Trading, however, was cautious on Friday as the market was silently awaiting a rate cut by SBP, consequently, prices changed slightly in the ready business, with a majority of bales changing hands at prices starting from Rs 5,700.
Phutti prices towards the end of the week were reportedly ranging from Rs 2,400 to Rs 2,750 per 40 kg in Sindh, whereas in Punjab, prices were slightly higher fluctuating between Rs 2,500 and Rs 2,800 per 4 kg. Lint prices were similarly higher up North, with good quality lint going between Rs 5,750 to Rs 6,050 per maund, while in Sindh prices ranged between Rs 5,300 and Rs 6,000 per maund.
Overall, demand for cotton in the local market should remain strong in the next few weeks as a depreciated Rupee against the greenback means that Textile exports are set to hike up further in the near future. Additionally, a 50 bps cut in policy rate is also expected to fuel some life into the business activity in the country, which should be helpful for the textile industry.
On the international front, Reuters reports that US cotton futures closed lower on Thursday as buying ran out on account of depressed US export data. Consequently, the benchmark contract on ICE Futures settled at 74.56 cents per lb, sliding by 0.75 percent over the previous 2 days prices.
Additionally, USDA in its monthly crop report has slightly lowered the 2012-13 global cotton stock forecast for the first time. Although, the carryover is still at a record high, analysts predict that the numbers are going to bring about some fresh demand amidst lower output figures.
Rice
Transport issues greatly hampered rice trade this last week as rice shipments ready for export were unable to be transported to ports. Consequently, a large number of shipments which were to be sent out to Chinese and African buyers were delayed causing significant financial losses to exporters.
Additionally, arrivals from lower Sindh -which are still coming in as a result of a season that began late- have been disrupted, causing tightened supplies in the southern markets. This coupled with inadequate storage facilities of the paddy which was to be transported to mills is set to lower the finished quality of the rice.
On rice prices, FAO reports that prices for Pakistani variety will settle slightly lower this season as world rice trade in 2013 is forecast to reach 37.6 million tones, slightly higher than the figures for the same period last year, and driven mostly by large exportable supplies in exporting countries such as Pakistan.
Moreover, the paddy output in Asia is expected to reach 441 million tons, mainly off the back of increased yields in producing countries such as Bangladesh, China and Thailand. Consequently, rice prices in the entire region are expected to remain tight throughout 2013.
Sugar
The ECC has finally lent an ear to the woes of the millers by doing away with the export quotas and allowing uncapped exports of sugar.
Besides, allowing unabated exports, the government is also mulling over providing a subsidy of Rs 6 per kg to the millers as the prices in the international market are under a bearish strain amid plenteous global production. Moreover, ECC has also advised TCP to procure 0.3 tons of sugar from the millers to maintain a strategic reserve of 0.5 million tons.
The wholesale prices of sugar which have been falling for quite some time now saw some stability subsequent to ECC decision, hovering around Rs 49 - 51 per kg across the country.
The decision to permit open export of sugar comes as a boon to the miller community who claimed that the uncontrolled supply of the commodity in the local market would result in the huge slip in the prices thereby mustering enormous losses for the millers. However, industry insiders recommend that the government must set a collective export quota of 0.8 to 1 million tons otherwise; prices would hike hysterically in the local market.
So far, over 0.3 million tons of sugarcane has been crushed collectively by the millers of Sindh, Punjab and KPK which account for 6 percent of the total forecast production volume of 5 million tons for the current season.
Another issue in the limelight is that TCP would require Rs 17 billion to acquire 0.3 million tons white sugar. However, TCP has already consumed Rs 126 billion out of its total credit limit of Rs 137 billion. Therefore, an additional amount will be required to make payments. Since CY10, TCP has procured 678,000 tons of white sugar from the mills which it releases in the open market via utility stores corporation.
Subsequent to Iran's decision to decline the import of refined sugar from Pakistan, India is the next big export market for Pakistani sugar. However, Indian sugar mills, already grappling against the rise in the state advised price are likely to suffer more after GoP removed the ceiling on sugar exports.
Consequently, more sugar will be exported to India through the Wagah border in Punjab. Sugar from Pakistan is at least Rs 5 a kg cheaper than Indian mills even after the imposition of a 20 percent duty by the Indian government.
However, market sources underpin the fact that a prudent Indian government will not impair its local industry by allowing the free flow of sugar from Pakistan. Rather, the government of India will make the most of this opportunity by buying sugar from Pakistan at the lowest possible rates to prop up its reserves, which it will release in the open market after their domestic mills completely sell off their produce.
Probing into the international setting, Kingsman, an international body of market analysis and research in sugar, biofuel and biofuel feedstocks, raised its estimate for the 2012-13 global sugar surplus to 9.2 million tons, from 6.7 million tons, as good crop prospects in China encouraged mills to initiate the harvest early and heavy summer rains in Centre and South Brazil benefited cane growth and weight.
On the prices front, March 2013, No 11 raw sugar contract on ICE was traded at 18.54 cents/lb while No 5 white sugar contract at LIFFE settled at $499.80/ton as of December 14th.
Wheat
The wholesale prices of wheat that took a trivial dip last week again rebounded, lingering at Rs 3020-3050 per 100 kg.
Hitherto, approximately 19 million acres of land is brought under wheat cultivation which is down 3 million from the targeted area of 22 million acres. This bears out the probability that this year Pakistan will not be able to meet its production target of 25 million tons.
While the international wheat production estimate rests at 654 million tons, the global demand tallies over 680 million tons. Had Pakistan met its production target this year by undertaking timely wheat sowing, Pakistan would have been in a position to feed the world.
The prices of wheat and flour are expected to boost significantly in the coming months with the announcement of new wheat support price of Rs 1200 per maund by the government. Moreover, poor expected wheat crop on account of comparatively lesser what cultivation area this year, and a hike in the international wheat prices have resulted in a jittery supply situation of wheat and flour in the country.
Examining international wheat set-up, IGC's latest forecast illustrates a further thinning in the global wheat balance, with ending stocks for the 2012-13 season revised down by 4 million tons, to 324 million tons. This would be the lowest level since 2007-08, with inventories for the key exporters even tighter and at their least for 17 years.
On the price front, US hard red wheat for Gulf delivery settled on $355 per ton. While the EU France grade-1 wheat clocks in at $349 per ton, as of December 14th.