Before the start of the Eidul Azha holidays from Thursday 24th of September 2015 lasting till the end of this week, needy mills indulged in cotton buying to cross over the holidays. Thus lint prices reportedly remained firm to tight during the first half of this week. Business will now open on next Monday viz the 28th of September 2015.
In the meantime, there were more rains in several parts of the cotton belt so that according to cotton consultant Naseem Usman, Pakistan is likely to reap only 13 million to 13.5 million bales of cotton (155 Kgs) this season (August 2015 / July 2016) on an ex-gin basis. There are also fears of further pest attack which could not only decrease cotton output during the current season (2015 / 2016), but quality may also be a casualty in the ongoing crop. Better idea of the crop situation could emerge over the next few weeks.
Thus even though the cotton futures prices in New York fell below 60 cents per pound, said to be the lowest level in more than several months, domestic cotton prices have been steadily held since almost a fortnight. The Karachi Cotton Associaton (KCA) has consistently fixed the ex-gin price of grade three cotton at Rs 4,700 per maund (37.32 Kgs) since 11 days. Thus even though the international cotton prices have remained under pressure lately, the domestic lint prices have been held firmly. The local textile industry has not being performing well. Yarns and textile products are costly in Pakistan because of high cost of production. Thus Pakistani textile producers cannot compete with other regional manufacturers. For instance, textile circles said that China is buying yarn and textile products from India instead of Pakistan.
On Wednesday, the general price idea of seedcotton from Sindh was said to range from Rs 2350 to Rs 2450 per 40 kgs, while in the Punjab they reportedly ranged from Rs 2250 to Rs 2450 per 40 kilogrammes. In general, lint prices from Sindh were said to have extended from Rs 4675 to Rs 4800 per maund (37.32 Kgs), while in the Punjab they reportedly ranged from Rs 4850 to Rs 4950 per maund in a firm market. Thus cotton prices this week were stable and steadily held. Though trading activity in the market was relatively low, prices were generally firm.
On the global economic and financial front, the current calendar year (2015) promised lot of hopes at its inception, but as the year progressed deeper faultiness appeared and emerged to show that the world's economy is quite sick. Indeed the global economic malaise became more evident than what was believed at the beginning of the year.
First and foremost, it was conjectured that the United States economy was out of the woods and the Federal Reserve would increase the interest rates above the zero level where they have been languishing since 2008. Several observers believe that such a step would have been disastrous. The Federal Reserve has thus left the American economy in a limbo. Then a series of events emerged in different parts of the world pointing to serious socioeconomic and political shortcomings which have failed to convince the economic stalwarts that the global economy is indeed on a credible course of recovery.
To begin with, economy growth during the first quarter in the United States was regressive. Moreover, unemployment in America remained below par and suffered stagnancy. It was generally believed that the United States economic recovery during 2015 will pull up universal growth but that did not happen. The truth of the matter is that according to the Organization of Economic Cooperation and Development (OECD), the global economy would witness low growth during the next year (2016).
Starting from Greece, Spain, Portugal, Ireland and Italy, the economic regression over the past several years became a cause of major concern in the Eurozone. However, it was believed that the economic decline of these peripheral countries would somehow be halted, or even reversed due to better performance in core countries like Germany, France or the United Kingdom. However, unfortunately it did not happen. During the current month viz September 2015, manufacturing and the services sectors have again received a setback in the Eurozone. China's continued economic regression has also hit the prospects of recovery in the Eurozone. The European Central Bank has warned that the slipping economic growth in China and other developing countries will hit the demand for Eurozone's growth. Thus the inflation target in the Eurozone is suffering seriously.
Thus during the current calendar year (2015) the economic variables have been in a state of flux throughout the world. The noted economist Sanjeev Sanyal of Deutsche Bank has been quoted as saying that "with China undertaking once-in-a-generation shift from investment-led growth to consumption-led growth and with Europe too ambling about with little growth, the world economy is expected to be in a limbo for at least a year".
Hardly a couple of years have gone by that everybody believed Chinese economy would provide succor and sustenance to the failing world economy. That was not to be. Indeed China today is itself struggling to provide immediate help to its fast eroding banking, housing and other sectors.
Lest we forget, other emerging and struggling economies including Brazil which is in a near collapse condition, Canada with its fast declining growth, Australia with its loss of buyers for primary goods and commodities and South Africa are all in dire straits. Last not least, the Volkswagen's emissions scandal and sinking prices of oils and sundry commodities has triggered a deep dive on the equity markets.
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