March 29, 2013
The domestic cotton market in Pakistan is maintaining its steady posture and has been range-bound over the past fortnight with full poise. Thus Thursday saw a positive price picture on the cotton market even though business and turnover were slow and sluggish.
Money crunch with the mill owners, repayment requirements of pending taxes by the mills and pending refunds due from the taxation authorities to the mills have reportedly decreased the cash flow of several textile mills. In any case, brokers reported from Karachi that the ginners are carrying only about 700,000 bales of unsold cotton from the current crop (August 2012 - July 2013).
The new cotton crop (August 2013 - July 2014) in Pakistan may be delayed by three to four weeks due to rains and cold weather over the past weeks. During the current season, Pakistan is said to have lost 11 percent of its crop compared to the pervious year (August 2011 - July 2012). Seedcotton (Kapas/Phutti) prices in Sindh are said to have ranged from Rs 2200 to Rs 2800 per 40 Kgs, while in the Punjab they are said to have extended from Rs 2200 to Rs 3200 per 40 Kgs according to the quality. Lint prices in both Sindh and Punjab are said to have ranged from Rs 6000 to Rs 7100 per maund (37.32 Kgs) according to the quality.
During the current season, Pakistani cotton crop may yield upto 13 million bales (155 Kgs). Yarn prices in the domestic market are reported to be steady. There were also reports that many Pakistani mills have booked their cotton requirements upto August 2013. Therefore, the domestic textile mills only pick and choose their cotton purchases when they have cheaper and attractive offers. Trade circles said on Thursday that New York cotton futures prices have regained one to two cents per pound in recent days and are apparently approaching the 90 cents per pound level.
Brokers also added that due to favourable rates the growers may plant more cotton during the next season (August 2013 - July 2014) in Pakistan. In any case, with both local and imported cottons being steady to firm, yarn prices are also in positive territory. It is thus seen that the cotton economy of Pakistan is likely to remain positive till the foreseeable future. The big drags on industrial development in Pakistan remain very short and erratic supply of gas and electricity in the country. On the global economic and financial front, the turmoil and turbulence in Cyprus remains the centre point.
In turn, the Eurozone continues to reel and rattle because of increase in the number of trouble spots like Greece, Spain, Portugal, Italy and then France. In its own way, the United Kingdom continues to fester due to slowing down and festering of its economy due to incoming infection in its primal role as a finance centre. Banking in Cyprus closed down two weeks ago due to toxic debts it has accumulated and as a result created a bankrupt treasury where Cyprus cannot meet its financial obligations. Money would have gone abroad if the banks had not been closed during the last fortnight.
However, restrictions on withdrawal of money from Cyprian banks has flabbergasted the global financial industry as the restrictions on withdrawal of money from the banks by owners of the money is not only unique but patently damaging. Thus long lines of depositors outside the Cyprian banks were visible on Thursday following earlier controls clamped on the banks. The decision of the authorities to curb withdrawal of one's own money from the banks has sent shivers across global borders as it is damaging the confidence of the international banking system at large.
This situation is reported to have come about by large losses occurring in two of the leading banks of Cyprus, namely the Bank of Cyprus and the Popular Bank. Limits on withdrawals have been clamped on depositors, including foreign depositors and curbs imposed on the use of credit cards to 5,000 euros per month. Restrictions have reportedly also seen imposed on premature withdrawals on term deposits and transfers of more than 5,000 euros. People want to withdraw money for the occasion of Easter holidays but their entitlement to draw money has been restricted.
These bank restrictions on owner's monies will alarm and possibly scare depositors of the peripheral Eurozone economies like Greece, Portugal, Spain and possibly Italy for fear of undue restriction on their deposit money or their own funds. As an obvious result, the euro is said to have sunk to four month low levels against the United States dollar. Obviously, the overall Eurozone problems will get worse and the virus is unlikely to remain within the confines of the European boundaries. It is likely to infect the entire world. While the banks in the United Kingdom are already working under dire conditions, the fear of European banks catching the Cyprian infection are hair raising.
The Japanese economy is already undergoing fall in retail sales and business confidence is said to be lacking. In the United States, it has been reported by the CNN that the number of persons filing for their first week of unemployment benefit rose last week signifying an increase in jobless figures in America. Thus several equity markets in Asia went down creating fears that other stock market indices are also likely to follow suit. Wall Street also retreated at midweek on soft demand at an Italian debt auction.
(Source:Business Recorder)