Pakistan Cotton Ginners' Association has released its fortnightly cotton arrival and disposal figures as on 1st December, 09. Total arrival of seed cotton was reported equivalent to 10.428 million local weight bales against 8.336 million bales received same time last year - the increase is 2.092 million bales = 25.09 percent.
Local mills' purchased 8.285 million bales against 6.272 million bales purchased same time last year, increase is 2.013 million bales =24.30 percent. Local spinning mills mopped up entire increase of 2.0 million bales as on 1st December, 09, over same time last season.
Looking at the figures of Table No 1, we know that the increase of some 2 million bales has been maintained on three fortnight dates. If this increase in arrivals is maintained till end of the season then the crop size would be around 13.348 million bales. If this increase of 2.0 million bales is reduced to 1.5 million bales then crop size would be around 12.849 million bales and if the increase is reduced to half at 1.0 million bales then the crop size would be around 12.348 million bales.
In the last four seasons viz; 2005-06 to 2008-09, on average some 3.5 million bales equivalent of seed-cotton were received in ginneries after the month of November ie in December and onward and on this basis, total crop comes to 10.428 + 3.5 = 13.928 million bales. However, latest field reports the assessments of different credible people indicate crop size no less than 13.0 million bales ex-gin.
In view of fast recovery from global economic crisis, foreign demand of yarn, cloth and other textile products appears very strong globally tremendously increasing the volume of foreign trade in all commodities specially textiles.
Our cotton and textile industry plays pivotal role in our economy and earns major share of foreign exchange. As such, our domestic cotton consumption would be fairly larger between 15.0 and 15.5 million 170-Kg bales this season while Pakistan's export of raw cotton may touch the level of 1.0 million bales against last four years average export of some 400,000 bales. Thus, Pakistan would require import of 3.0-3.5 million 170-Kg equivalent bales to meet its domestic requirements.
It is unfortunate that Pakistan will have to bear loss of US$ 75.0 millions as replacement cost of 1.0 million bales export. By the end of November month, local exporters had registered export contracts of about 752,000 bales with the Trade Development Authority of Pakistan against which the exporters have purchased about 627,000 bales while total physical shipments are about 479,000 bales. In view of steep rise in lint cotton prices a few exporters could not fully cover their export requirements and trade reports indicate shipment default of about 75,000 bales beside some quality problems in cotton shipments. The Trade Development Authority of Pakistan should work out a system of providing relief to one trade partner from the default or discrepancy of the other partner in foreign trade through Mercantile courts.
This would improve the image of Pakistan in the world trade and provide relief / compensation or justice to the aggrieved party.
Lint cotton prices of 2009-10 season took start from Rs 3,300 in July,09 and by the first week of December, 09 month, it touched, perhaps the ever highest level of Rs 4,500 per maund of 37.324 Kg ex-gin - the increase of Rs 1,200 per maund = 36.36 percent in about six month's period. The prices of yarn, cloth, garments and other textile products also increased proportionately, almost on strong foreign demand and the high export price level of these items is losing affordability and viability of the domestic weaving, knitting, towel and garment industries. Reportedly, yarn prices in the local market have increased by 25-30 percent in the last couple of months. The increase in power and gas rates has also fuelled the production cost rendering it uncompetitive in local as well as foreign markets and down stream industries have started closing rendering large number of workers unemployed and creating other economic and social problems. On the demand of the down stream industries of weaving, knitting, towel and garment, to ban or restrict the export of yarn and cloth to the level of average of last three years, for increasing availability of these items for local industries, the government of Pakistan has formed a vigilance committee comprising of representatives of different stakeholders and has developed a procedure for registration of all export contracts of yarn under the Trade Development Authority of Pakistan (TDAP).
Also a Minimum Export Price will be fixed under which no export sales would be made. The vigilance committee will meet from time to time to monitor the export of yarn specially up to 32s count which is mostly the requirement of local down-stream industries. In the market, there are reports of ban on exports of yarn up to 32s count but without conformation. This situation has slowed down the buying interests of local spinning industries in raw cotton. The fact is that Pakistan's yarn production in November, 09 has increased by 20,000 metric tons to 230,000 tons from average 210,000 m/tons of some previous months probably on revival of some idle spinning capacity.
The export of cotton yarn is reported to have jumped to four months (July -October, 09) monthly average of little less than 61,500 tons against monthly average of 44,000 m/tons in 2008-09, about 48,000 m/tons in 2007-08 and about 55,500 m/tons in 2006-07. The All Pakistan Textile Mills' Association mostly representing the interests of spinning industry, are against any ban or restriction on yarn exports on the strong plea that despite already shortage of cotton production against domestic consumption, exports of raw cotton take place every year and the spinning industry has to import 3 to 4 million 170-Kg equivalent cotton bales every season.
As such, the local downstream industry can import yarn to meet its requirement and should not oppose yarn exports. China (where due to increasing exports of textile goods and increase in local demand) and US (where spinning capacity has been drastically reduced by about 70 percent in last 11 years) are the largest importer of cotton yarn.
According to one report, Pakistan has the largest contribution of 37 percent in the total import of yarn in China in six months' period of January - June,09 while India 9 percent, Taiwan 9 percent, Vietnam 7 percent, Indonesia 2 percent and other countries 36 percent. It is hoped that Pakistan' share in China's yarn imports for the six-period of July - December,09 would be even larger. After all, the Government of Pakistan should, taking into consideration the ground realities and all pros and cons of the matter, make a decision to ensure smooth supply of cotton yarn to local downstream industry at appropriate rates in the national interest.
It has been seen that growth rate of world textile and clothing has been registered at 7.8 percent since the new millennium in post-quota period while the growth rate in pre-quota period was 6.2 percent clearly indicating advantages of liberalised trade. The world textile and clothing trade which was at US$ 356 billions in 2000 increased to 598 billions in 2008 which is projected to touch the level of US$ 700 billions by 2012, indicating shifting of global trade to value-added textile goods. Pakistan should take account of the situation and make policy to avail the future opportunities in textile sector.
In the recent, there had been many factors generally favouring bearish sentiments in cotton market but all were mopped up by the strong bullish market. Now, there are some factors in the domestic market such as, ever high lint prices of Rs 4,500 per maund of 37.324 Kg ex-gin, some moves at least to discourage, if not ban or restrict, export of cotton yarn, reduction in operational and business profits, tight local money supplies in December month and some other factors on international front such as resistance to bullish trend of prices, long holidays on account of X-Mas and new year celebrations, holiday and touring mood of business class people, may create an atmosphere of easiness followed by bearishness in cotton and other commodity markets in December month and first half of coming January month otherwise there appears remote chances of any weakness in cotton market in next couple of months.
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Tab: 1 Comparative Cotton Arrivals (bales)
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Date 2009-10 2008-09 Difference Percentage
1st. September 1,291,550 - - -
1st. October 3,079,254 2,364,008 715,246 30.25
16th October 5,048,243 3,499,020 1,549,223 44.27
1st. November 7,363,929 5,257,810 2,106,119 40.06
16th November 9,261,398 7,171,640 2,089,758 29.14
1st. December 10.427,737 8,336,235 2,091,502 25.09
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Source: PCGA Reports
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