Downside sentiment prevailed on the cotton market as mills in Pakistan continue to suffer from large yarn losses both domestically and on the export front. There was hope that the new cotton crop in Pakistan (August 2015 /July 2016) has just started but arrivals are meager and modest and that thus lint prices would be strong. However, due to very negative sentiment in the textile industry, cotton prices continue to be subdued. Even globally the textile industry remains quite bearish.
In Pakistan, the new federal budget (2015/2016) announced recently incorporates several taxation measures which are keeping the domestic textile industry under pressure. Several textile units are reported to have closed down already or are in the process of winding up their production activity till conditions become more conducive. Even though there was practically very little or no carryover of cotton from the previous year (August 2014 / July 2015, there is no eager buying of ready cotton. Because the mills in Pakistan are not doing well, prices of seed cotton as well as lint from the new crop remain easy. Monsoon season has started forcefully dropping ample rains and creating floods, but till now the spell of rains has been mostly beneficial. If some damage has occurred to date, it may be compensated from other areas of Sindh and Punjab which will be beneficial to the crop.
On Thursday, both seed cotton and lint prices remained under pressure. Brokers reported new crop (2015 /2016) seed cotton prices in Sindh to range from Rs 2250 to Rs 2300 per 40 Kgs, while in the Punjab the seed cotton prices are said to have extended from Rs 2200 to Rs 2300 per 40 Kilogrammes. If the recent spell of rains continues, it could delay the new crop arrivals and possibly compromise cotton quality.
Lint prices after the extended holidays of Eid-ul-Fitr also remained under pressure. In Sindh, ginned cotton prices reportedly ranged from Rs 4675 to Rs 4700 per maund (37.32 Kgs), according to the quality. In the Punjab, lint prices were said to have ranged from Rs 4900 to Rs 5000 per maund. Mills buying was slow despite decrease in cotton prices. Thus activity in the cotton and textile markets in Pakistan remains slow. If both the domestic as well as global conditions of the cotton economy deteriorate, mills buying will remain low and moderate.
Therefore, both raw cotton and spinning activity are likely to be low as the mills are also constrained with low level of liquidity in the market. Speculators on the global futures market are still showing a longish stance, but any adverse news could precipitate a lower level of lint prices.
On the global economic and financial front, the current calendar year (2015) was being projected to push up economic growth universally with high hopes emanating from the USA, the United Kingdom, China and Germany. Also included in this group of countries were the other BRICS constituents like Brazil and India. However, that was not to be. Now that 2015 has entered in its second half period, many negative forecasts are emerging from several parts of the globe which indicate that a global economic recovery in not approaching anytime soon. Far from it.
The International Monetary Fund (IMF) has warned America that its economy is still at risk of stalling and advised the Federal Reserve not to increase the interest rates prematurely. IMF has thus warned that any increase in interest rates should be done in 2016 or later. Last month the IMF growth rate for America slowed down due to continuing uncertainties and tepid rate of increase in inflation. High unemployment and low wages are still pestering the American economy.
Economic weaknesses continue to take their toll in Europe, particularly in the peripheral countries of the Eurozone. The Greek economy remains in dire straits despite accommodation by its leading lenders to give it another bailout program recently. Fears are afloat that the several economic crises in Greece would not only damage Europe but will conceivably travel beyond the Atlantic to the Americas, both North and South. If Greek economy and the conundrum in Ukraine do not abate, they could conceivably not only delay but also disturb the American economy sizably.
It has also been reported that persistent weakness in the Eurozone economy would cause imports and exports through North European ports to decline during the current year and thus further slacken trade in the Eurozone countries. No doubt the much publicised input of pumping emergency funds will increase the liquidity of Greece by 900 million Euros but it remains doubtful that even such an injection of funds will solve the long term economic wellbeing of Greece.
Moreover bleak economic conditions are widespread in many parts of the world. Reports from Japan indicate that container trade outlook has worsened in Japan. In China, authorities have stepped in stimulate its weak exports business. Moreover, economic forecasts for growth not withstanding, the Chinese economy is projected to slow down. Also, exports from India are continuing to slide downwards. According to one observation, "grim economic news is appearing from many directions". In South Korea, growth figures have fallen to two-year low levels. The UK retail sales have slipped in June 2015.
Decline of commodity prices over the five years have been catastrophic as numerous countries producing primary products are in hot soup. Thus it has been reported that gold prices have fallen by 40 percent, sliver by 70 percent, copper by 45 percent, oil by 55 percent. The Bloomberg Index has reportedly fallen by 60 percent since its peak in 2008. Thus the Great Recession continues to take its economic toll mercilessly in a seemingly unending and gloomy scenario.
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