Price, quality uncertainties continue on cotton market

With domestic new crop (2011-2012) mostly still a couple of months away and shortages of cotton of good quality remaining, lint price levels are likely to remain uncertain. With domestic as well as global yarn offtakes reportedly slack and dull conditions coupled with an uncertainty regarding the price and quality of incoming cotton around the world, unpredictability may remain a prime feature of the fibre market.
On the New York cotton futures market, July 2011 contract was under final settlement this week and was thus showing increase in price levels upto US Cents 166.70 per pound but then is said to have closed at US Cents 164.52 per pound (Thursday evening Pakistan Time). With July 2011 contract out of the way, a more rational price structure in cotton futures may be established because the parameters and the supply position of cotton may be known better in the foreseeable future.
In the domestic market, most of the current cotton crop (2010-2011) has been disposed off. Now the attention is shifting to the new cotton crop (2011-2012) in Pakistan. The output projection of the new crop is being announced in very optimistic terms due to extensive sowing and hitherto good weather conditions. Official circles put it around 15 million bales of local size.
This week, however, weather pundits have forecast high flood levels in the rivers during the next couple of months which could inundate villages and dislocate upto five million people. This would be only half the intensity of the historic floods Pakistan saw last year, but it could damage agriculture, including the standing cotton crop, considerably.
Anyhow, we can retain our earlier idea that cotton output during the forthcoming season (August 2011-July 2012) would range between 13.5 million to 14 million domestic size bales. Mills would need an anticipated 14 million to 15 million bales as consumption. The exporters may ship between 0.5 million and one million bales while mills in Pakistan may import between 1.5 million to 2.5 million bales.
Current crop (2010-2011) lint prices reportedly ranged from Rs 8,000 to Rs 8,800 per maund (37.32 Kgs) in a steady market. New crop (2011-2012) seedcotton (Kapas/Phutti) prices reportedly ranged from Rs 3,800 to Rs 3,850 per 40 Kgs in Sindh while they are said to ranged from Rs 3,900 to Rs 4,000 per 40 Kgs in the Punjab.
The price disposition for the new crop cotton was steady. Reports indicated that upto now if 240 bales of new crop (August 2011-July 2012) have been pressed in Sindh, nearly 2,500 bales of new crop cotton have been ginned in the Punjab from seedcotton received from Sindh. To gin the new cotton crop, till now one ginning factory has started in Sindh while seven factories are reported to be functional in the Punjab.
On the global economic and financial front, this week brought more uncertainty and negative news so that it is exceedingly difficult to conceive how the world economy can be restored or rehabilitated any time soon. Fears of financial meltdown in Greece have raised the hackles of all the leaders of the Eurozone though they were reported to have cobbled up another bailout programme for Greece. However, street protests continued unabated in several towns and cities of Greece.
The French Agriculture minister Bruno Le Maire told a radio interview this week that to prevent food shortages around the world need a priority "to prevent the 21st century from becoming the century of hunger."
All equity markets around the world went down when the Federal Reserve in the United States reduced its idea of an economic recovery soon. With an unemployment figure of 9.1 percent in the United States refusing to come down, the indication of a slow growth announced by the Federal Reserve has dampened any hope of an early economic recovery in America.
Thus we saw the European shares at three month low levels this week, a drop in United Kingdom's share index, fall in share prices from Australia, Shanghai and Seoul to Taiwan and India. Greece's economic woes appear glaring and it appears that Greece has reached the end of the tether. But it must be kept in mind that if Greece goes into default - as it might - then may be it would have to devalue its currency, possibly a new drachma, heavily if it is to retain and continue its daily business intercourse with the world.
To summarise the situation, private banks in many countries in the world are shaky, the much desired economic recovery around the world refuses to materialise, widescale conflicts, wars, repressions and rigors of poverty are impoverishing the world as never before. There appear no leaders of mettle and sincerity who can control or cut back the global economic malaise we are going through.