Prices on the ready market firmed up this week upon fears that the current cotton crop (August 2015 / July 2016) in Pakistan would be less than ten million bales (155 Kgs) compared to the original projections of nearly 15 million bales on an ex-gin basis. This shortfall is close to the lowest output since the past 20 years. As a consequence, prices of higher quality lint have risen by Rs 100 per maund (37.32 Kgs).
It is presently estimated that the total cotton output this season (2015/2016) could range from 9.5 to 10 million bales (155 Kgs) on an ex-gin basis. Domestic mills would be needing anywhere from 13.5 to 14 million bales of cotton. Mills may thus import from 3 million to 4 million bales while the exporters may ship between 300,000 to 350,000 bales during the current season.
On Thursday, seed cotton (Kapas / Phutti) prices reportedly ranged from Rs 1800 to Rs 3000 per 40 Kgs in Sindh, while in the Punjab they are said to have ranged from Rs 2200 to Rs 3200 per 40 Kgs, according to the quality. Due to reported slowdown in seed cotton arrivals, prices of better grade lints are said to have risen by Rs 100 per maund (37.32 Kgs). In Sindh, cotton prices are said to have ranged from Rs 4700 to Rs 5600 per maund, while in the Punjab they reportedly ranged from Rs 4700 to Rs 5700 per maund in a firming market.
In ready business in Sindh, 200 bales from Daur were said to have been sold at Rs 5225 per maund. In the Punjab, 600 bales of lower grade cotton from Mian Channu were said to have been sold at Rs 4600 per maund (37.32 Kgs), 400 bales each from Mianwali and Fort Abbas both sold at Rs 5525 per maund, while 800 bales from Rajanpur were sold at Rs 5600 per maund.
According the fortnightly cotton report till the period 1st of January, 2016, the Pakistan Cotton Ginners Association has shown seed cotton arrivals for the current crop (2015 / 2016) at 9,279,105 lint equivalent bales from which the domestic mills have picked up 7,271,473 bales. Exporters are said to have lifted 355,426 bales, while the ginners are retaining an unsold quantity of 1,652,206 bales in both loose and pressed form.
There is hardly any charm in yarn sales or other textile activity. The outgoing calendar year (2015) has been mostly difficult and unrewarding for the Pakistan textile industry. Several units are reportedly closed while others have been operating at low capacity. Despite the weak condition of the Pakistan textile industry, domestic cotton prices could rise by Rs 300 to Rs 400 per maund (37.32 Kgs) in the coming months due to shortage of good quality domestic cotton.
On the global economic and financial front, the inevitable has happened : led by the Chinese rout in equity markets twice during the very first working week at the inception of the new calendar year (2016), the global shares markets followed in tandem to record falls with no gainsaying when this calamity will end. Following the fall in scrips values globally, the commodity markets sunk further to new debts. For instance, crude oil prices fell to US Dollars thirty per barrel, a new eleven years low level.
In the present context, global shares prices dove precariously on unending worries of the Chinese economy which started slithering during the latter half of 2015. It thus became inevitable that China's economic rout would in turn spur the global stocks selloff. Other factors were also instrumental in making the start of the new calendar year as inauspicious such as the niggardly low inflation of only 0.2 percent in the Eurozone during the December of 2015.
Thus Wall Street reportedly finished its final day of 2015 downwards, making it its worst annual performance in several years. As mentioned earlier, crude oil prices have fallen precipitously suffering steep losses and may not rise again during the current year. Indeed so long as the oil surplus continues, it may not be before 2017, or even 2018 before they start moving up positively.
In the United Kingdom, the global turbulence in equity prices resulted in the fall of British shares by five percent during 2015. The fall in equity prices around the globe is correlated with poor economic performance widely across the world. For instance, the Chinese shares prices tumbled due to poor factory data. Poor weather around the world including the United States, Britain, Europe and elsewhere have also caused havoc to economic activity. For instance, the El-Nino phenomenon has created global weather chaos in recent months.
Therefore, global shares have been plumping since the past several days on very jittery markets. Suspension of trading activity on the equity markets for the second time this week due to automatic attraction of circuit breakers speaks loudly of the highly depressed Chinese economy where the government is applying all the ways and means to stop the economy from sinking further, including suspension of shares trading for the second time this week under an automatic shutdown scheme. With these portents, the Chief of the International Monetary Fund (IMF), Christine Lagarde, has rightly warned of the disappointing global growth during 2016.
On her part, the Chairwoman of the Federal Reserve has been reported by the New York Times as having created a strong consensus among the Federal Reserve officials for raising the benchmark interest rate during December 2015. Now the Federal Reserve officials are likely to raise the interest rates by one percentage point during 2016 in four quarter - point increments.
Furthermore, the continuation of the refugees problem in the Middle East and Europe and now the conflagrations between Saudi Arabia and Iran have become explosive issues of monumental proportions which could shatter the global economy.
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