July 11, 2013
As the provincial food departments enter the last leg of their procurement drives, things are finally gaining some semblance of clarity in the market.
In a telephonic conversation earlier this week, sources within Punjab Food Department brought BR Research up to date with the government’s wheat buying activities, which have been right on track as planned.
From the onset, this year’s harvest has been mired in innumerable controversies.
First, market participants vehemently opposed the late start of the procurement process (food agencies meanwhile remained adamant that the moisture level of the crop merited the late purchases).
And as things progressed, prices of the staple commodity began climbing as a fear took hold in the market vis-à-vis the size of the crop. As of this week, the banter between provincial food agencies and traders remains tense as officials blame the traders for hoarding in a bid to create panic, while market players point fingers at the food departments for extorting bribes from growers in exchange for gunny bags.
Although, the size of the crop is indeed smaller than expected, there are ample indications that the market will come down. As it is, market sources reveal that the time is right for all growers who have been hoarding to sell the crop before the government leaves the market- which will be in another 10 to 15 days.
In the meantime, wheat sowing in Russia’s Siberia region has reportedly been delayed as the area suffers from a prolonged dry spell which has delayed grain sowing activities in the biggest spring wheat producing area. USDA reports spring wheat planting standing at 43 percent at the close of this week, well behind the 92 percent sowing completed at the same time last year.
Consequently, European wheat futures gained during the week. The November milling wheat on the benchmark Paris futures market was up by 0.49 percent at $270/ton on Thursday.
In the American futures market, wheat exhibited a similarly healthy stance this week, strengthening off the back of robust US export data. After having rallied for two days straight, Chicago Board of Trade wheat futures rose 2.1 percent on Thursday, hitting the highest price in more than a week. Kansas City Board of Trade hard red winter wheat futures and MGEX spring wheat also closed higher.
Cotton trading this week remained slow once more as mills continued to buy hesitantly amid lacklustre exports and a quieter local spinning sector. Sources report that an unsold stock of 20,000 odd bales still lies with ginners, unable to find buyers who await the arrival of the new crop- which is expected to hit markets in Sindh as early as mid-July.
Moreover, there is little indication that trading will pick up in the coming weeks. According to latest export numbers published by PBS, textile export figures for April show the full effect of the debilitating energy shortfalls in Punjab.
Having slipped 3.9 percent month-on-month, exports for cotton yarn and textile made ups including garments have shed 9.6 and 10.42 percent respectively as the local industry struggles to fulfil export orders.
On the international front, the week saw the supply situation finally easing in America and Chinese buying has also been slower as of late, prompting slippages in futures.
The most-active July cotton contract on ICE Futures US subsequently fell 1.64 cents, or two percent, to settle at 81.78 cents/lb. Earlier in the week, the contract had dropped as low as 81.52 cents/lb after breaching a key technical support.
The week saw prices strengthen in the rice market, with Pakistani sellers raising their price quotations by as much as $5 for a number of varieties including the five and six percent brokens. Meanwhile, data released by PBS reveals China as the leading destination for Pakistani rice as of April- with over 23 percent of the country’s non-basmati exports destined for Beijing during the Jul-Apr period.
However, REAP reports that dispatches sent out to traditional markets of Basmati rice such as the UK and the Middle East were as much as 50 percent below last year’s export numbers during the same period. This has largely been due to the much more attractive Indian Basmati rice, which at a cheaper price has not only captured a large chunk of the Iranian business, but has also managed to elbow Pakistan out of the traditional European markets effectively.
One important piece of news to hit media outlets this week was that Chinese authorities had found traces of Cadmium in rice originating from the Hunan province. Sales have subsequently taken a major hit and many are predicting that this might help the Thai rice gain some much coveted lost footing in the market. Quotes for Thai rice however continue to remain unchanged for the time being.
The week saw a Presidential order levy a 16 percent GST on sugar before the budget announcement, in a bid to collect an estimated Rs10 billion to counter some of the loss of revenue to the exchequer. The news has predictably been met with much hand wringing by the PSMA associates who agree that the sector’s profitability will on the whole be greatly jeopardised.
But much worse off will be the much suffering growers who already bear the brunt of outstanding payments at the hands of the mills. Already weighed in by a supply glut, and without much leg room to pass off the additional costs onto the customers, industry experts agree that the local sugar industry might be in for hard times as a consequence of the imposition.
On the global sugar scene, things remain once more in limbo. Mounting inventories, bountiful harvests and no foreseeable supply disruptions on the horizon have weighed in on prices and raw sugar futures in New York fell to a near 3-year low as expectations for a record sugarcane harvest in Brazil mounted for another week.
The most-active July contract hence settled at 16.81 cents/lb, down eight points after futures reached, but failed to break through the psychological level of 17 cents/lb on Thursday. The contract also managed to touch 16.8 cents during the session, its lowest since July 2010.
Source: Business Recorder
News Collected by agrinfobank.com Team