COTTON: Prices remained surprisingly tensile last week as demand slowly but steadily rose. Data collected by PAR shows that Al-Karam textiles, Gadoon, Rafique SPG mills and Interloop textiles made significant purchases towards the end of the week, with a majority of transactions taking place in Punjab.
Sources report that interest from the spinning quarter has also picked up after a luke-warm few weeks and that has helped break the fall of the declining Spot rate, sustaining it at Rs 6,450 at the close on Friday. A pick-up in volumes comes after a tepid few weeks which saw spinners almost retreating to the sidelines amid a weak dynamic but now that China has started making sporadic purchases, the dullness from the yarn market might vanish, they say.
Likewise China once again remains the leading determinant of cotton prices on the international front in the foreseeable future. The hopes of a revival in demand from Chinese millers had in fact managed to breathe a new life in a generally lacklustre natural fibre market last week, with the ICE cotton jumping to two week highs after the country forecast a 12 percent decline in cotton production this year.
But Beijing giveth and Beijing taketh away as they say. This week came a wave of tension which saw investor interest declining and with uncertainty hanging over whether or not Beijing will release some of its massive stock in the domestic markets; cotton was left in the dumps once more. Cotton futures subsequently sank by 2 percent on Friday and touched a more than ten-month low, weighed by supply pressures. The most-active March cotton contract on ICE Futures US was down 1.58 cent, at 76.77 cents/ lb by close of Friday-the weakest prices since January.
Wheat
Wheat support prices are still a no-show this week as the farmers eagerly await announcement. In the meantime the Met Office has sagely advised the farmers to remember to sow their wheat before December if they want to achieve optimal yields- which just might be the worst piece of positive re-enforcement we might have had the opportunity to witness for quite some time.
With sowing having been delayed well past its normal time, wheat yields for the next season are already under jeopardy - a number of agri-experts have informed BR Research repeatedly, some insisting that any sowings that take place beyond Mid November are already too late. At the heels of a season when the country is already facing scarcity of the staple grain, this continued absence of a price incentive is becoming conspicuous and will most definitely impact the production of the commodity next season.
Meanwhile, flour prices have retained their upward trajectory, having gone up in urban areas due to shortage of the commodity in the open market. The transporters' strike managed to worsen things and the retail prices of even the low quality mixed imported wheat has gone up as high as Rs 3,600/100 kg bag.
Rice
Asian rice quotes remain largely static this week, with Indian benchmark 5 percent remaining the most expensive - being quoted for around $410 - $420 per ton. Indian rice remains highly sought after and is in fact selling for a premium over the Thai 5 percent broke, which is still being quoted for $400 - $410 per ton, about $5 per ton discount to Viet 5% rice shown around $405 - $415 per ton. The benchmark 5 percent broken white rice of Pakistani origin meanwhile has hit some fresh lows, and is being quoted around $375 - $385 per ton- the lowest levels prices have hit in the last 6 months.
In the meantime, PBS has released the export numbers for the first quarter of this Fiscal and it seems that the lower rice prices have managed to bring some buyer interest our way. The country has reportedly exported around 882,132 tons of rice in the first four months of FY13, which is up about 24 percent from around 711,393 tons exported during the same period last year, according to the numbers released by PBS.
Most of the increase is due to resurgence in non-basmati rice exports which have increased to around 678,420 tons in the last quarter, up about 36 percent from around 498,196 tons exported in the same period in FY13.
However, Pakistan's basmati rice exports during the same period still show a depressing declining trend, down by about 4.5 percent from around 213,197 tons that were exported in the same period last year. In terms of value, total rice exports in July-October 2013 have earned Pakistan around Rs 58.7 billion, up about 40 percent from around Rs 42 billion in the same period in FY13.
Sugar
Slow harvesting and a delayed crushing season have artificially pushed up prices of sugar in the domestic market but some respite has finally emerged as this week ends. Crushing has finally started and in anticipation of procurements picking up pace, prices have already started slowing down- with the commodity shedding Rs 1.50/kg in the space of a few short days.
However, the clouds have not entirely dissipated, confirm our sources. Average retail prices in urban centers including Lahore, Quetta and Karachi are skimming dangerously close to Rs 60/kg and have gone even higher in some places. With a buffer stock of around 1 million ton available with the local mills and TCP, things should very likely cool down- if the recent flare was nothing more than a psychological response to the delay in the crushing season that is.
But some circles still maintain that either the stock situation has been exaggerated or a possible holding back is taking place which has made the commodity scarce in the market. With the mills only now beginning the crushing, the next few weeks will remain tense and we'll have to wait and see which way the pendulum swings. Watch this space for follow up details.