Cotton: Trading activity on the cotton market retained its vigour as buying by mills continued during the course of the week. With the season drawing to a close, pressure on prices has been mounting and mills have started afresh on a buying spree in a bid to stock up before prices climb further.
While the official spot rate climbed to Rs6,450 during the week, rates on the open market climbed as high as Rs7,000 per 37-kilogram bale. Meanwhile trading volume also surged as the week drew to a close and the news of the imposition of Sales Tax and Withholding Tax on import of cotton hit the markets.
According to USDA's estimates, Pakistan is expected to produce 9.6 million bales during the 2012/13 season, recording a nine percent decline over last year's production stats. Delayed plantations being a major reason, estimated yield at 679 kilogram/hectare has also taken a blow during the current season, going down by nine percent year-on-year.
On the international price front, New York Cotton hit the highest note in the last nine months, climbing to new heights during Thursday's session. Coming off the back of strong US export figures, which have retained strength despite climbing prices.
Volumes have regained health and fiber has found much vigor in the last few weeks as speculation keeps luring in buyers to the fore. Consequently, the most-active May cotton contract on ICE Futures rose by another 1.1 percent at the close of the week, settling at 85.29 cents per pound, having soared as high as 85.97 cents/l earlier.
In the meantime, the Cotton Outlook Report released by USDA reports that world fiber consumption - a factor that has continued to support prices despite piling inventories with hoarders the likes of China- is going to further increase by three percent during 2012/13. Fuelled by rising consumption in non producing markets, the fiber usage is also expected to further increase in countries like India and Pakistan that are actively exporting low value added yarn to China.
Sugar
This week sugar wholesale prices have gained Re1 per kilogram, hovering around Rs4900 - 5000 per quintal across the country. In the retail market, the sweetener is available at Rs52 - 54 per kilogram. Besides exports from the County taking place at a full swing on private level, the export deal between the state-owned enterprise, Trading Corporation of Pakistan (TCP) and Tajikistan has also been issued a No Objection Certificate by the Ministry Of Finance, this week.
Talking about the local scenario, 700 tons of low-quality sugar imported from India in 2010, which was under debate for past few months, is given a go-ahead signal by the ECC. A large quantity of this substandard lot has already been released in the market. However, Utility Stores Corporation (USC) has refused to sell the shoddy stock into the market.
On the prices front, while retail prices of the commodity are lingering at Rs52 - 53 per kilogram, USC has recently revised the prices, fixing it at Rs45 per kilogram, for its outlets that number over 150 across the country. According to the Consumer Price Index calculated by the Pakistan Bureau of Statistics, the price of sugar has dropped by 2.05 percent over a month.
The global scenario indicates a supply glut throughout CY13. According to various researches, world sugar production is now forecast higher at 181 million tons as against the previous estimate of 177.1 million tons; while in the previous year the actual production stood at 177 million tons. Region-wise, the EU is expected to produce 17.2 million tons, China 15.1 million tons, Russia 5.3 million tons, India 26.4 million tons, Brazil 40.3 million tons, and Pakistan 5.3 million tons. The production projection for Ukraine has been recently revised down to 2.4 million tons.
Strong global supplies continued to take a toll on international sugar prices. May 2013, No 11 raw sugar contract at ICE settled at 17.91 cents/lb, while No 5 May 2013 white sugar contract at LIFFE was traded at $513.90/ton as of March 2, 2013.
Wheat
The wholesale wheat prices stayed between Rs3,300 and Rs3,350 per quintal across the Country. According to market sources, the new crop will start making its ways to the markets in Sindh by the middle of March. In other provinces, the new crop will be available from April onwards.
The Punjab government is expected to release its entire stock before the new crop arrives. However, PASSCO may be allowed to maintain one million tons of strategic reserves from last year's produce. Out of the new stock, the Punjab government will purchase four million tons.
On a month-to-month basis, wheat prices have surged by 0.67 percent while wheat products have gained 1.72 percent. Market participants underpin that the prices would have surged to a greater degree, had the government agencies not released their stocks so generously. In Sindh and Punjab, each mill is given 600 bags per day which is well above their demand of 400-450 bags. In spite of getting sufficient stocks, mills are selling flour at exorbitant prices.
The price of wheat flour (Atta No 2 1/2) has been fixed by the Government at Rs38 per kilogram. However, it is sold at Rs 40 per kilogram. The price of refined flour (Fine Atta) is set by the Government at Rs44 per kilogram; however it is currently being sold in the market at Rs44- 48 per kilogram. The price of flour available at small grinders (Chakki Atta) is between Rs46 - 49 per kilogram, though fixed by the government at Rs44 per kilogram.
This year wheat has been cultivated over an area of 8.6 million hectares and the recent rains have increased the probability of better output. Thus, the country will have abundant flour available to keep prices in check. That said, the factor that could push the prices up is hoarding and black selling by the millers.
Looking at the global prices, US hard red wheat for Gulf delivery settled on $320 per ton, on March 2, 2013, as against $303, a year ago. While the EU France grade-1 wheat clocks in at $326 per ton, as against $284 per ton, last year.
Rice
Prices for rice of Pakistani origin are said to have firmed up over the week as strong sales at the Gulf food event in Dubai have helped exporters grab buyer attention. Prices for the benchmark five percent-broken strengthened by $10 overnight as rates climbed to $435/ton - the highest in the last few weeks.
News from other Asian quarters are also positive this week as Vietnamese Food Association has announced plans to sell off some 2.9 million tons of rice, the contracts for which are in the process of being negotiated. It seems as if Vietnam's plans to slash back prices in a bid to lure in buyers has paid off as this will take the country's export sales for the period up by nearly 100 percent year-on-year.
Prices on the Asian front have continued to remain firm this last week despite the ample amount of supplies available with countries the likes of India and Thailand. Coming as a surprise to most people who have expecting prices to take a lurch following reports of excellent harvest from India, Reuters report that this situation is likely to be a momentary respite.
Despite a rising demand, the overwhelming amount of supplies available with the Asian giants is very likely to depress prices again, a majority of analysts agree.