December 15, 2017

Cotton market adopts higher trajectory.

The domestic cotton market has entered its third week of rising prices providing a sustained firmness to its outlook.

A lower domestic crop during the current season (August 2017/July 2018) together with gradual decline in quality at the approaching end of the season and higher tendency in global cotton prices have pushed up the domestic values of cotton. Furthermore, a decrease in the value of the Pakistani currency against the greenback in recent weeks has also tightened cotton prices globally.

 

Moreover, decline in quality of cotton in Maharashtra in neighbouring India has occurred where pink bollworm is said to have reduced the size of the crop to quite a large extent. Thus these developments have provided an increase in the value of lint cotton universally. Thus on Thursday the seedcotton (Kapas/Phutti) prices in Sindh are said to have ranged from Rs 2800 to Rs 3300 per 40 Kgs, while in the Punjab they reportedly ranged from Rs 2800 to Rs 3400 per 40 Kgs.

 

Lint cotton in Sindh is said to be selling from Rs 6200 to Rs 7300 per maund (37.32 Kgs) in a very tight market on Thursday. Punjab cotton was reported to have ranged from Rs 6400 to Rs 7400 per maund, according to the quality. These prices are said to be the season's highest prices.

 

The yarn and textile sector is also said to be performing better. Though cotton prices have risen because the Pakistani rupee weakened by Rs 5 against the American dollar in recent weeks, yarns, fabrics and finished textile goods should also fetch higher prices due to the reduction of the rupee value against the American dollar.

 

Because of the nearing of the close of the cotton season in Sindh, overall paucity of good quality of cotton is quite evident in the market. Money supply is becoming tighter in the market because of closing of the banking sector at the approaching end of the calendar year. Moreover, lint quality in Punjab will also be deteriorating during the coming months.

 

Ready sales reported from Punjab on Thursday included 2000 bales of cotton from Bahawalpur at Rs 7200 per maund (37.32 Kgs), 4000 bales from Liaqatpur at Rs 7150/Rs 7400 per maund as per quality, 2000 bales from Khanpur at Rs 7300/Rs 7400 per maund and 1600 bales from Rahimyar Khan at Rs 7400 per maund.

 

On the global economic and financial front, the outgoing financial year end December 2017 seems to have made remarkable growth in the United States and Europe. As nearly one year has passed since President Donald Trump took office, the equity values have hit record high levels despite some fears in certain quarters that share values could topple as presently they are perched on dizzy heights.

 

Be that as it may, the reported increase in the United States economic output is said to have gone up by more than three percent annually in recent quarters. Additionally, it may be noted that the unemployment rate has fallen to 4.1 percent during the previous month which has been the lowest since 2001.

 

Recently, the United States Federal Reserve increased the benchmark interest rate by a quarter percent. The Federal Reserve is now forecasting three increases in interest rates during 2018 which should push up the Gross Domestic Product to 2.5 percent which is notably higher than the projection of 2.1 percent made in September 2017.

 

According to the outgoing Federal Reserve chair Janet Yellen who is leaving her post in February, 2018, the economy, labour hiring and the financial situation of American have made a strong recovery during her tenure. President Donald Trump has nominated Jerome Powell to be the new Chair of the U.S. Federal Reserve. Mr. Powell has served on the Federal Reserve Board since 2012. Powell is a former investment banker having sufficient experience to run the Federal Reserve Bank.

 

It may be added here that it is being hoped that President Trump's relaxation in tax levies and also to cut various taxes would indeed prop up the American economy further and push economic growth upwards. In the European Union, generally there has been an uptick in the economy though certain countries are still struggling for larger growth. Therefore, the European Central Bank in its wisdom left its key rate unchanged and decided to unwind the Euro and withdraw the stimulii gradually. The European Union continues to wrestle with immigration gouts.

 

Other global economic problems include the low production in the United Kingdom. Moreover, more recently Prime Minister Theresa May is facing serious political problems including the difficulty of cobbling together a coalition government. The North Korean problem of nuclear missiles continues to confront global peace menacingly. Also the anarchy in Venezuela continues to wither the nation. The Chinese banking industry continues to throw doubt on its efficacy. Thus the global economic growth remains threatened with uncertainty.