Cotton prices took a beating this week on this domestic market even though the arrivals of lint are in smaller quantities as of now. Fall in New York cotton futures prices, lack of any sales of yarns and other textile products in the market, reported closures of about thirty percent of the spinning capacity and forecast of a bumper new crop (2011-2012) in Pakistan have bunched together to impart a definitely bearish outlook to the market.
Several mills are partially or fully closed, yarn offtake is static, new crop is expected to yield more than fifteen million domestic size bales which if achieved would be a record output for Pakistan. Lack of regular gas and power supply are also taking their toll on the domestic textile output.
As a result of these developments, mills have mostly withdrawn from the cotton market introducing what could yet be a freefall in cotton prices. Better global cotton outlook with higher expected outputs in Australia, India, Pakistan and Brazil are also hammering cotton prices downwards. Thus buyers are receding from the market in what could yet develop from a bearish to a critical situation.
Government officials have fixed a cotton target of 15 million domestic size bales for the forthcoming crop (2011-2012) in Pakistan but official circles also add that output could even increase from 15 million to 16 million bales which would be a record output exceeding the existing record production of 14.4 million bales of domestic size achieved in the year 2003-2004. Of course the vagaries of the weather including forecast of some floods in the forthcoming months must be kept in mind.
Seedcotton (Kapas/Phutti) prices of new crop in Sindh are said to have fallen by Rs 400 to Rs 500 per 40 Kgs and by Rs 500 per 40 Kgs in the Punjab since the beginning of this week. Thus new crop seedcotton prices ranged between Rs 3,350 to Rs 3,400 in Sindh and extended from Rs 3,100 to Rs 3,300 per 40 Kgs in the Punjab.
Similarly, lint prices in both Sindh and Punjab fell by Rs 400 to Rs 500 per maund (37.32 Kgs) this week. Sindh cotton prices reportedly ranged from Rs 8,200 to Rs 8,300 per maund while lint prices in Punjab were said to have been offered from Rs 8,300 to Rs 8,400 per maund in a very weak market.
In this connection, Naseem Usman, a leading cotton consultant from Karachi, who visited the cotton belt in lower Sindh this week and also talked to prominent growers in Punjab, feels that cotton output next season (August 2011-July 2012) could surpass 15 million bales of local size subject to conducive weather.
According to Naseem Usman, due to record high rates of seedcotton (Kapas/Phutti) received by the growers during the outgoing season (2010-2011), the growers have decided to grow cotton in preference to rice or sugarcane in their fields. The Federal Ministry of Food and Agriculture estimates that cotton growers have planted anywhere from 8.8 million to 9 million acres of cotton for the next crop against last years (2010-2011) 7.8 million acres.
On the economic and financial front, Greece remained on the global worry list as everybody wondered if the parliament in Athens would pass the bill introducing very strong austerity measures. To begin with, increase in taxes and spending cuts worth US Dollars 28 billion would be made to satisfy the International Monetary Fund, the finance bosses of the Eurozone and private banks in Germany, France and elsewhere.
There was general consensus in the global financial community that if Greece failed to meet the extraordinary financial cutbacks in state expenses or refuses to introduce cuts in public pays and pensions, it could default in a few days time and go bankrupt.
Such an eventuality would be a serious setback to the Eurozone countries and the contagion would soon travel like wildfire and engulf not only the Eurozone, It would most likely move on to Asia and America and thus bring down global trade and industrial activity like ninepins.
However, though the proceedings to save the Greek economy from utter collapse found a narrow escape in the parliament, the battle has now shifted from the lawmakers to the streets of Athens where ugly riots have broken out. As it is, even the austerity measures passed in the Greek parliament were passed while boiling anger was said to have enraged the common people protesting on the streets of Athens burning fires and throwing Molotov cocktails in retaliation.
It appeared that the public in Athens was responding ferociously against the rulers in Greece on the assumption that all bailout money and repayments over the next several years would have to be made by the common people while the richer and powerful people in business and politics will be saved. Violence is said to have broken out outside the parliament house where the protesters shouted slogans claiming that major tax evasion and corruption was done by the moneyed people and the parliamentarians and that now the poor people are being asked to pay back to the creditors of Greece over the next many years.
As it is, Greece has failed to pay back the money it received for the first bailout. The fear is that if the social unrest which has escalated materially in Greece gets out of hand, it may bring down the financial ratings of its creditors like France and others.
The conclusion is that the leaders of Europe have credible reasons to believe that with the rise in most of the global equity markets hoping for a settlement of the impending Greek social drama and financial rundown, somehow the economic condition of Greece will not sink into a tragedy of epic proportions enveloping most other countries around the world. On her part, the new IMF Chief, Christine Lagarde, has called for unity amongst the Eurozone members and the Greek people to avert any breakdown of the Greek financial system and its economy at large.