With increasing strength on the New York cotton futures market (ICE) coupled with more gains in most of the commodities prices in recent weeks, domestic lint prices have entered a consolidation phase. In the face of upcoming demand for cotton during the incoming months, local lint prices are likely to remain firm.
Though actual business remains somewhat moderate due to tight money supply in the market, the underlying price sentiment continues to be stable to steady with proclivity towards tightness.
Since the last ten days or so, local lint prices have gone up by about Rs 700 per maund (37.32 Kgs). The ex-gin price of grade three cotton which was fixed by the Karachi Cotton Association (KCA)at Rs 9,000 per maund on Monday the 27th of December, 2010 has today (Thursday) been determined at Rs 9,700 per maund.
In the ready market also, good quality lint which was selling at Rs 9,300 per maund at the beginning of last week is selling today at Rs 10,000 per maund. Due to dearth of cotton both here and abroad, it may be assumed that any sizeable drop in lint prices remains improbable at present.
Like elsewhere, many Pakistani mills may have succeeded to improve the prices of yarns and other textile products in tandem with the phenomenal increase in the price of raw cotton. For instance, it has been reported that textile exports have increased by about twenty seven percent during the period from July to November, 2010.
There is tremendous disruption in gas and power supply to the domestic textile industry and a number of textile units, particularly in the Punjab, are suffering badly. For this purpose All Pakistan Textile Mills Association (APTMA) chairman Gohar Ejaz has complained to President Asaf Ali Zardari personally who has assured Ejaz of his full and timely attention to rectify the deficiencies of gas and power supply.
Anyhow, with continuing struggle of the textile industry, it is likely to keep performing reasonably well against all the odds. In case better supply of public utilities and infrastructure is made available to the domestic textile industry, it is likely to perform superbly and even increase its production and productivity exponentially.
The Pakistan Cotton Ginner's Association (PCGA) has released its seedcotton (Kapas/Phutti) arrivals report for the current season (August 2010-July 2011) till the 1st of January, 2011. Seedcotton arrivals till the 1st of January have been shown at 10,240,366 lint equivalent bales of domestic size against last year's arrivals of 11,930,794 bales, or a shortage of 14.17 percent. From this quantity, domestic mills are said to have lifted 8,636,893 bales, while the exporters are said to have picked up 428,000 bales. Ginners are reported to be carrying unsold stocks of 1,175,473 bales in both pressed and loose form.
From this available data, it may be projected that Pakistan may produce anywhere from 10.75 million to 11.25 million domestic size bales during the prevailing season (August 2010-July 2011) on an ex-gin basis. Exporters may ship 400,000 to 500,000 bales from this quantity during the season while the mills would import a total of two million to 2.5 million bales (170 Kgs) during the season.
Seedcotton (Kapas/Phutti) prices gained notably overnight increasing by Rs 100 per 40 kilogrammes. Thus seedcotton prices ranged between Rs 3,900 to Rs 4,600 per 40 kgs, according to the quality. Lint prices maintained their strength and reportedly ranged from Rs 9,400 to Rs 10,000 per maund (37.32 Kgs) according to the quality.
In Sindh, a sale of 1,000 bales of cotton from Sukkhur division was reported between Rs 9,000 to Rs 10,000 per maund (37.32 Kgs), while in the Punjab 3,000 bales from Rahimyar Khan were said to have been sold at Rs 10,000 per maund in a tightening market.
In other news, Punjab governor Salman Taseer was gunned down on last Tuesday, January 4, 2011 by his own bodyguard. He was buried on last Wednesday. Now business is again getting back to normal.
Reports by agents of cotton merchants in Karachi say that large number of applications have been received by the competent authority from cotton exporters in India and that the fate of those applications may be decided by next week. The agents added that Indian Cotton procedures remain cumbersome and confounding and therefore the decision regarding resumption of cotton exports from India is anybody's guess.
On the global economic and financial front, equity and commodity markets are enjoying large increases in their prices. However, several economists still worry about the unresolved basic problems which beset a large number of the leading economies in the west.
In the United States, the gain of political power by the Republicans in the House of Representatives means that government stimuli to economic growth may be curtailed or rescinded. In fact, government spending may be reduced vastly to balance the budgets.
Rising food prices around the world are scaring the populace of several countries threatening them of deprivation. Some economists foresee that bad harvests are carrying the possibility of a catastrophe due to food shortages in the near future. Increasing crude oil prices are threatening the viability of economic recovery around the world with the possible increase in cost of manufacturing, generation of power and the functioning of the transport system.
Currency wars, particularly the apparent stand-off between China and the United States on the management of currency rates, could further undermine any global economic recovery partially achieved during the past year (2010).
Therefore, one may conclude by saying that though the stocks prices keep flying high and commodity prices are rising with frenzy, but basic problems of unemployment, sovereign debts of governments and the creaking global banking system remain credible threats to the betterment of the global economic recovery any time soon.