Wheat: some semblance of clarity
obtaining in market
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
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
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
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.