Dramatic rise in New York Cotton futures (ICE) prices since the last three months have astounded many veterans of cotton trade who have not seen or heard of any such exhilarating performance since the previous one and a half centuries.

At first when the cotton futures shot up to 157.23 Cents per pound during last November (10 November 2010), several of us were breathless.

However, there was more in store for us.

After many ups and downs thereafter when cotton futures prices undulated continuously during the subsequent three months, ie till this instant (10th of February 2011), the growers, merchants and mills saw the spectacle with wonder.

Today (10th of February 2011) evening Pakistan time, March 2011 contract had attained the record level of 186.30 cents at its highest and was still roaming around that level later on.

There is no knowing how high the ICE contracts will continue to rise.

The next target for the seers and soothsayers is Dollars Two per pound at the ICE cotton futures market, which now surprisingly seems attainable.

It is not only the Indian Government cotton export policy which may have triggered this phenomenon, the world a flush with easy money (Quantitative Easing) by the United States, United Kingdom and Eurozone also deserve the credit for the record setting activity of the New York futures (ICE) inexorable rise in fibre prices.

For good measure, wary investors seeking safe haven have also chosen gold, and last not least the various commodities to fight off inflation, and within the commodities complex cotton futures prices (ICE) takes the cake for stellar performance.

With this background, it was but axiomatic that domestic prices of raw cotton and textiles in Pakistan will follow suit in tandem with ICE futures prices and loll around at lofty heights.

So be it.

Thus ready cotton prices rose nearly by Rs 3,000 per maund (37.32 Kgs) since the past three months and are now ruling at the record level of Rs 12200 per maund since the beginning of this week.

Had it not been for extreme stringency in money supply, local lint prices would have been much higher.

Thus we see seedcotton (Kapas/Phutti) prices in Pakistan rise to the record range of Rs 4,300 to Rs 5,500 per 40 Kgs, according to the quality.

Similarly, lint prices in the local market have also ratcheted up to the unprecedented range of Rs 10,500 to Rs 12,200 per maund (37.32 Kgs) at the end of last week in the ready market which is keeping a continuously tight posture, but was being quoted between Rs 10,500 and Rs 12,000 per maund on Thursday because of unprecedented credit squeeze in the market.

Ready sales in Sindh for the better varieties comprised 400 bales of cotton each bought by exporters from Tando Adam in Sindh at Rs 11,400 and Rs 11,500 per maund (37.32 Kgs), while 1200 bales from Sadiqabad in Punjab were said to have been sold at Rs 12,000 per maund.

According to brokers in Karachi, Indian Cotton prices have also risen in proportion to the global increases and were reportedly being offered at Indian Rupees 60,000 per Kandy, up from about Rs 50,000 per Kandy about a week ago.

As a result of these developments, most of the open end units in Pakistan have closed down and some of the ring spinners may also have to follow suit, at least for the next three or four months, awaiting new crop to arrive.

A small quantity of new crop (2011-2012) in Pakistan may arrive as early as May or June 2011.

It is projected that due to more than double the prices of seedcotton (Kapas/Phutti) received by the growers in the outgoing season (August 2010-July 2011), they may plant ten percent more area for the new crop (2011-2012), increasing the sown acreage to about 3.3 million hectares.

In this background, Pakistani mills may consume about 15 million bales of domestic size cotton during the next season.

Currently, yarn and textile business is doing quite well in Pakistan, the only hurdle being shortage of funds in the money market.

On the global economic and financial front, things are not getting any easier.

First of all, the reported proposal of Ben Bernanke, Chairman of the Federal Reserve Bank in the United States, to ask congress to increase government's borrowing powers to cope with ballooning government debts indicates that not all is well with the economy.

Added to this the global fears of rising food prices and increasing inflation are bad omens for the world's economic health.

Compounding these worries, the recent floods in Australia, talk of unprecedented drought in China and the fear of an unstabilized Egypt have again pulled down equity markets at midweek.

Moreover, continuous tightening of credit by Chinese banks to battle inflation again caused fall in share prices in the Asia Pacific region.

Therefore, the economic mangers around the world are facing a classic dilemma.

If they ease money lending, the inflation goes worse.

If they tighten money supply, more businesses may close down and increase the already alarmingly high unemployment.

Therefore, economic conduct around the world is like sailing on a rudderless ship with hardly any means to guide her to safe waters.

Copyright Business Recorder, 2011

Share

Add comment

Name (required)

E-mail (required, but will not display)

Website

Notify me of follow-up comments

Refresh

Send

Cancel

JComments