronger rupee meant that margins for ready-made garments and other value added textiles are likely to be squeezed.
Phutti prices as a result are reportedly down by up to Rs 100 throughout the country, with prices in Sindh ranging between Rs 2,400 to Rs 2,700 per 40 kg while in Punjab they were slightly higher, ranging between Rs 2,500 to Rs 2,800 per 40 Kg.
Similarly, Lint prices have also lost Rs 50 per maund on account of a stronger Rupee, with prices in Sindh fluctuating between Rs 5,400 and Rs 6,100 per maund while in Punjab they are said to have ranged from Rs 5,850 to Rs 6,100 per maund.
In all likeliness, prices should be expected to remain down and out in the coming week as ginners may lower prices even further to sell some stock ahead of the bank's year closings and the market inactivity expected on account of Christmas holidays.
These past few weeks have also not been kind to exporters who have had to face heavy losses as a result of transporters' strike which has hampered the flow of exports at a time which is considered the peak season for dispatches of RMGs and other related textiles to markets in Europe and the US. As a result, a large number of orders have been reportedly cancelled while some exporters have had to send out orders by air, raising their costs exponentially.
On the International front, cotton prices managed to witness a similar cooling off as heavy selling was witnessed across the commodity markets as holders remained concerned over the US budget woes. According to Reuters, The benchmark March contract on ICE futures consequently slid down by some 0.07 percent, settling at 75.83 cents per lb.
Rice
Prices for Pakistani rice have witnessed a slide this week as the prices for the benchmark Irri-6 5 percent have slid by nearly $15 over last week. Currently going for $415 per ton, Pakistani long grain rice is currently selling far lower than Thai and comparable to the Vietnamese varieties.
Indian prices for the same Irri-6 5 percent broken remain somewhat range bound as well, going between $375- $400 per ton as all three exporting countries struggle to capture orders in a market which is expected to remain tight throughout the next year.
On the Basmati front, however, prices remain strong as Pakistani yield for the famed rice has remained low this season. As farmers increasingly shift towards planting hybrid varieties on their land, the size of the Basmati crop in Pakistan is very likely to shrink within the next few years, giving exporters like India another edge in the market.
While the hybrid varieties have been much lauded in having managed to increase the per acre yield of rice in the country, Basmati production, which has long remained the forte of this region is very likely to become the prerogative of a select few.
As things stand, the lower than average Basmati production in the country has managed to push up prices to the level where the Indian varieties are selling lower by as much as $100 per ton against the Pakistani varieties. Consequently, Basmati exports are very likely to remain low this season.
Sugar
The wholesale prices of sugar which have been falling since the start of the crushing season witness some steadiness for two weeks, subsequent to the ECC decision to allow exports. This week the wholesale prices hovered around Rs 49 - 50 per kg across the country. While the ex-mill price ranges between Rs 47 - 49 per kg.
With no specific export limit on the individual millers, SBP has set a collective export target of 0.5 million tons to prevent any unabated export of the commodity that could result in the local price upsurge. Exporters are directed to ship the commodity after 90 days of the registration or else their contracts would be considered void.
According to market insiders, the country is expected to produce 5 million tons of sugar this year with the local demand clocking in at around 4.3 million tons. This is expected to create a glut-like situation thereby keeping the prices subdued. However, ECC's decision to allow exports is accurate and timely, and is expected to generate sufficient liquidity for the millers, rendering them in a better position to make timely payments to the farmers.
Yet, the millers don't seem satisfied as amid superfluous international sugar production, millers are not getting better deals to export. Industry sources highlighted that the price offered to them is FOB $500 per ton. However, any price below $525 per ton is not attractive to them. Thus, they are asking the government to provide them with a subsidy of Rs 6 per kg which would incentivize to export.
The usual sugar recovery rate in the country is 10 percent (10 kg sugar per 100 kg cane). However, this year the recovery has improved to 11-12 percent. The crop cycle for 2012-13 stands at 1.13 million hectares as compared to 1.057 million hectares the previous year, while yield lingers at 56 tons per hectare.
Much in line with Pakistan, sugar production in India has also picked up pace across the country in the last two weeks and is 2% more than the production figures for the same period last year, at 4.9 million tons. However, in contrast to Pakistani backdrop, the demand in India is much higher than its production and thus, India is a net importer of sugar.
Looking at the international sugar scenario, sugar prices are projected to decline, but are expected to remain on an elevated plateau and to an average higher in real terms. Moreover, according to the Wall Street Journal, US ethanol imports are shaking up the US $1.6-trillion world sugar market. Commodities investors are betting that a rising US demand for sugar-based ethanol will reduce supplies of the sweetener and curb a decline in prices, which recently have fallen to 28-month lows.
With the ISO forecasting a 6.2 million ton global sugar surplus next year, sugar prices are expected to be suppressed for a year.
On prices front, March 2013, No 11 raw sugar contract at ICE was traded at 19.25 cents/lb while No 5 white sugar contract at LIFFE was traded at $518.30/ton as on December 20th.
Wheat
While much uncertainty is seen in the market about the prices of wheat, owing to lower area under wheat cultivation this year, however, the prices are sure to remain in the highlands in the months to come. This week the wholesale prices oscillated between Rs 3030 and 3050 per 100 kg.
Market sources underpin that the prices are expected to reach the mark of Rs 3800 - 4000 per 100 kg by the mid of 2013, resulting in enormous food security issues in the country.
Largely, wheat accounts for 13 percent of the total value addition by the agricultural sector to GDP, and is cultivated over 37 percent of the total crop area. However, during 2012, the cultivation area dropped by 3 percent to tally 22 million acres. The situation is further aggravated for 2013 wheat crop where the cultivation area barely stands at 18 - 19 million acres due to delayed decision by the government to raise the minimum procurement prices though the issue was cried over by farmers for many months.
Consequently, even the incentive of higher wheat support prices fell short in enhancing production towards achieving the 25 million tons target. Most of the farmers in Southern Punjab opted for early sown cotton variety and sunflower instead of wheat. To add insult to injury, those who opted for wheat are also not expecting good yield as much of the sowing is done after the end of the ideal sowing season which ends in November.
The international wheat scenario, as depicted by IGC, underscores the production in 2013 to tally 654 million tons which is down 6 percent as compared to the production accomplished in 2012. The international demand is anticipated to surpass the estimated production, to total 678 million tons. Thus, prices are expected to fetch an elevated trajectory.
The major exporters of wheat in 2013, according to IGC would be Argentina, Australia, Canada, the EU, Kazakhstan, Russia, Ukraine, and the US. On the price front, the US hard red wheat for Gulf delivery settled on $353 per ton. While the EU France grade-1 wheat clocks in at $337 per ton, as of December 20th.