After a couple of months of uncertainty and volatility in the domestic cotton market, cotton prices have found a positive direction when the federal government removed the two month old Regulatory Duty on yarn exports on the 26th of this month. Consequently, cotton prices have made a handsome recovery of Rs 200 to Rs 400 per maund (37.32 Kgs) since the inception of this week.

Now cotton economy from grower and ginner to the spinners, weaver and value added sector has become free so that market mechanism will henceforth drive the entire chain of stakeholders to work efficiently and also profitably. In this connection, All Pakistan Textile Mills Association (APTMA) Chairman, Shahzad Ahmad, who also worked hard to free the cotton economy from restrictions, has lauded the government for unshackling yarn exports which should make yarns available at steady prices in the local market for the end users.

Recent rains during the past fortnight over a wide area of the cotton belt are being construed as beneficial to the standing crop. However, any excessive rains henceforth could provide too much water in the fields where it could stagnate and effect the crop adversely.

With these positive developments, lint prices have gone up by at least Rs 300 per maund (37.32 kgs) since the inception of this week with good to fine class of cottons fetching between Rs 6,200 to Rs 6,400 per maund. With increasing prospects of cotton arrivals of the domestic crop gaining added momentum August onwards, import enquiries from the mills for the nearby months are facing reduced demand. Moreover, at present, mills in Pakistan are focussing on procurement of local ready cotton with little or no interest in offers of imported cottons for the distant months.

With the cotton trade and industry now expected to be back on the rails, demand for cotton during the forthcoming years is likely to increase steadily. As a corollary and with the induction of Bt cotton from Monsanto, with whom market reports indicate that the government has reached an understanding, lint output in Pakistan could rise to 20 or even 22 or 33 million bales (170 Kgs) in the foreseeable future.

On Thursday, seedcotton (Kapas/Phutti) prices gained Rs 100 per 40 Kgs in both Sindh and Punjab since last week. In Sindh, the seedcotton prices reportedly ranged between Rs 2,650 to Rs 2,700 per 40 kgs, while in the Punjab they were also said to have ranged higher between Rs 2,750 to Rs 2,900 per 40 Kilogrammes. Lint prices have also moved up significantly. In Sindh, they are said to the ranged between Rs 6,000 to Rs 6,100 per maund (37.32 Kgs) according to the quality, while in the Punjab they reportedly ranged between Rs 6,300 to Rs 6,400 per maund.

In the evening the brokers reiterated their reports that both raw cotton and yarn prices had becoming tighter. The 2010-2011 cotton crop output in Pakistan continued to be assessed in conservative terms to be between 13.50 to 14 million running bales domestic size on an ex-gin basis. Mills consumption was still being given to the between 15.25 to 15.50 million bales.

Market sources said on Thursday that upto 200,000 bales have been pressed till now from the new season (August 2010-July 2011). About 8,000 bales are being ginned daily by 75 to 80 ginning factories but the daily rate of cotton ginning from the new crop is expected to go up materially from the 15th of August 2010. Sales of about 2,000 bales of new crop from such Punjab stations like Burewala, Chichawatni, Sahiwal, Bahawalnagar and Khanewal was made at Rs 6,400 per maund (37.32 Kgs). The overall market stance for both raw cotton and yarns is quite positive.

On the global economic and financial front, there is nothing really positive or encouraging. A good earnings report here and there sends the investors into a flurry, but again their sentiments are dampened when they hear that a double dip recession remains a possibility. The governor of the Bank of England has warned that there is hardly any case for increasing the bank rates at present.

There are again grave fears that despite some positive data emerging from the United States over the past one year or so, the United States economic growth has again lost momentum and is likely to suffer a prolonged period of economic downturn which would further undermine any possible improvement in the unemployment situation. Reports emanating from Washington, D.C. indicate that several economic indicators are showing negative trends.

In one assessment by the AFP, retail sales, new home construction, manufacturing, inventory building and exports were all weaker in the world's largest economy, the USA The report added that consumer confidence, a key barometer, has fallen to its lowest level in five months on diminishing faith in the state of the economy and growing unemployment. There is general feeling in America that the economy will start to shrink again. Actually, any improvement in the European, American and the Japanese economies was stimulus driven, only to start contracting once the stimuli are withdrawn.

Moreover, now America is accusing China, Germany and Japan of not spending their reserves and surpluses as if prodigality and profligacy are the only methods to jump start the stagnating economies. It would seem that the real way and means to put aberrant economies into normalcy would be to make them efficient with increasing productivity and controlled financial management. back