Official cotton production estimates for this season have now been put at 14.6 million 170-kg bales = 15.0 million running bales which appear quite realistic. This season, government had initially estimated output of 10.7 million 170-kg bales which have finally been increased by 35.5 percent to 14.5 million bales. Yearly cotton productions in Pakistan have been fluctuating widely but greater consistency has been seen in annual domestic consumption figures.
Trade circles estimate our total domestic consumption for this season around 14.0 million running bales which of course include some about 1.0 million bales of cotton-waste generated by local spinning industry. To stay competitive in world textile market, Pakistan has to produce cotton equal to its domestic consumption. To meet such production targets, Pakistan has to take drastic measures such as:
1) Adoption of bio-technology and genetic engineering for producing high grade seed.
2) Corporate farming.
3) Improve the defective century-old irrigation system.
4) Improve fertiliser availability system.
5) Ensure supply of adulteration-free pesticides.
6) Re-organise agriculture research institutions and agriculture extension departments to meet the new challenges.
7) Immediately apply cotton standardisation system (quality based pricing system) at ginning stage.
8) Again try co-operative farming system. Previously it failed but in changed circumstances it should be tried with proper check and balance measures.
9) Measures should be taken for consolidation of land-holdings and discourage fragmentation.
10) Improve satellite imaging system and apply it for precise weather-forecasting, monitoring pest-attack and diseases and monitoring crop development.
11) Reduce cotton growing in weak areas of middle Punjab such as Faisalabad, Sahiwal, Vehari, Mian-Channu, Chichawatni, Arifwala and Pakpattan and switch over to virgin lands in Balochistan along Pat-feeder canal and in Dera Ismail Khan division along Right Bank Canal.
Now, time has come to take revolutionary measures to improve our agriculture system matching in yield, quality and cost with international levels. We cannot find any alternative for our agro-based industries at least in next 50 years so we should make our agriculture very strong and remunerative.
In this regard, we may take guidance and assistance from concerned international organisations. In WTO regime, better quality and competitive price would rule. We should also take all necessary measures for improving our poor lint-quality to international standards.
By January 15, 2005, total seed-cotton arrivals are estimated equivalent to 13. 7 - 13.8 million bales and expectedly, further about 1.0 million bales plus would be received to finish crop at 14.7 -15.0 million bales.
The government has taken a right step to disallow Trading Corporation of Pakistan (TCP) to make fresh contracts. TCP is reported to have made contracts of about 2.6 million bales and is understood to have taken deliveries of some 13.0 million bales.
However, TCP is accepting deliveries against existing contracts but very cautiously. Instead, TCP should take necessary measures for safety and security of its cotton stocks. TCP should also plan for the disposal of its cotton to avoid extra carrying expenses and also possible danger of damage and loss to stocks due to possible rains or fire beside country damage.
To expedite the disposal, both local as well as export selling should be adopted but necessary homework should be done to avoid any malpractice.
Local lint prices were depressed after TCP reported go slow performance. If TCP decides to hold the stocks for a longer period then prices may maintain steady trend but danger of deterioration of cotton stocks is there. In case, TCP opts to dispose its stocks in local market, prices may be depressed but if opts for exports sales then prices may firms up. Better it is, if TCP simultaneously adopts both ways of cotton disposal.
Lint prices after touching high of Rs 2,200 per maund ex-gin for better quality, re-acted otherwise to lose about Rs 100 per maund. Low grade cotton in lower Sindh is quoted around Rs 1,700 and 1,800 per maund. To keep the exporters active, better grade cotton should be available around Rs 1,900 - 1.950 while average grade around Rs 1,800 and lower grade around 1,600 - 1,700 per maund ex-gin.
Trend in cotton market may be set after this week Eid holidays. Yarn prices have also improved. Pakistan spinners and textile merchants are participating in Heimtextil exhibition in Germany for securing orders.
Cotton prices in New York Future market showed mixed trend. Ruling March, 05 contract and May,05 contract marginally closed 46.17 and 47.23 respectively on the end of the last week. US export sales during the ended January 6, 05 was quite robust at 2,51,400 running bales but reports of further increase in world out-put countered it.
US has committed to 8,788,100 bales in exports including 5,62,400 bales of US Pima cotton. Of this, total 3,605,200 bales have been shipped including 334,800 bales of US Pima. US has exported target of 12.7 million bales. Its consumption this season is reported around 6.2 million bales.
Major segment of US crop around 9.0 + million bales has been put under loan and its redemption would become viable when New York future prices go beyond the level of 47.
Tight availability of physical stocks would tend the prices go up resulting redemption of stocks and then redemption would put selling pressure in the market tending the prices go down. Thus, prices are likely to maintain the level of 45 to 50 in next couple of fortnights.
According to US estimates, China may import 8.8 Million bales this season. Chinese Spinning Mills are running with a limited cotton inventory of 30 days or even less. Average daily consumption of raw cotton in China is 100,000 bales of 480-lb.
China can consume entire Australian cotton production in 25 days, Zimbabwe crop in 7 days, and its total own crop in less than 10 months period. Chinese mills are demanding cotton for immediate shipment.
China does not want to repeat last year''s mistake this season and as such playing very smoothly but how long. This time, instead of bulk buying from US, it opted to buy from other sources like, Australia, CIS and African countries. Pakistan is also exporting cotton to China mainly through international merchants.
Here, is a table giving cotton statistics of the world and some of the prominent cotton producing, consuming and exporting countries. These figures may help the readers in determining the trend of cotton prices in coming months.
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2004-2005 World Cotton Supply and Offtake (January-2005)
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(Million 480-lb bales)
Beg. Stock Production Imports Mills-use Exports End. Stock
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World 35.6 115.6 32.9 104.4 32.6 47.1
USA 3.5 23.0 0.0 6.2 12.7 7.6
China 7.8 29.0 8.8 36.8 0.2 8.6
Pakistan 2.0 11.5 1.0 10.2 0.6 3.7
India 4.1 15.2 0.7 14.5 0.6 4.9
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CENTRAL
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Asia 1.7 7.9 0.0 2.0 5.3 2.3
Australia 0.9 2.5 0.0 0.1 1.7 1.6
Brazil 4.6 5.9 0.4 4.1 2.0 4.8
Indonesia 0.4 0.0 2.3 2.2 0.0 0.5
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SELECTED
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Asia 1.9 0.2 8.5 8.2 0.1 2.3
Mexico 1.1 0.6 1.6 2.0 0.2 1.1
Turkey 1.4 4.3 2.4 6.2 0.3 1.6
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Source: USDA-WAOB -January 2005.
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