Lint prices have suffered about Rs 200 per maund (37.32 Kgs) loss in both Sindh and Punjab over the last couple of days due to increasing seedcotton (Kapas/Phutti) arrivals, mostly in Punjab, and also more yield per acre and higher ginning out-run (GOT). This season (August 2011/July 2012) also saw an unprecedented planting fervour amongst the growers who saw outgoing season's lint prices shoot up to Rs 14,000 per maund during the second week of March, 2011.
Per acre yield in Punjab is said to be 35 maunds or more, and in some special circumstances even as high as 50 maunds per acre. The ginning out-turn (GOT) which would normally range between 13.5 or 14 maunds from 40 maunds of seedcotton has gone up to 15 or 16 maunds. Therefore the new estimates for cotton output for the current crop (August 2011/July 2012) in Pakistan have risen to a record 14.5 million domestic size bales while some optimists put it as high as 15 million bales. Previously, Pakistan achieved a record cotton crop of 14.265 million bales during the 2004-2005 season.
Therefore cotton business became subdued by the middle this week which had become steady and stable just a few days ago. Only the exporters were reported to be doing a modicum of buying where as the mills were mostly diffident in their purchases. Thus seedcotton (Kapas/Phutti) prices also reportedly decreased by Rs 50 per to Rs 100 per 40 Kilogrammes. Chinese New Year holidays also slowed down some international buying though in the earlier weeks and months China had indulged in handsome buying of cotton to build up their inventories. Yarns and textiles business is also said to have become slower.
Thus on Thursday the prices of seedcotton (Kapas/Phutti) reportedly ranged lower from Rs 1,800 to Rs 2,400 per 40 Kgs in Sindh, while in the Punjab they were also said to have ranged lower from Rs 2,000 to Rs 2,750 per 40 Kilogrammes. Lint prices in Sindh were said to have ranged from Rs 4,500 to Rs 5,700 per maund (37.32 Kgs), while in the Punjab they are also said to have ranged lower from Rs 5,200 to Rs 5,800 per maund.
In recent months, spinners who were making coarser counts of yarns were doing very well because according to market reports the course to medium counts of yarns had fair demand from China and other importers. In the over all scenario, mills with handy power supply have been doing well. A modicum of improvement in the textile sector was also reported due to cheaper domestic cotton which some times was cheaper by twenty cents per pound compared to the imported fibre.
Due to cheaper domestic prices, Pakistan exporters of cotton have also been quite active and have been selling regularly into India and elsewhere. Over the last few weeks, cotton futures prices have mostly remained at a whisker's distance from one dollar a pound for the frontal months in New York (ICE), but have recently shied away to lower levels.
Besides the Chinese buying to stock up their inventories, global buying of cotton has mostly been intermittent and sporadic over the last twelve months or so, exemplifying the old maxim: "you are damned if you do, and damned if you don't": so go ahead. Of course, the speculative funds have been indulging themselves regularly.
On the global economic and financial front, we are in the fifth year since the recession started (2007-2008) and we are no wiser as to why we have landed in this mess and also are essentially unaware as to where we are heading. We have been told that spending more than we have been earning has been the hallmark of our economic wisdom over the past three or four decades which has brought us to this pass and penury.
In a philosophy quite reminiscent of the curative power of homeopathy, the medical science which proffers the maxim simila, simlibus currantur (like cures like), the Federal Reserve has now announced that the policy of low interest rates will continue for the next two or three years. Such largesse by the managers of the Federal Reserve is said to promise that US national borrowing (debt) would climb from US Dollars 15 trillions to around 20 or more trillion dollars in the near future and may ameliorate the current economic fiasco not only in the United States but in all the four corners of the world.
Elsewhere, it is the same prescription except probably Germany which thrives on higher productivity, cautious monetary policy and adding high values to its sundry goods and manufactures. Also in the Eurozone, as the banks are shrinking and thus lending less to the borrowers, the regulators are proposing to reinforce the banks to avoid another credit crunch. How else would the millions of unemployed find their livelihoods restored?
The International Labour Organisation (ILO) has prophesised that the unemployment situation will worsen throughout the world from 2012 onwards. In the mean time, the Indian economy is anticipated to weaken more that expected. Socioeconomic and financial crises since the past one year have nearly paralysed Egypt. Japan has just suffered its first trade deficit in 30 years. The United States economy slipped 0.2 percent during the last quarter of 2011. There is also bad news from the United Kingdom where the economy keeps sinking.
These economic pains and portents have persuaded the International Monetary Fund (IMF) Chief Christine Lagarde to declare that if timely steps are not taken in the Eurozone, we face an economic doom reminiscent of the 1930's. Now the crème de la crème of the world's political leaders, economists, private sector bosses and banking luminaries are gathering at Davos, Switzerland to suggest how to sort out the entangled global economic mess.
We are never short of rhetoric. President Obama has just informed us in his State of the Union address that he would like to see "economic fairness" in the USA to satisfy the 99 percent of the "Occupiers" who are feeling short changed during the past several decades. Obama also desires better trade practices from countries which have under valued their currencies and are also employing unfair trade practices. Obama also wants to discourage US companies which are outsourcing their businesses abroad. Anyhow, in view of the above the IMF has clearly said that the global economy is in deep trouble, due particularly to the Eurozone crisis and also the fragility of the US economy.