Cotton futures prices in New York (ICE) shot up incredibly to shatter all previous records and surpass the tantalizing figure of US Dollars two per pound so that a new record was created on Thursday at US Cents 204.02 per pound when it struck the limit up ceiling for the March 2011 contract. Though not quite unanticipated, nevertheless this marvelous rise had a fanciful aura to its performance.
Much credit is being ascribed to the hedge funds for this tremendous performance who are riding a high wave of global commodity shortages, last not least being the scarce cotton. Added to the adventure of dare- and - do of funds managers and sundry investors, buyers are also cashing in on short global supplies of the fibre which may not be alleviated at any time in the near future. Restrictive cotton export policies in India are adding fuel to fire in this fantastic drama of seemingly unstoppable rise in cotton prices.
The current cotton crop (2010-2011) in Pakistan is drawing to a close sometime soon with total output being presently expected to range between 11.7 to 11.8 million local size bales on an ex-gin basis. Total seedcotton (Kapas/Phutti) arrivals till the middle of this month ie 15 February 2011 are estimated around 11.4 million lint equivalent bales while the ginners are still estimated to be holding an unsold stock of around 0.5 million bales. Exporters are expected to ship a quantity of 500,000 bales or more this season and are ready buyers at Rs 12,500 per maund at present. New crop (2011-2012) has started being sown in some early areas in both Sindh and Punjab in moderate quantities.
Agents for international merchants said in Karachi that Pakistani mills may have bought about 250,000 metric tons of imported cotton on both fixed and unfixed basis during the current season (2010-2011) from which nearly half the quantity is estimated to have arrived and cleared by the customs authorities by the end of January 2011. Out of these 250,000 tons, about 80,000 tons may be of Indian origin, while the balance quantity of about 170,000 tons could possibly comprise equally of mostly American (Including Pima) and West African origin and some Brazilian styles.
With the phenomenal increase in the New York cotton futures prices (ICE), and also physical cottons at various origins, domestic cotton prices have also risen to record levels in the ready market today. Seedcotton (Kapas/Phutti) prices have risen to all time high levels in the ready market to range between Rs 4,500 to Rs 5,500 per 40 Kgs in Sindh and between Rs 4,500 to Rs 5,900 per 40 Kgs in the Punjab.
Likewise, both Sindh and Punjab lint prices have also shot up to range between unprecedented levels of Rs 11,000 to Rs 13,000 per maund (37.32 Kgs) in a very tight market. With New York cotton futures prices having risen to sky-high levels with no holds barred, it was but evident that local lint prices would follow suit.
Thus 600 bales of cotton from Sanghar in Sindh reportedly sold at Rs 12,000/Rs,12,200 per maund (37.32 Kgs) in the ready market on Thursday, while 500 bales from the Khairpur district were sold at Rs 12,500 per maund. In the Punjab, 400 bales from Hasilpur and 700 bales from Rajanpur both are said to have been sold at Rs 13,000 per maund each.
Brokers said in Karachi on Thursday that if a Pakistani mills imports cotton from West Africa or Shankar from India at US Cents 230 per pound cost and freight, then after considering its better fibre characteristics and adding for the expenses within Pakistan, it will cost the importing mils about Rs 14,800 per maund (37.32 Kgs). Moreover, ready shipments are presently not easily available.
Last week the annual dinner of the All Pakistan Textile Mills Association (APTMA) was held at the President's house in Islamabad presided over by President Asif Ali Zardari. President Zardari assured the millowners that textile industry in Pakistan being of prime importance to the national economy with its leading role in employment, foreign exchange earnings and industrialization at large, government will go all out to help it improve its development and growth. President Zardari assured APTMA chairman Gohar Ejaz that the year 2011 has been designated as the year of textiles in Pakistan. President Zardari also lauded the distinguished roles played by Shahzada Alam Monnoo, Bashir Ali Mohammad and the late Razzak Tabba who have been honoured as the legends of the Pakistani textile industry.
On the global economic and financial front, equity markets similarly continued to post net gains. However, the fear of slow economic recovery in the USA, the Eurozone barring Germany and the United Kingdom, continues to haunt the economic managers. Basic issues such as inflation, unemployment and slow recovery in the United States and Europe are still creating doubts about a quick global recovery.
The new political scenario and the unrest following Egyptian discarding of Hosni Mubark as president has spread to Yemen, Bahrain, Libya, Jordan and Algeria. The new revolutionary fervour in the Middle East must be viewed seriously because it has all the elements of disturbing and destabilising whatever remains of the global economic and social system. Moreover, with Iranian warships closing up on the Suez Canal, the entire Middle East has entered into the throes of a dangerous situation which could render the remaining global economic fabric into tatters.