According to Pakistan Cotton Ginners' Association (PCGA) periodical cotton arrivals report up to November 1, seed-cotton equivalent to 6,258,569 bales--51.09 percent higher than last season at same time had been received at the ginneries. Of this Punjab produced 4,827,833 bales, some 48.11 percent higher, and Sindh 1,430,736 bales, some 62.09 percent higher.
This does not mean that final crop would be 50 percent higher than last year. These figures show the highest arrivals in the history of Pakistan although when Pakistan produced record high crop of 12.822 million bales in 1991-92, barely1.356 million bales were received up to the end of October against 6.258 million bales received this season.
Record high monthly arrivals of 3.4 million bales were received in November and December each month in 1991-92 but surprisingly 2.644 million bales have been received only in the second fortnight of October, 2004.
In full month of October, 2004 total arrivals of 4.085 million bales were recorded which is unprecedented.
A prominent exporter/cotton merchant, commenting on these high arrivals, said these figures appeared cooked up for some interests. Actually, the crop pattern has changed. Early sowings have shifted peak cotton arrival months from November and December to October and November.
On studying cotton arrivals figures of last five seasons ie, 1999-2000 to 2003-2004, we find that up to October the percentages of total cotton arrivals were 32.6, 38.1, 31.8, 34.5 and 42.2, respectively.
This season, due to increased early sowings and conducive weather conditions, 6.26 million bales arrived up to October, 2004 ie about 50 percent of the total estimated crop.
Arrivals of 2.644 million bales in the second fortnight of October, 2004 are quite surprising and highest in cotton history of Pakistan and this ratio may not be maintained even in the first fortnight of November, 2004, and are likely to fall. We understand that beyond December, less than 10 percent crop may be left in fields. However, the growers may keep seed-cotton stock in their warehouses for getting higher rates.
Unlike last season, the growers do not want to miss wheat sowing this time and would clean the fields of cotton stalks for timely wheat sowing. Fair estimate for cotton crop this season is around 12.5 million bales.
Domestic cotton consumption this season may be between 13.0 and 13.5 million bales due to increase in spinning capacity and advantage of cheap cotton prices against high prices of manmade fibre.
On reports of record high cotton arrivals up to October, 2004, the market lost ground by Rs 100 and lint cotton prices were quoted at Rs 1,750 to Rs 1,850 for Sindh styles and Rs 1,850 to Rs 1,950 per maund for Punjab styles by the end of last week, while seed-cotton prices were ruling between Rs 750 and Rs 890 per 40 kg against government's minimum support price of Rs 925 per maund.
On November 1, stock of unsold cotton (unginned and pressed both) was 1.62 million bales against 1.21 million same time last year - increase 34 percent. It is estimated that by December, unsold stocked may inflate to 2.0 - 2.5 million bales which would exert selling pressure on cotton market resulting in fall in cotton prices.
Although Trading Corporation of Pakistan (TCP ) is reported to have made purchase contracts for more than 500,000 bales and its procurement program is going on, but the growers are still not getting government's fixed price of Rs 925 per 40 kg for seed-cotton.
The government is also reported to have decided to apply premium and discount system on TCP purchases. It means ginners would get quality premium for cotton classed better than base Grade III and staple 1-1/32 inches and discount for lower grade cotton. Again, this step would add to the profits of ginners, and growers would again remain deprived of it.
TCP will open the export tender bids for 20,000 bales of Grade III staple 1-1/16 inches and decide their fate by November 12. TCP may get the best bid of around 40.0 cents/lb fob Karachi against its purchase equivalent price of 48 cents.
TCP is understood to have received deliveries of some 200,000 bales which would ultimately be sold in export through international tenders. The ginners are generally complaining of undue delay in ad hoc payments.
The procedure for issuing payment is quite cumbersome and unnecessarily lengthy which provides chances for corruption. The staff detailed in upcountry offices and warehouses is quite inexperienced and incompetent.
There is no system of monitoring / vigilance and inspection to counter-check the work of field staff which gives free hand to the field workers. The whole system lacks proper planning and procedure for speedy disposal of cases.
New York cotton futures prices decreased on lower US sales. December contract finished at 43.36 cents, down 1.62 cents, and March contract closed at 43.74 cents, down 0.83 cent.
In the week ended on October 28, US exports sales were low at 79,500 bales. Thus total US cotton export sales are reported at 6,340,800 bales against which shipments of only 2,555,900 bales have been made.
US cotton is selling around 51.0 cents/lb while its production cost is stated around 77.11 cents /lb. The difference of more than 26 cents is the subsidy given to the growers.
US is finding it difficult to sell its all surplus cotton in the market by the end of the season as there is a glut of cotton production in the world.
India is producing 19.4 to 20.0 million 170-kg bales this season against its record crop of 18.0 million local bales a few years ago. India's domestic consumption is around 19.0 million bales and it has to sell its surplus cotton of about 1.0 million bales this season.
Australia is planning to produce 4.0 million bales next season in 2006 against 1.2 million bales produced last year. CIS and African countries are producing bumper crop this season. However, China is producing about 5.0 million bales short of its domestic consumption.
Reportedly, one Saudi company has planned to go for cotton cultivation on 10,000 hectares in Indonesia. Reports from China indicate that China would achieve export target of more than $500 billion in 2004-05 season. Cotton inventories are very low in spinning mills.
Production has been curtailed in spinning mills. Although China is buying cotton from other countries but the prices are not going up like last season. US is considering requests of its textile mills for fixing quota on import of some textile items from China as safety measures after 2004 when quota system will go away. Cotton prices in the coming couple of months may remain depressed due to surplus global cotton production.
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