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PAKISTAN: Economic recession in West and business slowdown in East, forecast pessimistic cotton outlook (August 23, 11)

PAKISTAN: Economic recession in West and business slowdown in East, forecast pessimistic cotton outlook

Ginners complaint that the fresh supplies of seed-cotton are rain-affected with heavy moisture percentage. As the growers need money for Eid festival expenses so selling pressure is mounting, which has eased lint cotton prices down to Rs 6,000-6,100 in Sindh and 6,400 in Punjab and seed cotton prices to Rs 2,650 - 2,700 in Sindh and Rs 2,800-2,850 in Punjab per 40 Kgs ex-gin.

The ginners appear reluctant in welcoming fresh seed-cotton supplies in furtherance of temporary suspension of ginning operations and other activities for about a week or so due to Eid holidays. Field reports mention weather conditions very conducive to crop development. After Eid vacations, cotton picking will be resumed fully increasing the momentum of seed-cotton arrivals at ginning factories. If the weather remains conducive in coming weeks, crop condition may improve further. The present clear and sunny weather would reduce the possibilities of pest attack and diseases. On Sunday (21st. August, 2011), a spell of gusty winds and black clouds entered into Sindh from Rajasthan side and lashed wide area with rains and passed away to west into Arabian seas through Karachi. As such, cotton-seed arrivals may be seen at the peak during second half of September month.

Quality of cotton in Punjab is reported to be better than Sindh so the spinning mills would concentrate their purchase in Punjab because of better cotton quality and lower transportation expenses. Thus, the exporters would prefer to make their export coverings from Sindh due to lower rates and lower transportation cost. The exports of Sindh cost works out around US Cents 92.0 a pound. FOB- Karachi. Hopefully, Pakistan would harvest a bumper crop close to 15.0-16.0 million bales in 2011-12 season, making available some 1.5 to 2.0 million bales export surplus.

Domestic cotton consumption is now estimated lower between 13.5 and 14.0 million bales in view of acute power shortage, deteriorating law and situation, slackened demand, poor business conditions and political instability in the country. Slack cotton demand in local and export markets may keep domestic cotton market depressed at least during peak arrival period from second fortnight of September to first fortnight of October month.

New York cotton futures are operating within narrow range. October month contract closed at 106.76 while remote contract of December-11, closed at 106.22. European countries are facing financial crisis, US just managed to escape default position and is debt crisis, its unemployment has gone high up to 9 and interest rates down almost to zero, China and other Asian economies may face slowdown - these factors do not favour any optimistic outlook in coming months. The historically high rates of cotton upto US Cents 225 a pound in first week of March, 11 and than steep fall below 100 by the end of July-11. has shocked all stakeholders specially the spinning sector. Yarn prices have nosed down more than 50 percent in sympathy with cotton prices in five months period, which made the operators suffer heavy losses. Coming back to at least workable position may take some time. The banks have lost as the value of pledged stocks of cotton and yarn have has decreased 50 percent. Overall business conditions do not look promising and so the cotton market outlook.

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