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Prices maintained on cotton market

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Economic Updates - Pak Major Financial News

Cotton traders reported a continuing regular stance in the ready market on Thursday with reports that a record crop between 14 million to 14.50 million domestic size bales will be reaped during the current season (August 2011-July 2012).

Lifting of lint has been regular and reports that the European Union has accorded reduced import duty status to several textile items from Pakistan has provided much optimism to the cotton and textile trade and industry.



The World Trade Organisation (WTO) has also approved the European Union duty waiver on several textile goods from Pakistan entering the European Union.

On an estimated basis, total arrivals of seedcotton (Kapas/Phutti) till the first of February, 2012 could be about 13.4 million domestic size lint equivalent bales from which the Pakistani mills have lifted nearly 11.4 million bales.

Exporters are estimated to have lifted about eight hundred thousand bales till the beginning of this month, while the ginners may be carrying 1.2 million bales of unsold cotton in both ginned and loose form.



Pakistan's access to the European Union countries is being construed quite positively imparting incentive to the spinners to lift cotton more regularly.

Thus, offtake of cotton is expected to remain steady and stable.

Other important news for the cotton economy concerns the government's decision to drop the idea of introducing the Trading Corporation of Pakistan into the market to purchase cotton so that growers could achieve a higher price.

The ginners had been supporting this move but the Karachi Cotton Association (KCA) and the All Pakistan Textile Mills Association (APTMA) had been opposing any public sector involvement in cotton business vehemently.



It may be recalled that both the KCA and APTMA have been calling for maintaining a totally free import and export regime for cotton which is in the larger interest of the country.

Duty free imports and exports of cotton have helped cotton trade and industry very well while government intervention in cotton trade has always been detrimental and counter productive.



On a rough estimate, it may be projected that Pakistan may produce a record crop between 14 million to 14.5 million domestic size bales during this season (August 2011-July 2012).

The domestic mills will consume almost 14 million bales.

Exporters may ship about one million bales while the mills may be importing nearly one million bales.



Cotton prices were barely steady on Thursday but ginners refrained from selling their good grades to the mills easily.

The general price idea of seedcotton (Kapas/Phutti) in Sindh reportedly ranged from Rs 1,800 to Rs 2,400 per 40 Kgs, while in the Punjab it was said to have ranged from Rs 2,000 to Rs 2,700 per 40 Kilogrammes.



Lint prices reportedly ranged from Rs 4,400 to Rs 5,700 per maund (37.32 Kgs) in Sindh, while in the Punjab they are said to have ranged from Rs 5,200 to Rs 6,000 per maund according to the quality.

In ready cotton sales on Thursday, 600 bales of cotton from Khairpur in Sindh sold at Rs 5,600 per maund (37.32 Kgs), 600 bales from Rohri sold at Rs 5,650 per maund while 1600 bales from Salehput sold at Rs 5,700 per maund.

In the Punjab, 400 bales from Bahawalnagar sold at Rs 5,200 per maund while 400 bales from Mailsi sold at Rs 5,700 per maund.



On the global economic and financial front, most equity markets performed well over the past couple of days.

Some positive news were forthcoming such as reports that manufacturing activity is picking up around the world and that Wall Street has extended Its rally into February, 2012.

Chancellor Angela Merkel of Germany was in Beijing to muster Chinese support to pull out the Eurozone from its desperate straits.

While Chinese policy has always been positive towards Europe, it is not anticipated that China would directly participate in any bailout scheme for the Eurozone.

Chinese interests are likely to remain for a stable and healthy Euro which should be for the global betterment.



Eurozone stability and economic steadiness are also complementary with the Chinese interests provided the Chinese investment remains safe and sound.

However, it is unlikely that China would enter into any direct engagement to rescue Greece, or for that matter deal with such laggards of the Eurozone like Spain, Italy, Portugal, Ireland or Iceland directly.



Equities simply rose during the middle of this week in view of the new economic package which would entail imposition of transaction tax on financial dealings and a framework which would involve cutting Eurozone debt and deficits accumulated by the respective governments.

However, as it well known, Europe is hurting badly so that it remains difficult to see how it can put its act together.

Chancellor Merkel has called for strict budgeting rules.



However, Greece and Portugal are on the brink of hopelessness and disaster.

British joblessness is at the highest since 1994 with all the signs and signals that Britain is hurtling towards a deeper recession.

The British Prime Minister David Cameron has called the transactional tax on the financial dealings of the European Union as a "Mad" tax.

The Eurozone jobless figures have hit their highest level since the birth of the Euro as a single currency for the zone.

The zonal joblessness rose to 10.4 percent during December, 2011.

Another dire warning came from rating agency Standard and Poor's which has reportedly warned the Group of 20 countries that they would be forced to cut their welfare activities and health reforms otherwise they face downgrading of their financial status.



Recently, debt-laden Greece is reported to have rejected a German proposal that the European Union should take over the control of its tax and spending authority, which Greece has rejected as being tantamount to impinging on its sovereignty.

Notwithstanding these developments, Portugal needs an imminent bailout to avoid a default.

Nevertheless, United Kingdom and the Czech Republic refused to support any approval by the other 25 countries of the European Union whereby individual countries would be constrained to have their budgets approved by the Union.



The dilemma which has presently arisen is that if several of the European countries cut their budgets it would not only impair their growth but slow down the possibility of any early global economic revival.

Despite meeting umpteen of times during the past two years, the European leaders have failed to deliver any workable, coherent or tangible economic plan which can pull Europe out of its historical mess in which its finds itself today.

Therefore, any hopes about a global economic revival or a restructuring and rehabilitation of the financial system remains a distant dream.

Courtesy: Business Recorder

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