Wednesday, September 20th, 2017
Home »Cotton and Textiles » Cotton Analysis » Cotton prices tighten on low supply
Due to regular rains in most parts of the cotton belt since the past several weeks, the supply of seed cotton (Kapas/Phutti) has slowed down resulting in low supply of lint to the domestic mills. Thus cotton supply has decreased leading to a shortage for the present time which could be alleviated with increased arrivals in later weeks. Ready cotton prices have therefore risen materially.

The prices of seed cotton of the new cotton crop (2017/2018) from Sindh is said to have ranged from Rs 2700 to Rs 3100 per 40 Kgs, while in the Punjab the seed cotton prices reportedly ranged from Rs 3000 to Rs 3350 per 40 Kgs, according to the quality. Prices of seed cotton and lint have risen since the last fortnight or so.

Though the current crop in Pakistan (2017/2018) has not been materially damaged by the rains, further and persistent rains could damage the crop. If humid weather persists, fear of pests like army worm or white fly cannot be ruled out.

Lint prices for ready delivery in Sindh are said to have ranged on Thursday from Rs 6350 to Rs 6400 per maund (37.32 Kgs), while in the Punjab they are reported to have ranged from Rs 6700 to Rs 6725 per maund, according to the quality.

Textile industry in Pakistan is still reported to be facing many problems. Yarn sales continue to face problems. On the weaving side, many looms are said to have closed down.

Traders said that global cotton prices have also risen and are tighter. There are also speculations that the Pakistani rupee could slide down appreciably against the American Dollar. One report indicated that the Pakistani rupee could fall to the level of 115 against the American dollar, which is also rumoured to be the target being aimed by the International Monetary Fund (IMF).

Thus presently the cotton seller is sitting tight and it is believed that regular supplies of cotton may not be forthcoming till the beginning of the second week of September, 2017. Moreover, a fair size of the standing cotton crop (2017/2018) is not ready for harvesting. If no damage is done by further rains or pests, the new cotton crop (2017/2018) in Pakistan could range from 12.5 to 13 million bales (155 Kgs) on an ex-gin basis.

On the global economic and financial front, some of the larger economies of the world like the economies of the United States and Europe are performing quite well. While the economies of the United States or the European Union are now considered comparatively stable, fears abound in financial circled that in China and India the economies remain fundamentally uncertain and thus vulnerable.

In the United States, the Dow Jones Industrial Average, a basket of thirty major stocks easily surpassed above the 22,000 point for the first time ever at mid-week, said to have been pushed up by a rise in Apple stocks. This is a notable event as the Dow Jones kept a steady upward pace since the beginning of this year, viz January, 2017.

Regarding the Eurozone, economic growth has almost kept rising and picked up its positive pace as the jobless rate fell to 9.1 percent. Indeed the employment rate in Europe reached record rates across the Eurozone and indeed in the European Union during the first quarter of this year. As a consequence, the popular support in the Eurozone has touched a thirteen year high level.

On the other hand, the world's third largest economy may be thrown off the track because of the serious political crisis which has engulfed Japan. Reports from Tokyo indicate that Japanese Prime Minister Shinzo Abe is facing a highly damaging political crisis and it remains quite unclear if he can survive the crisis of confidence he is facing.

In other parts of the world, several countries are facing sociopolitical and economic crises. For instance, reports from India indicate that conditions in India have deteriorated. Business conditions in India are reported to have suffered the most since the global financial crisis as the imposition of a national sales tax has reportedly disrupted supply and distribution like just months after Prime Minister Narindra Modi's cash ban shattered the markets.

In other countries, Mexican economy is facing a tough 2017 even without president Trump's wall project. Venezuela is facing a bloody civil disruption of high magnitude. Chinese economy is said to be facing tough economic imbalances. China has a troubled financial system and plethora of bad loans leading to high risks in its shadow banking which could abruptly slow down its economy and thus reduce its growth rate.

the author