Firmness prevails on cotton market

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Though the domestic mills were making some enquiries for cotton and even purchased some quantities, the tone of the market was barely steady. In fact seed cotton prices have come down and lint prices have also reportedly decreased in about one week’s time.

Earlier in the day there were reports that the growers were unwilling to sell at lower rates. Yarn sales were also reported to have made a modicum of improvement. Lint prices reportedly fell by about Rs 200 per maund (37.32 kgs) this week from their earlier levels. Due to lower returns and cheaper prices of cottonseed (Binola/Kakra) and oilcake (Khali), the ginners were also reported to be unhappy.

The seed cotton prices in Sindh on Thursday reportedly ranged from Rs 2,700 to Rs 2,800 per 40 kgs, while in the Punjab they are said to have ranged from Rs 2,400 to Rs 2,750 per 40 kgs. Lint prices in Sindh were said to have ranged from Rs 5,575 to Rs 5,600 per maund (37.32 kgs), while in the Punjab they are said to have ranged from Rs 5,600 to Rs 5,650 per maund.

According to the Pakistan Cotton Ginner’s Association (PCGA), seed cotton arrivals for the current season (August 2014/July 2015) till the 15th of September 2014 were 2,750,563 lint equivalent bales from which the domestic mills have lifted 2,314,837 bales. Exporters have picked up 97,615 bales while the ginners are still carrying 338,111 unsold bales with them.

Domestic yarn business is said to be slightly better so mills activity may improve. However, the ginners remain unsatisfied with their performance. Reports reaching from the cotton belt from Punjab and Sindh indicate that till now the cotton crop has been saved any sizeable damage from ravaging rains and floods which till the present reckoning is being described as manageable. However, wet weather and waterlogged fields in some areas still exist which could conceivably damage the output or quality later on.

Cotton output for the current season could thus still range from 13.5 to 14 million bales (155 kgs) while the domestic mills may need 15 to 15.5 million bales. Cotton exports could range from 400,000 to 500,000 bales while the mills may import between 1.5 to 2 million bales of cotton.

Ready cotton sales in Sindh include 1,000 bales from Mirpurkhas at Rs 5,575/Rs 5,600 per maund (37.32 kgs), 400 bales from Hala and 1,200 bales from Shahdadpur at Rs 5,600 per maund, 600 bales from Rohri and 1,000 bales from Khairpur at Rs 5,625 per maund.

In the Punjab, 200 bales each from Chichawatni and Bahawalnagar and 400 bales from Ahmadpur East all sold at Rs 5,600 per maund, 600 bales from Harunabad sold at Rs 5,600/Rs 5,625 per maund, 600 bales from Mian Channu sold at Rs 5,600/Rs 5,650 per maund, while 800 bales from Khanewal sold at Rs 5,700 per maund.

On the global economic and financial front, two main features influenced the equity markets broadly. First, European stocks prices increased for the second day in a row following the comment by the US Federal Reserve chair Janet Yellen that interest rates are not being increased any time soon. As a corollary, the American stocks rose reportedly.

The other important news of global significance was the polls being held in Scotland which will decide whether they will stay in the United Kingdom. Though the referendum is scheduled on Thursday September 18, 2014, the results will only emerge later on Friday following the counting. In case Scotland opts out of the UK, it will send serious economic and political signals around the world. The world’s financial and economic build-up will change drastically and dramatically.

With regard to the loose monetary policy of various central banks as in USA, the Eurozone and China, it has often been a debated issue. Now the Bank for International Settlements (BIS) has warned various governments around the world that flooding the monetary markets with excessive cash is simply an “illusion of permanent liquidity” which is unduly prompting the investors to take unconsidered risks which inflates the prices of assets unreasonably.

According to BIS, there is a fear that “Markets will not be liquid when that liquidity is needed most.” BIS has also warned the investors to be abundantly prudent and extra careful before rushing headlong into the seemingly bullish markets. BIS, popularly known as “the bank of central banks”, recalled that a number of central banks around the world have kept their interest rates at record low levels with the object to forestall the dangerous recession which hit the world in 2008 and later on to boost the faltering economic growth so pervasive around the globe.

As it is, China’s industrial production fell recently to only 6.9 percent against the original estimate by the bourses at 8.8 percent. This fall has been reported to be China’s lowest level of growth since the 2008/2009 financial crisis. In the Eurozone, economic recovery has come to a standstill and the inflation rate has reached zero point. In any case, now the economic sickness in Europe has travelled from the peripheral countries like Greece, Spain and Portugal to the core countries like France and Germany. Thus it is difficult at this point to seek a redeeming feature which can energise the deeply stricken global economy.

– Brecorder

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