Tepid tone on cotton market

Barring some higher grades of leftover cottons, most of the remaining lint from the current crop (August 2016/July 2017) is of lower quality as we approach the tailend of the season. Traders said on Thursday that less than half a million bales (155 Kgs) of cotton remain unsold from the leftover crop which are continuously depleting.

Yarns and textile business is generally slow but some better sales are reported for the higher grades of material. Mostly, however, only minor enquiries are received for yarns and other textile goods.

In Sindh province, all the seed cotton (Kapas/Phutti) for the current season (2016/2017) has been sold out. In the Punjab seed cotton reportedly sold between Rs 3750 and Rs 3800 per 40 Kilogrammes.

In Sindh, lint cotton prices were said to have ranged from Rs 6400 to Rs 7000 per maund but sale of cotton was reportedly slow on Saturday. In the Punjab, cotton prices reportedly ranged from Rs 6500 to Rs 7000 per maund in a slow selling market. The Karachi Cotton Association (KCA) deemed it fit to fix the ex-gin price of grade three cotton lower at Rs 6750 per maund (37.32 Kgs) on Thursday having reduced it by Rs 50 per maund from the overnight rate.

Cotton consultant Naseem Usman reported that during his visit to District Thatta and Badin following the harvesting of wheat recently, shortage of water has resulted in lower cultivation of cotton for the incoming season (2017/2018). Therefore, growth of cotton will be impaired in Sindh due to shortage of water. In Sindh, cultivation of cotton is done in the following major areas viz Shujawal, Thatta, Gharo, district of Badin, Pangrio, Tando Bago, Jhudo, Nawakot, Jan Digri and surrounding areas.

Like Sindh, Naseem Usman sought the attention of the Agriculture Department and the Seed Corporation in Punjab to provide ample supply of water regularly and also arrange for the proper supply and distribution of seed to enable the farmers to grow high quality of cotton during the incoming season (August 2017/July 2018). Besides the supply of authenticated cottonseeds, the supply of proper kind of pesticide should also be ensured. Ready cotton sales from Punjab constituted 200 bales from Bhakkar at Rs 6700 per maund and 400 bales from Khanewal at Rs 6800 per maund.

Correction: Please refer to the Cotton Analysis published on 10 March 2017. There was an oversight in the last line which should be properly read as follows: "Trade wars, isolationism and aggressive trade retaliation measures could shatter any existing trade agreements and understanding". The error is regretted.

On the global economic and financial front, the Trump election to the presidential seat in the United States was mostly projected to be gloomy, volatile and indeed fearful as riots broke out in several American Cities and an element of uncertainty and volatility appeared destined to shake up the American economic landscape widely. Equity markets were feared to topple and a considerable amount of economic anarchy would raise its head which would spread to all corners of the globe.

However, despite many fears arising out of political disturbances, battles, civil wars and public unrest in most corners of the world, the equity indices and even prices of many commodities maintained their levels and did not crash materially. Moreover, in some countries like the United State, Great Britain and Germany the economic growth also maintained respectable gains.

For instance, it has been reported that the Federal Reserve Bank in America increased its bench mark interest rate for the second time in three months and indicated that any further rise in interest rates would be on a gradual basis for the remainder of the year. Analysts have derived the impression of interest rate hikes by the Federal Reserve as signifying a solid growth in the U.S. economy meriting higher interest on some consumer items and certain type of business loans.

The American Federal Reserve is now reported to believe that after a penurious period of nearly eight long years following the Great Recession, a notable improvement in American economic growth no longer needs or necessitates continuation of low interest rates and has become fit enough to gradually manage with higher cost of money in its management of business.

The Associated Press has reported from Washington, D.C. that most officials from the Federal Reserve foresee that it will still raise interest rates three times this year. "The Central Bank outlook for the (American) economy changed little, with officials expecting economic growth of 2.1 percent in 2019. These forecasts are far below the 4 percent growth that President Donald Trump has said he can produce with his economic programme".

Be that as it may, equity values this week shot up to record high levels almost all around the world. The earlier employment report of the United States for the week ending last Friday clearly indicated that the world's number one economy is moving upwards and is presently riding on a strong growth track. Reports added that the U.S. cabinet created 235,000 new jobs in February 2017 which is much higher the presumed previously.