While the New York cotton futures (ICE) prices are mostly dilly-dallying in search of a positive direction, domestic lint prices have moved up by about Rs 200 per maund (37.32 Kgs) over the past couple of days. New York futures may attain a more perceptible direction after it has put the New Year's (2011) holidays behind it.
Domestic lint prices have shown a positive improvement over the last two days despite undergoing the year-end blues where financial closings of the sundry commercial banks tend to restrict money supply in the market. In the mean time, it has been reported that the Indian government has announced elaborate cotton export procedures and is collecting data and has also invited applications from cotton exporters for an overall export of raw cotton to 5.5 million bales (170 Kgs). The policy circular of the Directorate General of Foreign Trade (DGFT) of the Department of Commerce dated 29th of December, 2010 gives the details of the Indian Government policy regarding cotton exports from India for the current season (2010-2011).
According to market sources in Karachi, this step would release some pressure on the Pakistan mills as soon as registrations by Indian cotton exporters commence during the beginning of January, 2011. However, it is also added that despite a sizeable correction of New York cotton futures (ICE) by conceding nearly fifteen cents per pound on last Wednesday compared to the unprecedented apogee achieved on the 22nd of December, 2010 (159.12 Cents per pound), global cotton prices continue to maintain a tight underpinning due to generally short supply of the fibre.
Foreign cotton trade remains restricted due to prevailing holiday mood and banking closures and accounts finalisations. Therefore, it appears that practical business may not start properly till about another week or so. Seedcotton (Kapas/Phutti) asking prices ranged higher from Rs 3900 to Rs 4400 per 40 Kgs in both Sindh and Punjab on Thursday with a gain of about Rs 100 per 40 kilogrammes.
Due to declining stocks of seedcotton and possibility of lower incoming supplies, growers who have increased holding power have thus become reluctant sellers. Cottonseed (Binola/Kakra) prices have also risen proportionately by about Rs 50 per maund (37.32 Kgs) and now reportedly range from Rs 1,050 to Rs 1,200 per maund according to the quality. Cottonseed oil which was priced Rs 4,800 per maund has now risen to about Rs 5,100 per maund.
Ginners are reportedly also not willing sellers as they are wont to increase the price of lint due to higher seedcotton prices. Thus offers for lint prices increased on Thursday to range from Rs 9,000 to Rs 9,500 per maund in a steady market but decreased activity. Yarn and textile sales were also said to be lower.
Cotton output for the current season is now being reckoned between 10.5 million and 11.25 million domestic size bales during the current season (August 2010-July 2011) on an ex-gin basis. Mills consumption for prevailing season is being counted between 14.50 million and 15 million bales. It is assumed that seedcotton for about 10 million plus lint equivalent bales will have arrived into the ginning factories by the 1st of January, 2011. Presently, it also seems that the recent weakness in the cotton market has been replaced by an improved price sentiment. The ginners are presently not accepting lower prices for their lint.
In ready business on Thursday, 400 bales of cotton each from Hala and Shahdadpur in Sindh both sold at Rs 9,100 per maund (37.32 Kgs), 400 bales of cotton from Nawabshah sold at Rs 9,200 per maund, while 800 bales from Upper Sindh (K-68) sold variously from Rs 9,400 to Rs 9,500 per maund, according to the quality. Punjab cotton rates were not available till the evening.
On the global economic and financial front, the outgoing year (2010) has seen remarkable rise in equity and commodity prices, and also seen quite successful performance in Independent Public Offerings (IPOS), particularly over the previous few months. The current year (2010) is also seen as having been more positive on economic performance in several countries compared to the unprecedented recession of the previous year (2009). However, this development is at best provisionary as several crucial issues of the global economy remain unsolved.
For instance, despite the rise in equity prices, the United States consumer confidence again slipped to caution us against any continuation of improvement in the overall economy. Also, global analysts continue to worry about the debt crisis in the Eurozone. Market experts are still very worried about the debt problems of Greece, Spain and Portugal, a sluggish economic recovery in America which appears likely to spill over into 2011 and the concomitant increase in interest rates in China. We are thus hardly out of the woods yet.
More importantly, the prevailing and persistent unemployment in the United States, the United Kingdom, Spain, Italy, Portugal and elsewhere remains a serious impediment to any immediate global recovery. Also, absence of business reforms, and more free and fair trade remain items of concern which have been put on the backburner. Above all, the deluge arising out of money transfer from the developed to the emerging economies is creating inflationary problems in several countries of the developing world.
Such flow of easy capital from the rich countries to the emerging markets is also transforming the traditional working of the global economy leading to a new orientation of economic and political clout which is now shifting from Europe and America to the Pacific economies.