Barring another two or three working days when some mills may pick up modest quantities of cotton from the market, most of the industry is preparing for gradually slowing down their production to tune in with the approaching Eid-ul-Fitar holidays.
Transport to haul cotton from the ginning factories to the mills will also be less available henceforth. Government has declared the Eid holidays from the 31st of August to the 3rd of September, 2011 inclusive. Therefore most of next week will also witness little or no business activity so that full scale business may not resume till the second week of September, 2011.
Some cotton trading may be conducted over the next couple of days when mills carrying little or no inventories of cotton may shop for some cotton to tide over the next couple of weeks. Mills sources said that some of the mills who had earlier carried expensive cotton have essentially reduced their burden and may start purchasing cotton come September.
Previous several months also saw mills build yarn inventories to counter the burgeoning cost of cotton which hit the sky earlier in March, 2011. But now many of the mills have unloaded their burdensome inventories of high priced cotton and yarns though several of them are still under constraints to carry high cost raw materials and yarns. Piling up of cotton and yarn stocks had put tremendous pressure on fiber and yarn prices but hopefully cotton trade and the textile industry should be able to make a more positive start beginning September, 2011 though some units may not be able to cope with the prevailing difficulties easily.
A couple of weeks ago lint prices had risen on fears of excessive rains in southern Sindh and in parts of Punjab. However, it is surmised that about three or four hundred thousand bales of domestic size may have been lost, but still the trade assumes that Pakistan could produce 15 million bales during the current season (August 2011 - July 2012). Therefore, lint prices have lost nearly Rs 500 to Rs 600 per maund (37.32 Kgs) over the past fortnight. Arrivals could increase over the forthcoming weeks which could pressurize cotton prices after the Eid holidays.
With a few cents above a dollar a pound on the New York cotton futures market (ICE), cotton prices presently appear to be range bound. Physical activity on the cotton markets around the world still appears on the low side. Yarn sales still need to show more vivacity to inspire better cotton activity. Larger crops in both India and Pakistan are also keeping a check on any unwarranted rise in fibre prices.
Of great interest this week is the incoming hurricane Irene which could make a landfall on the eastern United States which is presently being designated to be carrying a force of category four. Fears that it could impact cotton in states like Georgia and North Carolina and possibly other neighbouring regions were being expressed. Of course cotton fields in the south-east of United States, could gain some benefit.
Thus on Thursday the domestic seedcotton (Kapas/Phutti) prices in Sindh reportedly ranged from Rs 2500 to Rs 2600 per 40 kgs, while in the Punjab they were said to have extended from Rs 2200 to Rs 2900 per 40 Kgs, according to the quality. Now nearly three hundred factories are pressing the current crop (2011-2012) in Pakistan. Up to now, about 1.4 million domestic size bales of cotton are estimated to have been ginned from the current crop. Last year (2010-2011), about one million bales were ginned during the same period.
In the afternoon, lint prices were being quoted between Rs 5700 to Rs 5800 per maund (37.32 Kgs) in Sindh, while in the Punjab they were being offered from Rs 5,800 to Rs 6,000 per maund, according to the quality. Exporters have been quite active this week. Reports indicate that upto 150,000 bales of cotton may have been booked for exports from the current crop (2011-2012), from which ginners are said to have covered ready cotton in the quantities of 15,000 to 20,000 bales this week alone. Pakistan rupee parity was at its lowest at Rs 86.90 per unit of the greenback on Wednesday.
Brokers added in the evening that from the gross output of current cotton crop estimated upto 15 million local size bales, Punjab alone is projected to provide 10.5 million bales. On a conservative basis, current crop (2011-2012) output could be said to range from 14 to 14.5 million bales of domestic size on an ex-gin basis from which the mills should lift 14 to 14.5 million bales, exporters to ship one to 1.5 million bales and the domestic mills may import half a million to one million bales (170 Kgs).
In ready sales reported till Thursday afternoon, 400 bales of cotton from Shahdadpur and 600 bales from Tando Adam both in Sindh sold at Rs 5,800 per maund (37.32 Kgs).
On the global economic and financial front, equity markets which had slumped previously before the German Chancellor Angela Markel and French President Sarkosy's tete-e-tete last week, they gained adrenaline upon two notable news. First, a sharp rise reported this week in United States durable goods orders raised the risk appetite of the investors. Secondly, the hopes that Federal Reserve chairman Ben Barnanke will introduce a third round of quantitative easing, (QE 3), essentially printing more money in the United States, gave boost to equity prices where investors felt that by pumping more money into the banks would somehow boost the overall economy in America and the ripple effect will bring improvement to other areas of the world, primarily Europe, China, India, and the Far East.
Thus gold prices slumped sizably over the last couple of days, namely by three percent to Dollars 1774.39 an ounce. However, Asian share prices fell on Wednesday unlike the performance on the United States markets. Asians feared government borrowing in Japan and also the stumbling political drama in Japan oozed no confidence in the investors. In fact, Moody's rating agency decreased Japan's credit standing by one notch and reduced it from AA3 to AA2.
While Greece, Italy, Spain and Portugal remain in the economic doldrums having shook the Eurozone unmistakably, the Japanese gradual downgrade since the past one decade relates to its increase in government debt followed by the natural disasters viz. the tsunami, nuclear accident and the earthquake earlier this year. Now political wrangling has pushed down Japan's financial rating another notch breeding uncertainty in the country.
To add to all the existing woes, German business confidence has fallen to a fourteen month low level. Moreover, political disarray in Libya, Syria and incertainties over a vast area of northern Africa, the Middle East, and now the mega size corruption scandals and the protest led against them in India by Anna Hazare leave little hope for an early restitution of the global economic condition.