Steadier condition on cotton market

A modicum of improvement was seen in the cotton rates on Thursday after several past days of relatively quieter situation on the ready market. This is possible because according to media reports the chairman of the All Pakistan Mills Association (APTMA), Gohar Ejaz, convinced the unregistered units of the textile industry to get themselves duly registered with the tax department and become entitled to zero-rated sales and purchases of their output earmarked for exports.
There had been an impasse in this regard recently. Though this decision awaits the final approval of the federal finance minister Dr Hafeez Sheikh who had to accompany prime minister Yousuf Raza Gilani to Uzbekistan and thus would now meet stakeholders on the 26th of March, 2011, but trade generally believes that this matter would be sorted out. APTMA is said to have endorsed the proposal of the Federal Board of Revenue for the sales tax.
Thus lint prices which were generally prevailing between Rs 11,000 to Rs 12,000 over the past several days have improved into the range of Rs 11,500 to Rs 13,000 per maund (37.32 Kgs) on Thursday in both Sindh and Punjab. Now there is hardly any current crop (2010-2011) seedcotton (Kapas/Phutti) left in the markets and the ginners may now have only 250,000 domestic size bales left unsold with them.
The notional seedcotton prices are said to range between Rs 4,000 to Rs 5,000 per 40 Kgs for any quality still left with the growers. It may be recalled that government had fixed a target output of 14 million domestic size bales (usually computed on ex farmgate basis), for the current crop but later revised the target downward to 11.7 million bales that due to massive floods and rains in the cotton belt. Now the traders believe that ex-gin output may range between 11,650,000 to 17 million bales.
Due to record high prices received by the growers in the outgoing season (2010-2011), traders feel that government may fix next season's (2011-2012) cotton output at 15 million bales on ex-farmgate basis.
Though New York cotton futures (ICE) prices are again fluttering around two dollars a pound for the two frontal months viz. May 2011 and July 2011 contracts, the prices of cotton for the subsequent months are decidedly lower. Therefore, a veritable uncertainty overhangs on the trade and also on the possible pressure on prices of cotton once the new crop (2011-2012) arrivals commence.
Also, the real plantings of cotton in the U.S.A. for the new season (2011-2012) remain a very variable and uncertain figure which gives rise to more probable volatility in the market. Therefore, we may still receive more jolts and see undulations in the market before it settles down reasonably.
Moreover, more complexities and variations on the global political and economic landscape after the escalating troubles in the Middle East, Africa and now particularly Libya, a true direction of commodity markets still remains evasive. On the global economic and financial front, equity markets were downbeat at midweek due to several negative news from the business sector. However, barring the Nikkei index in Japan, several markets made marginal improvements on Thursday.
In Europe, the Eurozone leaders are scheduled to huddle together to formulate long term policy to deal with the faltering economies. However, before they finalise their programme, Portugal has become the third country being forced to ask for a financial bailout following Greece and Ireland who already opted for a bailout earlier. Prime Minister Jose Socrates failed to push through austerity measures through the lawmakers so that a financial bailout option has become a necessary act for Portugal.
In the United Kingdom, finance minister George Osborne revealed his plans while presenting the annual budget how to kick start the economy. His plans included taxing the populace and spend the revenue for growth and jobs for the United Kingdom. However, it appears incongruous as to how he has balanced the revenue gains on the one hand and spending proposals on the other. The U.K. government has reportedly built up a total debt exceeding one trillion pounds which would be difficult to repay in the foreseeable future.
In the United States of America it has been reported that sales of new houses have sunk to a record low last month i.e. February, 2011, which is said to be the lowest since December, 2003. The sales of new single family residences are said to have punged nearly seventy percent.
The triple tragedy of a horrendous earthquake followed by the monumental Tsunami and then the disaster at the Fukushima Daiichi nuclear reactors will take much more than United States dollars three hundred billions to restore the gargantuan wreakges to their earlier health. This is besides the large loss in human deaths and misery.
Last not least, the American, British and French coalition's foray into Libya to enforce a no-fly zone is also bound to cost untold billions besides promising no positive result. Thus the tottering global economy has received more serious setbacks which could extend the path to recovery by many more years.
No doubt gold prices have surged again close to record levels at about Dollars 1440 per ounce as investors seek a safer haven for their capital. Moreover, crude oil prices in the United States have jumped to a two-and-a half year high level nearly touching Dollars 106 per barrel. Once again more negative developments have appeared to slow down global economic growth, particularly in the western countries, which will cast their negative effects all around the world.