Cotton prices firmer on depleting stocks

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From International Desk - Special Reports

Cotton prices firmed up this week due to depleting stocks from the current season (August-11 to July-12) and the possibility of delay in the new crop (August-12 to July-13) due to relatively later harvest of wheat.

As a result, the ready cotton prices have gone up by Rs 200 to Rs 300 per maund (37.32 Kgs) this week.

Seedcotton (Kapas/Phutti) prices of the current crop in Sindh reportedly ranged from Rs 1700 to Rs 2300 per 40 Kgs, while in the Punjab they are said to have ranged from Rs 2,000 to Rs 2,700 per 40 Kilogrammes.

Due to larger activity of the exporters and restrictive sales by the ginners, lint prices are said to have ranged from Rs 4,200 to Rs 5,700 per maund in Sindh, while in the Punjab they also prevailed higher in the reported range of Rs 4,500 to Rs 5,800 per maund according to the quality.Despite some decline in the New York cotton futures (ICE) prices recently, the local lint prices were fairly well maintained and also there was a rise in the price of better class of cotton.

Demand has also improved the appetite for cotton by the mills producing lower counts of yarns.The present idea of total output of cotton in Pakistan this season (2011-2012) ranges between 14.7 to 14.8 million domestic size bales while the mills need 14.5 to 15 (Fifteen) million bales.

Exporters are likely to ship between one and 1.5 million bales while the mills may import anywhere from one million to 1.5 million (1,500,000) bales of cotton.The global demand for cotton appears to be range-bound and the prices are therefore mostly maintained.

However, there is said to be good demand for the coarser counts of yarns.

While restrictive cotton export polices in India may tend to raise cotton prices, any Chinese step to increase inventories may help keep the cotton prices intact.Global cotton commodity markets will take a pause for Good Friday and a holiday on next Monday will extend this week's closures mostly till next Tuesday.

Investment funds are also likely to reformulate their longer term positions after the extended holidays.According to the Pakistan Cotton Ginners Association (PCGA) seedcotton (Kapas/Phutti) arrivals report for the current season (August 2011-July 2012) upto the first of April 2012, seedcotton equivalent to 14,670,338 lint equivalent bales arrived into the ginning factories against last year's arrivals of 11,601,577 bales for the same period, or an increase of 26.39 percent.

From this quantity, the mills picked up 13,040,770 bales while the exporters lifted 1,060,076 bales.

The ginners are carrying an unsold sock of 569,492 bales in both pressed and loose form.Domestic cotton market is unlikely to have any significant carryover.

In fact, Pakistani mills may have to import some more cotton to tide over smoothly till the next season (August 2012-July 2013).

On the global economic and financial front, the second half of this week saw several negative reports indicating that not only "the jobless recovery" has no redeeming feature for the betterment of the sundry economies, investors are getting nervous now.The world shares in the various equity markets fell sharply starting on last Tuesday on fears that on the one hand the hydra of unemployment is spreading its tentacles, while on the other hand inflation is raising its ugly head in both Europe and the United States of America.

The Pacific and the Far Easterns markets became panicky this week.Moreover, the gravity of the deteriorating economic situation is now sinking in the minds of the bigwigs of Europe because Italy is not a peripheral outpost of the Eurozone, but has a sizeable and substantially large economy.

The Italian labour unions are still protesting violently against the stiff labour reforms.The fact that the working sector in Europe again contracted in March 2012 has sent alarm bells ringing in the most parts of the world.

Besides the massive selloff of global shares this week, Athenian protestors in Greece confronted police this week as a pensioner reportedly shot himself outside the parliament.Failure to sell government funds in Spain this week forebodes more trouble ahead.

This spectre may reignite social unrest widely and foretells of more trouble for the Eurozone, as there are no buyers for the ten-year bonds.

Thus the Asian equity markets fell significantly as investors feared that these negative developments are likely to spread contagion.According to the European Central Bank, Europe has slipped back into a recession.

Even after pumping more than a trillion Dollars into the European market since the last two or three years, the underlying economic problem remains as growth continues to suffer interminably.Despite squandering trillion dollars or more in Europe at one percent interest rate, or even at a lower rate in America, the underlying economic and financial problems refuse to go away.

The trouble is that pumping money into the market and trying to control inflation at the same time mean working at cross purposes.

Add to that the desire to thrust austerity on the people at large, you have a toxic cocktail of contradictory and self-defeating programme which will give rise to wide scale unrest and anarchy.Besides the downswing of the equity markets, now the Australian economy is also moving downwards.

In conclusion, we are presently facing a rudderess global economy coupled with political and social unrest in the Middle East, Afghanistan, North Africa and several other places.

Every thing appears out of gear.

The gas and power shortages in Pakistan, the turf wars in Karachi and incessant unrest in several parts of the country are damaging the business and industrial activity widely.

Courtesy: Business Recorder

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