Feelings that this season (August 2011-July 2012) cotton output may not be as bad as deemed earlier have weakend lint prices after the market opened on Thursday after prolonged Eid-ul-Azha holidays. Furthermore, unsettled economic and financial conditions around the world and ample supply of fibre have also kept a lid on any increase in lint prices.
In fact, since the last couple of months or so, cotton futures prices in New York (ICE) have been hovering around one dollar a pound for the frontal contract of December, 2011. The global cotton prices are stuck in a groove which some deem to be a bottom. However, due to disturbed economic conditions in the Eurozone in particular at this time, cotton and textile products may not see any betterment of price or performance in the foreseeable future. Thus cotton situation in Pakistan is dull and weak as projected output is also now seen higher than earlier anticipated.
Textile circles said that rates for yarns in the export markets were also declining. In fact, some foreign buyers were not interested to buy yarns at present. It was also reported that generally negative sentiment is prevailing globally and the business activity is also slow in China. However, some cotton exporters here bought low grade cottons from Rs 3,500 to Rs 3,800 per maund (37.32 Kgs) from Sindh to ship it as Adnas type. In the evening, a sale of 200 bales of cotton from Sultanabad in Sindh was reported Rs 3,700 per maund.
Holiday mood still prevails following the recent Eid-ul-Azha closures. Brokers added from Karachi that there could be more bearish condition in the cotton market when business resumes fully next Monday after the holiday mood peters out. It is now seen that this year's (2011-2012) cotton ouput in Pakistan could range higher from 13 million to 14 million bales of domestic size on an ex-gin basis. This is roughly the same quantity the domestic mills are expected to consume this season. Exports could range from half a million to one million bales while imports could range from one million to 1.5 million bales during this season.
Traders said on Thursday that probably a quantity ranging from 50,000 to 100,000 bales of cotton of trashy or lower grade cotton remains unsold in the market and the rest of the inferior cotton has been mostly sold out. There were also some extra optimistic brokers in the Karachi market who were willing to bet that Pakistan would produce 15 million bales this season and that the crop is not that bad.
Seedcotton (Kapas/Phutti) prices in Sindh reportedly ranged from Rs 1,800 to Rs 2,400 per 40 Kgs according to the quality, while in the Punjab the seedcotton prices are said to have ranged from Rs 2,200 to Rs 2,500 per 40 kilogrammes. Lint prices in Sindh reportedly ranged from Rs 3,800 to Rs 5,300 per maund (37.32 Kgs) in a quiet and listless market. In the Punjab, lint prices extended from Rs 5,200 to Rs 5,500 per maund. Brokers added that J-34 style from India which was being offered at 94 or 95 cents per pound is now being offered at 88 cents per pound through the land route via Wagah border.
On the global economic and financial front, the tottering Eurozone economies have amply exhibited that things have not only gotten worse, they are heading towards a dangerous denouement. The focus of attention which was on Greece since the last several months has now shifted to Italy at the core of the Eurozone. While the peripheral economies like Portugal, Spain, Greece, Iceland and Ireland were already deemed to have reached close to economic doom, now the contagion has travelled to Italy. Italy is now perched on a precipice and is said to be veering towards the need of an imminent bailout.
One scenario proposed for the Greek financial and consequentially economic rehabilitation projects that in rescuing Greece it is actually that some leading German, French and Belgian banks which will be salvaged by the leaders of the Eurozone because these banks are hopelessly exposed to bad loans granted to Greece. In other words, the main aim to rescue Greece is to retrieve the dangerous exposures of German and French banks in that country. Thus charity begins at home as they in the financial markets say. And if something is not reinvented soon by the leadership in Germany and France, the contagion originating from the weaker Eurozone will strike the heart of Europe.
Thus this week the equity markets around the world plunged precipitatedly to reflect the advent of a global recession as never seen before. The negative events which have now emerged globally point to a dismal economic future. The Japanese machinery sales are down. The Chinese economy is slowing down. The double whammy facing Italy because of the resignation expected from Prime Minister Burlesconi accompanied by debt pile of an estimated two trillion dollars has shaken the global financial confidence, if there was any left.
Portugal's woes are worse than previously believed. Portugal is said to renegotiate its earlier bailout deal. The Euro is facing its worse decline in a year. The political instability and disarray in Italy can trigger the unravelling of the Euro single currency formulation. Thus there is turmoil on the global money markets because Italy is in a desperate financial trouble as its debt keeps spiraling up. Its cost of borrowing money or selling its bonds is reported to have shot up to seven percent signalling that it should soon need a bailout to keep it going economically.
Investors around the world believe that the Italian debt is unsustainable. Thus investors became basically doubtful about the entire Greek, Spanish and Italian drama along with the weaker countries like Portugal, Iceland and Ireland. Now the economic faultiness in Europe have adversely influenced the investors confidence globally so that by the middle of this week they were in the throes of an uncommon turmoil.
To begin with, Asian shares fell sharply when the investors learnt that Italy must borrow at a record interest rate of seven percent. Then the European shares followed suit and all the biddings of great leaders like "Merkosy" (Germanys chancellor Angda Merkel and Franch Prime Minister Nicholas Sarkosy) did not quell the fears of the operators on sundry bourses and pits around the world.
With business shut down in Greece, its legal system effectively paralysed and its populace continuing to protest against the existing system, it is difficult to see how Greece can be rehabilitated soon. Spain, Italy, Portugal, Iceland and Ireland and other countries in a similar predicament also cannot see any light at the end of the tunnel. As Milton has said. "Hope never comes that comes to all, but rather darkness visible".