Pakistan: Prices fall amid lack of buying interest on cotton market

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Downdrift in cotton values continued on the cotton market as both the prices of seed cotton (Kapas / Phutti) and lint recorded further slide. Seed cotton prices were reportedly down by Rs 100 to Rs 150 per 40 kgs on Thursday while lint cotton prices were also depressed by Rs 100 to Rs 150 per maund (37.32 kgs) on Thursday.

Traders in Karachi said that fall in cotton prices was nearly a global phenomenon as in other international markets like the United States, China and India cotton prices remained under pressure. Yarn prices were also weak and limited buying of cotton by the mills was seen. Some exporters also probed the market to pick up lower grades of cotton.

Surplus cotton around the world, reported losses being incurred by domestic mills in yarn sales and tight money in the market have all added up to create a depressed condition in the cotton economy at large. Now Pakistan is projected to produce about 14.7 million bales (155 kgs) ex-gin this season (August 2014 / July 2015). Thus Pakistani mills are facing a pinch in their manufacturing and sales operations.

Seed cotton (Kapas / Phutti) prices in Sindh are said to have ranged from Rs 1,700 to Rs 2,300 per 40 kgs, while in the Punjab they also extended lower from Rs 1,700 to Rs 2,550 per 40 kilogrammes. Lint prices in Sindh are said to have ranged from Rs 3,800 to Rs 4,900 per maund (37.32 kgs) according to the quality. In Punjab they reportedly ranged from Rs 4,700 to Rs 5,000 per maund. The ginners are also said to be disposing their cotton at a loss.

An anticipated correction of sorts seems to have occurred in cotton prices globally which has also pushed down yarn prices. Thus Pakistani mills are also said to be in a problem due to reported decrease in yarn prices. Thus both cotton and yarn businesses are muted in their respective markets.

On the global economic and financial front, all talk on Thursday (22 January 2015) centred on the announcement to be delivered by Mario Draghi, president of the European Central Bank (ECB), whereby the governments of the ECB would raise money by selling bonds to the investors. The idea is that lowering costs of borrowing would spur commercial banks and borrowers in the Eurozone which would motivate business concerns and the consumers at large to spend money.

This scheme has already been used by the United States, Japan and the United Kingdom where it helped shore up government finances and worked remarkably well in the United States and Britain. However, the overall economic picture remains gloomy around the world where deflation, unemployment and decrease in economic growth remain issues of paramount concern.

To be sure, economies in the Eurozone, China, the BRIC (Brazil, Russia, India and China) and other oil producing countries (Opec) remain under dire pressure and are refusing to heal. Now it is to be seen if the proposed one trillion Euros pumped into the Eurozone economy for the next two years will bring the desired results. Till last week, the grim global economic scenario has essentially remained quite disappointing. The International Monetary Fund (IMF) has lowered its global economic growth forecast for 2015 and even beyond to 3.5 percent for 2015 to 3.7 percent for 2016.

In the United States, stocks fell last Tuesday (20 January 2015) when the IMF cut its growth forecast for both 2015 and 2016. Commodities prices plummeted further during the week with crude oil price coming down close to US Dollar 40 per barrel with propensity to further dive downwards.

Chinese shares prices closed down 7.70 percent on last Tuesday recording their biggest fall in six years. An AFP report from Beijing stated that China’s Gross Development Product (GDP) slowed to its weakest rate in two decades indicating further deceleration in the world’s second largest economy this year.

In Japan, more employers became redundant compared to fresh hiring. Japanese economy is hardly out of the woods at present. Besides massive unemployment, the United Nations (UN) has warned that growing inequality is highly disturbing. The UN has further reported to have said that unemployment will rise by eleven million people during the next five years due to slower global growth and turbulence.

The unemployment and inequality continues to rise globally. Oil, other commodities and stocks prices are in a state of turmoil. Any possible growth projection in Europe is in a state of disarray. Thus from commodities markets, manufacturing and growth to increase in economic growth, the overall prospects remain despondent. Later in the evening Pakistan time, it was announced by the European Central Bank (ECB) that it would pump in billions of Euros into the sick Eurozone economy. Reports added that the ECB will purchase bonds worth Euros 60 billions per month till the end of September 2016.

The British Broadcasting Corporation (BBC) added that the ECB has also decided to hold interest rates at the present record low level of 0.5 percent. It is presumed that these steps would encourage banks to lend money to Eurozone business and courage consumers to spend more to counter the deflation.

– Brecorder

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