Wednesday, September 20th, 2017
Home »Cotton and Textiles » Cotton Analysis » Cotton prices remain stable
After an earlier decline during the beginning of the week, cotton prices have become stable. Thus new crop (August 2017/July 2018) prices increased by Rs 50 on Thursday and are now ranging between Rs 6200 and Rs 6250 per maund (37.32 Kgs). The standing crop of the new season is reported to be in good condition and the widespread rains in the cotton belt are reported to be beneficial. Crop is healthy in both Sindh and Punjab.

It has been reported that about 25 to 30 ginning factories are pressing the new crop in Sindh, while in the Punjab only three or four ginning factories have become functional. Consequentially estimates have put the projected output for 2017/2018 to range between 12.5 and 13 million bales (155 Kgs) on an ex-gin basis. Buying by domestic mills is supporting the prices of the new crop cotton. The quality of new crop cotton is said to be good.

However, generally speaking, the domestic textile mills remain in serious difficulty and are not doing well. Thus, the spinners continue to suffer sizeable losses. Yarn prices are still not providing the desired margins to the domestic mills. Reports from the United States, India and China generally speak of bearish tendencies in the cotton market. Favourable weather in the United States and India with monsoon rains has been beneficial combined with more cotton sales in China from their reserve also point to an overall weakness of cotton prices.

In a recent announcement by the International Cotton Advisory Committee (ICAC), the world cotton production declined in 2015/16 by 19 percent to 21.3 million tons, which was the lowest volume since 2002/03. This was a result of both a 9 percent contraction in area due to low cotton prices and a 10 percent fall in the world average yield. However, world cotton production is expected to grow for the second consecutive season by seven percent to 24.6 million tons in 2017/18.

On the global economic and financial front, the general assessment is that America, many of the countries in the European Union and the United Kingdom, besides a few other countries, have turned the corner after the Great Recession of 2007/2008 and are now hopefully poised in the direction of increasing economic growth. However, this assumption must be taken with a pinch of salt. To begin with the tenets of Trumponomics must be taken seriously as they clearly portray signs and signals of isolationism. The hallowed position of Western and Trans-Atlantic conjunction to trade together as they have for more than half of the past century with common gains and interests is under great strain. As a result, the European Union is now clearly on a path to seek new partners for mutual trade and cooperation such as Japan and China.

As defined by President Trump, America comes first, irrespective of other considerations, be they traditional or political, when economic interests are discussed. But such a stance is forcing other countries to challenge President Trump's intentions. For instance, at the end of last month German Chancellor Angela Merkel decided to challenge the decision of President Trump to opt out of the "Climate Change" deal. Indeed Chancellor Merkel has adamantly criticized President Trump's unilateral "America First" policies and made it clear that global problems could not be solved with protectionism and in isolation.

Earlier last month, the Japanese had clearly decided before a meeting of the negotiators that they hope to finalise a trade pact with the European Union which would clearly defy any projectionist proposals or ideas being hatched and promoted by the United States which threaten the global economy and at best are inward looking. Free trade agreement between Japan and the EU is in the final stage.

Thus new deals by the European Union and countries other than America are being discussed and finalized because of the inward looking trade attitudes of the United States. Reports from Tehran indicate that "French energy giant Total defied U.S. pressure on Monday (3rd July 2017) by signing a multi-billion-dollar gas deal with Iran, the first by a European firm in more than a decade".

Other political problems like the muddled Brexit issue, the North Korean success in firing an Intercontinental Ballistic Missile capable of reaching America, the immigration problems pestering Italy and other European nations, an element of uncertainty pertaining to the idiosyncrasies of president Trump are adding to the difficulties being faced by the global economy.

Copyright Business Recorder, 2017

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