Cotton prices in Pakistan domestic market persists its high rise

The rising cotton prices which had mind- numbing effects on the Pakistan market last week continue to remain fixed in the wake of the fact that the domestic market is left with only 200,00 bales of unsold cotton.

For whatever minimal quantity of seed cotton (kapas / phutti) prices in Sindh were quoted between Rs 2,000 and Rs 2,600 per 40 kgs, according to the quality, while in the Punjab they were quoted between Rs 2,400 to Rs 3,100 per 40 kilogrammes in a firming market.

Lint prices in Sindh generally ranged from Rs 4,400 to Rs 5,500 per maund (37.32 kgs), as per quality, while in the Punjab they reportedly ranged from Rs 4,900 to Rs 5,600 per maund in a steady market.

Ready cotton sales over the past couple of days included cotton from Dharo Naro and Kotri at Rs 4,900 per maund each, Multan at Rs 5,300 per maund, Jehanian at Rs 5,400 / 5,500 per maund, Lodhran at Rs 4,950 / Rs 5,450 per maund, Rahim Yar Khan at Rs 5,525 per maund, Alipur at Rs 5,550 and Vihari at Rs 5,500 per maund, 400 bales from Khanpur and Alipur at Rs 5,500 / Rs 5,600 per maund.

Also, 4,000 bales from Khanpur was said to have been sold at Rs 5,900 per maund a few days ago reportedly on three months credit basis.

Traders said on Thursday that a meeting was held on April 24, 2015 where the cotton and textile associations participated in the Textile Ministry office in Lahore on the implementation of Textile Policy 2014 – 2019 which was presided over by Syed Abbas Mehdi, Manager FA / Director Cotton Cess.

Among other things, it was decided to initiate the process of cotton hedge trading for which the Karachi Cotton Association (KCA) would call a meeting of stakeholders viz the All Pakistan Textile Mills Association (APTMA) and the Pakistan Cotton Ginners Association (PCGA) to initiate the process of domestic hedge trading in cotton. The KCA has requested that the Ministry of Textiles should also be invited.

In the 7th of May 2015 Cotton Analysis, mention was made of the Better Cotton Initiative (BCI). In this regard, Muhammad Shuaib, Pakistan Supply Chain Co-ordinator has clarified that Better Cotton Initiative (BCI) does not support or encourage any premium at Better Cotton trade. He added that they use retailer demand as pull factor and not to premium. Moreover, BCI’S goal is to produce sustainable cotton, it can or can’t be cleaner.

On the global economic and financial front several equity markets suffered at mid week in a very volatile activity. Since the past several years, some portents of economic recovery appear on the horizon as several countries try to extricate themselves from the after effects of the Great Recession of 2008, but again they slip back into economic regression so that lasting recovery still remains elusive.

Decline in the United States consumer spending in April 2015 has slowed down the economy as people there are said to be holding their money to have enough to ensure them for the rainy days. As a result, retail sales faltered in April following an earlier 1.1 percent increase in March 2015. Mostly, consumer spending in America during 2015 has been quite disappointing. Indeed it has been reported that the American economy is still operating below full capacity which adversely affects the global economic condition.

In the United Kingdom, the Bank of England said recently that economic growth will decline from 2.9 percent in 2015 to 2.5 percent. Governor Mark Carney of the Bank of England has said that deflation could emerge during the current year but that inflation could pick up later in the year. Inflation has been recorded at zero percent during March 2015 for a second month which is much below the Bank’s two percent target. Carney hoped however that the low inflation rate would be short-lived.

In the Euro zone, the economy barring Greece had been picking up but weaker than expected American retail sales influenced the European markets negatively because it was assumed that interest rate increase by the Federal Reserve had been pushed for a later date. Consequently a stronger Euro pushed several European markets downward, particularly Germany which relies heavily on exports.

The Greek economy was reported to have shrunk by 0.2 percent during the first three months of the current year (2015) and thus receded back into a recession. Earlier, it had contracted by 0.4 percent during the last quarter of 2014. There was a return to economic growth during 2014 creating hopes that the worst of its crisis is now left behind it. However, deteriorating political conditions in Greece have decreased demand and again put the country in a very precarious condition.

According to David Scutt of the Business Insider of Australia, Chinese industrial production, retail sales and urban fixed assessment figures for April (2015) have just been released and they’ve all come in below expectations.

Industrial production in China has been below the expected figure of six percent in April, retail sales have fallen recently and the trend is still lower, while the urban fixed asset investment has fallen sharply. Thus the global economic situation remains mostly lack luster and still waits for a genuine and lasting recovery.

Due to reported lack of demand for Pakistani yarns from China, its sales are reported to be sluggish and demand is not very good. Thus yarn sale business is facing comparatively low sales which put the domestic textile industry in a challenging position. Prices of raw cotton have remained steady over the past few weeks.

Besides this free floating stock in the market, exporters and certain textile mills are also reported to be selling their cottons. With the supply of current crop lint petering off, firmness has gripped the local lint market. Though the new crop (2015 / 2016) may not arrive till the end of July or the beginning of August 2015, some supply of early sown cotton in lower Sindh may trickle in by the middle of July 2015 due to hot weather prevailing in that region.