Cotton: As expected, the prices of Phutti on the cotton market have come under pressure as the pace of arrival picks up. During the last seven days, prices in Sindh saw the biggest slide, as a lack of showers in the southern cotton belt allowed an uninterrupted supply of the new crop to reach the market, consequently, seed cotton prices in Sindh had shed nearly Rs 100 per maund in the open market at the close of business on Friday.
Currently, seed cotton prices remain steady - despite easing supplies and less than enthusiastic interest by buyers- reportedly ranging between Rs 3100 and Rs 3200 per 40 Kg in Sindh and from Rs 3100 to Rs 3200 per 40 Kg in the Punjab. This is because the textile market on the whole is doing well, with most sectors of the fiber economy having picked up as a result of a weakening PKR against the greenback and the margin accretion for spinners.
However, the possible volatility in cotton prices will remain a key concern for yarn producers in Pakistan. On the whole, international cotton prices have remained steady since December 2011, mainly on account of Chinese government's policy to build its cotton reserves which have kept demand steady and supplies nice and tight.
But now, there's a possibility that fiber prices may take a turn for the worse and become volatile in FY14, due to concerns over recent data which suggests that China's cotton reserves have reached an all time high of 59 million bales, which has analysts predicting a possible re-structuring of the stockpiling policy within the coming months (and a possible sell off of the sky-high pile of the stocked commodity in the international market).
If that happens, global cotton prices will see a slump, which will directly affect Pakistani spinners who are currently selling yarn in the international market at around Rs 6,500 per maund.
Meanwhile, the week also saw fiber gain in the international market as the ICE cotton future rose on Thursday for the first time in three sessions and posted the biggest gains since early July as a result of a healthy spike in mill demand. Prices had previously been under pressure after wet weather in Texas had eased off worries about a less than expected fiber output from America, the largest exporter of the commodity in the world.
Wheat
Multiple market sources have confirmed to BR Research that Ramazan flour subsidy package has been little more than an eyewash for the masses as the subsidized 20 kg bags that were to be retailed at Rs 635 at the Utility Supply Corporation stores have already run out and people who have been lining up for the cheap flour have been turned away empty handed for the last three days.
Meanwhile, flour mill owners have refused to continue with the Atta supply to these stores at the government set rates, since the same 20 kg bag of flour is retailing at around Rs 780 in the open market, and with the short supply of the commodity, millers' are unwilling to sell.
During the last week, there has been an upward revision in the prices of ex-flour mill, which climbed by Rs 2 per kg and is now available to consumers at around Rs 42 per kg. Similarly, the price of chakki flour has also gone up as a result of massive hoarding, and is now available to consumers at the rate of Rs 45 per kg (in some pockets of Punjab prices have gone up to Rs 47/kg).
Currently, the government officials - especially in Punjab, where the whole Ramazan package drama is unfolding - seem little perturbed about short supply of the precious commodity in the market and are largely concentrating on somehow coming to an agreement with the flour mills in a bid to re-instate the supply of subsidized flour to Bachat Bazaars, a source reported.
In the meantime, the murmurs for the government to start looking at plans to import wheat to stave off a possible food security crisis- which we have heard in the last 3 weeks or so- have already turned into steady cries and may soon become unbearable as we head towards the end of the first fortnight of the holy month.
And as the food departments try to salvage something of the situation, it would be prudent that they looked beyond the ill-planned Ramazan subsidy, recognize the crisis for what it really is and work on ways to counter the price hikes which just might ensue mass public hysteria if left to its own devices.
Rice
The rice market remained quiet this week as bids in a largely uneventful market failed to impress sellers. Prices for the Pakistani varieties have remained unchanged this week; meanwhile quotations for some Vietnamese varieties- which have already been slashed in a bid to attract buyers- trended the lowest, sources report.
The week also brought news that India has been planning to begin an aggressive campaign of lobbying to get legal shelter for subsidy on rice exports to the world market ahead of the next WTO meeting which is to be held later this year.
Criticised roundly by Pakistani exporters, the move will harm the rice sector in Pakistan and several other smaller countries in the region. Sources say that the Indian government is using the Food Security Bill as an excuse to get WTO's approval for additional subsidies on rice which will further weaken the competition in the Asian bloc and hurt margins for local exporters.
Additionally, the week also saw Iran finally confirming the much-awaited grain barter deal, announcing plans to receive rice and wheat from Pakistan to repay Pakistan's electricity imports. Pakistan has previously bartered wheat with Iran but not rice.
The rice was reportedly added to the deal at the last moment after continued pressure from Pakistan's Union of Small and Medium Enterprises on Pakistan's government. India has already signed a rice barter deal with Iran and Indian rice makes up about a two-thirds of Iran's imports so this deal with Pakistan will level the playing field a bit more between the Indian and Pakistani rice industries which have once again come to loggerheads.