Cotton prices facing pressure

Raw cotton prices in Pakistan remain under pressure due to fear of rain damage which may produce water-laden lint due to the continuing rainfall in several parts of the cotton belt. Moreover, global weakness in cotton and yarn prices is also pressuring the cotton prices. Within a week or so, seedcotton (Kapas/Phutti) prices have reportedly declined by about Rs 200 per 40 Kilogrammes. Thus seedcotton prices in Sindh on Thursday were said to have ranged from Rs 1700 to Rs 2200 per 40 Kgs, while in the Punjab they reportedly ranged from Rs 1700 to Rs 2300 per kgs in a quiet market.
Lint prices are reported to have declined by Rs 100 to Rs 200 per maund (37.32 Kgs) within a week. Thus in Sindh Cotton prices were said to have ranged from Rs 4650 to Rs 4700 per maund (37.32 Kgs), while in the Punjab they reportedly ranged from Rs 4800 to Rs 4900 per maund.
Traders said in Karachi that nearly 100 ginning factories in both Sindh and Punjab are pressing the new crop of cotton (August 2015 / July 2016) in Pakistan. Other reports added that seedcotton equalling to nearly 40,000 bales (155 Kgs) from the new crop is arriving daily.
Brokers said in Karachi that the Trading Corporation of Pakistan (TCP) had earlier invited tender for the sale of 95,000 bales of old crop cotton (2014/2015) . From this figure, only one group of textiles was interested who is said to have bought 6,800 bales of cotton at Rs 4800 to Rs 4900 per maund. Yarn sales are moving very slowly and most of yarn business is said to be dull and depressed. In the mean time, the textile and all its affiliated sectors have reportedly started to close down. Besides the imposition of withholding tax and high costs of inputs, the textile industry leaders are complaining that the resultant high cost of doing business compared to their regional competitors have put the Pakistan textile industry at a great disadvantage.
Torrential rains and floods in cotton growing areas have drenched large tracts of the cotton belt. However, some observers have said that if parts of the cotton growing areas have suffered, other areas have gained due to receipt of sufficient moisture.
In ready cotton sales on Thursday 600 bales of cotton from Mirpurkhas were said to have been sold from Rs 4625 to Rs 4690 per maund while 400 bales of cotton from Shahdadpur in Sindh were sold at Rs 4650 to Rs 4700 per maund (37.32 Kgs), 400 bales from Hyderabad sold at Rs 4700 to Rs 4725 per maund, while 200 bales from Tando Adam sold at Rs 4725 per maund. In the Punjab, 600 bales from Pakpattan reportedly sold at Rs 4775 to Rs 4900 per maund. Though production may not suffer sizably as per current reckoning, some quality problems may arrive in the new crop (2015 / 2016) due to cotton getting wet and discoloured.
Thus both the cotton and textile sectors in Pakistan are subdued while transections of cotton and textile items remain slow. In other words, both cotton growers and textile millers are not doing well and the ginners are also said to be disappointed.
On the global economic and financial front, all Chinese shares prices fell to deep depth when they suffered their biggest one day fall in eight years last Monday. Chinese Government scrambled to enter the market with a buying programme to prop up stock prices. In the process, hundreds of billions of dollars were lost instantaneously shaking the confidence of the economic well being throughout the world. This negative development of the Chinese economy has shattered any hope that the global economy will mend and repair its persisting downturn any time in the foreseeable future.
Greece seems to have been relatively a minor economic issue compared to the staggering Chinese setback. Indeed the Chinese debacle appears to be symptomatic of an aging bull market which to date has failed to compensate or make adequate amends in the equity markets around the world which crashed in tandem with the Chinese bourses. The biggest one day crash in China since 2007 has rattled the global markets ferociously.
As a consequence, shares in China initially fell more than eight percent in a day on concerns regarding lagging growth. Obviously, worries have wounded about growth concerns in China prompting the government to prop up the market but till now the government appears to have failed to prevent a sharp slowdown. The Chinese economy presently seems to be heading towards further decline.
In appears that some of the main reasons for a historic fall in Chinese stocks values seems to have occurred due to sharp decline in industrial profits in June in 2015, poor Purchasing Mangers Index (PMI) and worry amongst the populace that Government will exit the stock market. Earlier it was reported that the Chinese government had injected Dollars 800 billions to stall the disastrous crash of equity market, but to no avail. Some observers say that "carnage" in Chinese stock market has just begun.
Chinese stocks continued to slide due to extreme fear in the functioning of the stock market which was carried away by millions of small time investors looking towards "making a quick buck". The Emerging Markets (EM) also felt the pain of global stress following the gargantuan fall in Chinese scrips prices. So did most if not many of the bourses and stocks markets around the world. Now most investors believe that the government in China has few means or methods to control the highly bruised stock market.
Other parts of the world have also been taken by the Chinese economic setback and people are wondering if the Chinese setback in colossal decline of stocks bodes trouble for the global economy. Being the second largest economy of the world, economic trouble in China could undermine any hopes of an early rehabilitation of the global economy.
Not only has calm been shattered around the world due to dive in the Chinese stocks prices, but trouble spots like Greece, Russia and commodity producers like Australia, Brazil and Russia with its hydrocarbon and the Opec countries with their oil are clearly wobbling the global economy as never before.