Cotton prices in the domestic market have zoomed within the last few days due to delay in picking because of humid weather in the fields, gap in seedcotton (Kapas/Phutti) arrivals compared to last month (July, 2011), dissatisfaction of the growers concerning the prices of seedcotton and increase in the ginning factories which compete with each other for procuring the limited Quantities of new crop (2011-2012) available at present.
Thus the price of seedcotton (Kapas/Phutti) in Sindh escalated to range between Rs 2700 to Rs 2800 per 40 Kgs, while in the Punjab the seedcotton prices were said to have been offered between Rs 2900 and Rs 3100 per 40 Kgs on Thursday. In this connection, ginners reportedly met officials of the Sindh government demanding that a minimum support price for seedcotton for the current season may be fixed at Rs 3,600 per 40 Kilogrammes. Also, a general body meeting of the Pakistan Cotton Ginners Association (PCGA) is being held in Multan regarding the removal of the 3.5 percent tax on seedcotton.
The lint prices also moved up significantly and were thus ranging from Rs 6,100 to Rs 6,200 per maund (37.32 Kgs) in Sindh while in the Punjab they were also said to have ranged significantly higher between Rs 6,500 to Rs 6,600 per maund in an extremely tight market. Thus ready lint prices have gone up by about Rs 800 per maund (37.32 Kgs) since the beginning of this week in Sindh, while in the Punjab they are said to have gone up by about Rs 1,000 per maund.
Recent increases in the New York Cotton futures prices also improved the price levels of domestic cotton in the ready market. This year seedcotton in some areas of the cotton belt had started arriving exceptionally early. Thus it is expected that when the normal arrivals of seedcotton may start during the next few weeks, the situation may normalise.
With this interrupted pattern of cotton arrival, some spinners have again curtailed of their production programmes which may be resumed during the coming weeks. Already about two hundred ginning factories are said to have become operational. With scramble between the ginning factors to obtain more cotton, seedcotton prices have also moved notably upwards.
Observers say that the month of August remains particularly crucial for the health of the standing cotton crop in Pakistan, though the weather in early September, 2011 will also remain important. At present, the selectors coming from the cotton fields speak of a very good crop in Pakistan.
On a conservative basis, Pakistan may produce between 14 million to 15 million domestic size bales on an ex-gin basis during this season (2011-2012). Mills may consume anywhere from 14 million to 14.5 million bales, the exporters may ship between one million to 1.5 million bales, while the domestic mills may import between half a million to one million bales (170Kgs).
Lint prices may have shot up in our market but yarn condition is being described as dull and listless. In fact, domestic and the global cotton and yarn situations may be construed as slack. Some improvement in yarn prices have been reported but its offtake remains unsatisfactory.
Ready sales of cotton reported in Sindh till the afternoon included 200 bales from Nooriabad and 600 bales from Shahdadpur both at Rs 6,200 per maund (37.32 Kgs), while in the Punjab 200 bales from Hasilpur sold at Rs 6500 per maund while 400 bales from Burewalla were said to have been sold at Rs 6,600 per maund.
On the global economic and financial front, there was all round deterioration in both the business conditions around the world as well as the values of the equity markets which slid unmistakably. The prime attention over the past week was accorded to the anticipated outcome of any possible increase in the level of borrowings which the United States government would be allowed by the congress to draw from sundry creditors.
After much ado and procrastination, the United States Congress allowed the government to exceed the hitherto permitted ceiling of United States Dollars 14.3 trillions through a dollar 2.1 trillion deficit reduction programme on August 2, 2011 which was singed into law by president Barack Obama.
First of all, most analysts and observers are of the opinion that this step will not remedy or rectify the deeper and unsustainable problems of the United States economy. A possible default on its financial obligations by the United States may have been averted for the time being, but the deeper economic problems have not been adequately addressed. Therefore, instead of heaving a sigh of relief on the so-called Debt Deal struck by the Democrat and the Republican politicians, an additional mood of skepticism has engulfed the business capitals around the world including in the United States itself.
Many analysts feel that overspending by the United States government, allowing cheap money to consumers and property builders which they cannot pay back, fighting far flung expensive wars, sometimes with nebulous aims, allowing a living style beyond most people's means have aggravated the problem. Unfortunately, this spending spree against cheap credits was passed on to Europe, Japan, Australia and other countries ranging from Canada to China. Now most governments, and also the average populace, feel they have irrationally increased their expenses and overspent beyond their reasonable means.
Both China and Russia, besides some European countries, have admonished the United States for making excessive public expenses stretching them beyond their legitimate means. In this regard Prime Minister Vladimir Putin was recently reported to have accused the United States of acting as a "parasite" on the world economy by accumulating massive debts that are threatening the global financial system.
Though each country must answer for itself regarding its economic policies and practices, but the globalising of the credit culture and spending spree must be examined for its negative impact on billions of people around the world. The only safe haven available to the investors seems to be the old time hallowed metal ie gold. As a consequence of unbridled financing of unworthy governments and reckless consumers, the entire global banking system is under great strain. Redundancies, losses and frauds in several banks around the world keep cropping up every now and then.
Therefore, the United States of America, the United Kingdom, most of the Eurozone countries, and now even some emerging economies of Latin America, Asia and the Middle East, are finding it difficult to manage their economies properly. With the possible loss of it triple "A" standing, its large unemployment and decreasing productivity, the United States may continue to face daunting economic and financial problems not unlike those of Greece, Spain, Portugal, Italy, Ireland, Iceland or Corsica.