While barely 35,000 to 40,000 bales of unsold cotton are left from the outgoing season (August 2010-July 2011), new crop cotton (August 2011-July 2012) made its debut in the market this week produced from seedcotton (Kapas/Phutti) from lower Sindh being ginned in a few factories in Punjab and Sindh.
Brokers said in Karachi that four lots of cotton produced from Sindh seedcotton have already been pressed in Harunabad and one lot in Burewalla in Punjab, while two lots of cotton have been packed in Shahdadpur in Sindh from the new crop (2011-2012). Another ginning factory in Sanghar in Sindh is poised to commence production immediately.
New Crop (2011-2012) lint from Harunabad sold at Rs 8,600 per maund (37.32 Kgs). Outgoing crop (2010-2011) seedcotton (Kapas/Phutti) was being nominally quoted at Rs 2,500 to Rs 3,000 per 40 Kgs because hardly any appreciable quantity of it is left in the market. New crop (2011-2012) seedcotton is being variously offered from Rs 3,650 to Rs 3,700 per 40 Kgs, according to its quality. Current crop (2010-2011) lint is being offered from Rs 8,000 to Rs 9,000 per maund (37.32 Kgs), according to the quality.
Despite strong fundamentals due to poor condition of the cotton crop in both Texas and Georgia, two of the USA's largest regions producing cotton, the cotton futures in New York (ICE) lost more than ten cents per pound in the July 2011 contract during the current week and the price was hovering around 146 cents per pound in the evening of Thursday (Pakistan time)
A complex-wide commodities decline influenced cotton fibre prices to follow suit despite its relative shorter output projected for the incoming season (2011-2012). Pakistan yarn prices are also subdued again and yarn sales are said to be slow. Offtake of yarn from the mills remains moderate. Therefore, dull yarn conditions are also weighing on the cotton prices.
Due to approaching of end of June when many companies close their annual accounts, business is likely to remain slow for the remainder of this month. Moreover, commercial banks also need companies to square their accounts at midyear in many cases.
New cotton crop (2011-2012) has been sown extensively all over the cotton belt in Pakistan with added enthusiasm as growers received record high seedcotton prices during the outgoing season (2010-2011). More than eight million acres have been put under cotton while some estimates put it as high as 8.5 million acres. A very optimistic output during the new season (2011-2012) is being given at a new high watermark of 15 million domestic size bales. According to the Ministry of Food and Agriculture, Government of Pakistan, about 90 percent of the new crop cotton (2011-2012) has already been planted in Sindh and Punjab.
However, on a conservative consideration, next year (2011-2012) Pakistan may yield a cotton output in the range of 13.5 million to 14 million bales of domestic size on an ex-gin basis. Mills demand next year may range from 14 million to 15 million bales. Exporters may ship out anywhere from half a million to one million bales while the domestic mills may have to import between 1.5 million to 2.5 million bales of cotton. Of course the global textile business and the overall economic condition will also be important determinants of the level of functioning of the textile industry.
General feeling in Pakistan is that the domestic textile industry will keep functioning below its full capacity over the following two or three months where after it could gear up to higher or full capacity once the cotton supply from the new crop becomes readily available and the global lint prices settle down to workable levels.
Hopefully, at least some of the existing imponderables will become better known and longer term cotton and textile planning and strategy will become possible with a degree of certainty which has hitherto been lacking throughout the outgoing season (2010-2011).
On the global economic and financial front, never since the collapse of Lehman Brothers in September, 2008 has the sentiment or the actual condition of the global economic condition suffered so much as it is suffering now. To begin with, the condition of the Greek economy seems beyond redemption. Not all the might of the Eurozone, the International Monetary Fund (IMF) or credit infusions by Germany, France and others are likely to restore the wreck of the Greek economy to normalcy. In fact, Moody's has warned that it may cut ratings of some of the banks in France due to its Greek debt exposures.
Not only is the Euro shaken, it has reported to have raised alarm levels around the world. The ripple effect may travel beyond the shores of Europe and engulf African, Asian, or even the American economies. With equity prices beginning to fall sharply around the world, the Greek contagion is rattling the global markets extraordinarily. The more one perceives a Greek financial default as likely to be inevitable, shares markets from Asia and Europe to the United States of America have started falling in unison after the middle of this week.
The fear that a similar fate awaits Portugal, Spain or Ireland has unnerved sundry bankers and investors around the globe. Fears abound that an economic and fiscal turmoil has engulfed the global polity. With the unravelling of the Eurozone, economic downturn will soon be travelling to Japan, Hong Kong, India, China, Brazil, the United Kingdom, and last but not the least, the United States of America.
America is already facing several economic, financial and socio-political problems. A bipartisan group of legislators is reported to have approached the judiciary by filing a suit against President Barack Obama stating that the United States war activity in Libya is unlawful as it does not have congressional approval.
In the meantime, the European Central Bank is reported to have said on last Wednesday that the Eurozone debt crisis may initiate a destabilising chain reaction within the bloc's financial sector. Such an event could easily grow into global proportions which could conceivably accentuate a universal financial crisis.
Underlying economic uncertainties are likely to proliferate when the world's largest economy, the United States, continues to remain rudderless with Obama administration wanting to keep cheap money flowing incessantly, while a group of law makers are aiming not to allow any increase in the US government borrowing beyond the existing United States Dollars 14.3 trillions. In this context, the Federal Reserve chairman Ben Bernanke is said to have warned that a failure to increase the US debt ceiling risks a potentially dangerous loss of confidence in America's credit worthiness.