Prices expected to increase amid religious festivities and recent rains, causing shortage in supply

Steady tendency persists on cotton market

Recent rains in the cotton belt and also Hindu religious festival and the forthcoming Eidul Azha festival have slowed down cotton picking which has provided firmness to the domestic cotton. Otherwise, generally the foreign origin fiber prices in the United States, China and India were reported to be subdued. However, it is mostly observed that the current rains have not damaged the standing cotton crop in any notable way.

In Sindh due to better quality of seed cotton the rates were higher by Rs 50 per 40 kilogrammes. Thus on Thursday the seed cotton price in Sindh was said to have ranged from Rs 3400 to Rs 3550 per 40 Kgs, while in the Punjab the seed cotton prices extended from Rs 3000 to Rs 3350 per 40 Kgs, according to the quality.

Lint prices moved higher over the past few days due to slowdown of seed cotton arrivals. The lint prices Sindh are said to have ranged from Rs 6750 to Rs 6850 per maund (37.32 Kgs), according to the quality. In the Punjab, lint prices extended from Rs 6850 to Rs 6950 per maund, according to the quality. Thus cotton prices have been firm and stable over the past couple of days despite reports that textile sector is not doing so well. Generally speaking, the better textile units are able to make their ends meet, but the smaller units are mostly in difficulty.

The mills which are making polyester cotton yarns are not doing well and are facing significant problems. Several mills are also reportedly closed as they cannot sustain the cash losses.

Domestic lint prices are expected to remain firm in the near future due to short local supply. In this connection, the four percent import duty on cotton is a drag on the spinning sector. The Karachi Cotton Association (KCA) has also conveyed to the government to keep import and export of cotton free of taxes as the cotton economy of Pakistan is the largest employer in Pakistan and also contributes to the exchequer significantly. Over the past several decades, only free cotton trade has delivered the maximum benefit to the people of Pakistan and the country at large.

The 75th plenary meeting of the International Cotton Advisory Committee (ICAC) is being held from the 30th of October to the 4th of November, 2016 in Islamabad. Following the meeting, the delegates will spend three days in Faisalabad which is one of the locations where a sizeable portion of the Pakistan textile industry is established. This was stated recently by Miss Rubina Wasti who is the Senior Joint Sectary of the Ministry of Textile Industry.

On the global economic and financial front, the only certainty we now see is that we will not see any improvement during 2016. Indeed, for a plethora of reasons, we may conclude that the global economy will not mend its ways and we are now moving fast towards a very hazardous denouement. Trade figures show that the world economy is still sputtering.

With the continued wavering and lack of direction of the United States Federal Reserve, some financial observers believe that America’s Central Bank has not yet perceived nor identified the major problems the country is facing. Now the American markets are reported to be waiting for the speech of Federal Reserve Chair Janet Yellen expected to be delivered on Friday when she might provide a clear monetary policy whereby interest rates may be increased come September, 2016. She is expected to finally tackle the increase in interest rate issue before the weekend.

China’s economic woes continue to compound without any visible solution in sight. Retail industry and investment activity remain very disappointing in China. In many instances, recovery of loans has become a major problem. Indeed Chinese economic slowdown continues to weaken. In a recent reckoning, Chinese economic growth has been the lowest in 25 years.

Besides China, the economic malaise in Europe remains uncomfortably large and worrisome. Problems of productivity, need for economic structural reforms, increasing migration and terrorism in Europe are also undermining the economic growth on the Continent. Presently, Italy is facing a full-grown banking crisis. Brexit has also downgraded the economic growth in Europe. Moreover, the ageold economic woes in Greece, Spain and Portugal remain a drag on the progress of the European Union.

A recent report from the BBC indicates the fall in business confidence in Germany, Europe’s largest economy. The IFO business confidence index is said to have fallen to 106.2 points in August compared to 108.3 points in July 2016. It is reported to be the steepest monthly fall in more than four years. Perhaps the negative efforts of Brexit are now being perceived more properly by the German business sector. Moreover, it has also been stated that the German economy grew at a slower pace in the second quarter of 2016 compared to the first quarter.

On Wednesday, Britain’s bluechip share index FTSE is reported to have retreated. Wall Street is also said to have taken a defensive stance on Wednesday reportedly led by technology and defensive stocks as investors anticipated a rise in interest rates in the coming months. Chinese stocks also declined on Wednesday on perception of impending monetary easing by the Federal Reserve.

Copyright Business Recorder, 2016
 

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