Subdued condition on cotton market

Due to continuing economic unease around the world, monumental earthquake and tsunami disasters in Japan followed by a catastrophe in its nuclear installations, Libyan war continuing on uncertain basis and over all lack of Chinese interest in cotton yarns, cotton prices are giving relatively bearish look in most of the markets.
Besides problems with yarns sales, off take of physical cottons and its demands seems to be dull even if New York cotton futures (ICE) prices are trying to maintain a high profile. Thus local yarn prices in Pakistan are appearing to be quite dull amidst reports that there are hardly any sales while yarn inventories are building up in some of the mills.
While domestic floating stock of cotton is barely a couple of hundred thousand bales left from the current crop (2010-2011), sellers seem interested to sell off their remaining stocks of cotton without further ado. Therefore, there appears to be pressure on the yarn market so that enquires for fresh cotton purchases are rather meager. If some mills do not have enough lint to last them out till the advent of the new season (August 2011-July 2012), they are likely to close a part of their spinning production for three or four months rather than buy cotton at high prices in a very high priced and volatile market.
Moreover, there had been an impasse between the government and the cotton community - ginners, spinners and small scale weavers other exporters included - regarding the imposition of a sales tax under the S.R.O.231, which now appears to have been settled by rationalizing its administration by the government.
However, some traders are still of the opinion that these changes will not, particularly due to imposition of six percent sales tax on non-registered manufacturers and four percent on cloth weavers settle the issue. These provisions will also suck out more money from the market.
However, permanent problems of the cotton economy not only continue to remain unabated, they appear to have increased in a money hungry market. Despite stringent measures by the State Bank of Pakistan (SBP) to curb credit, vast government spending continues to inflate the prices of sundry goods and commodities. As long as the spinners remain worried regarding their yarn sales, lint and yarn prices are likely to remain under pressure despite the hullaballoo to created by the hedge funds and the long position stakeholders on the New York cotton futures market. However, the funds can still play a credible bull game in the market for some more time to come.
Due to stringency of funds, our market remains quite dull and drab which are presently its notable features. Thus till the evening no reports could be ascertained regarding actual business in the market. On a nominal basis, however, seedcotton (Kapas/Phutti) prices on Thursday may presumed to have ranged between Rs 4,000 to Rs 5,000 per 40 Kgs in a rather inert market. Similarly, notional prices for lint in Sindh and Punjab were reportedly quoted lower between Rs 11,500 to Rs 12,500 per maund (37.32 Kgs) in a sluggish market.
Other news included a report that a meeting of the Cotton Committee constituted by President Asif Ali Zardari met under the chairmanship of former food and agriculture minister Nazar Mohammad Gondal which recommended increase in area under cotton cultivation. The committee deliberated upon a crash programme regarding short and long-term strategies to boost cotton output in Pakistan. The creation of a Pakistan Cotton Board as an autonomous body under private cum public partnership was also mooted in the meeting.
Representatives of the provinces, cotton growers, traders and textile industries also attended the meeting. The aim of the government was to sow cotton on 80.01 million acres and attain an output of about 15 million domestic size bales during the forthcoming season (2011-2012) by increasing the area by eight percent.
On the global economic and financial front, more dire news kept cropping up. Despite a positive showing on the equity markets at midweek, news from several other quarters remained essentially negative. Even though the United States housing figures showed a nine-year low, observers felt it had not yet reached the bottom.
Tokyo's electronic shares plunged after news were received that atomic radiation from the Fukushima plants was three thousand times more than the permissible limit. Japanese economy has hit a two year low. The global insurance industry is facing a tough time after the recent earthquake debacles of Chile, New Zealand and now Japan.
Despite receiving an earlier financial bailout, Ireland's banks are again facing very difficult times. Indeed Ireland itself is in the throes of another economic breakdown which will lead to seeking additional financial bailout. Greece, Portugal and Spain still find their economies in terrible conditions as they remain essentially crippled. Thus further financial bailouts remain an imperative for them as more injections of money are required.
The United States is still facing serious problems in its housing as a consequence of reckless lending by the banks to home builders over the years. The Eurozone sovereign debt crises remain serious and will not go away. The continuing war in Libya and unsettled social and political problems in Afghanistan, the Middle East and North Africa, particularly Libya, point to extended slowdowns, if not a veritable breakdown on the global economic and financial front.