Conducive weather is brightening the prospects for a bumper cotton crop of 11.5 million 375-lb bales in 2004-05 season with very good cotton quality. As the harvesting is gaining momentum, more and more ginning factories are resuming operation in new crop cotton.
Last week, when I visited cotton areas of Hyderabad, Sanghar and Nawabshah districts of Sindh, I found the crop generally to be in good-to-very-good position. I also saw phutti (seed-cotton) arrivals and ginning operations in factories where quality of lint cotton was found to be equivalent to US Grade 'Middling' with staple length between 1-1/16 and 1-3/32 inches.
Some bright white and clean seed-cotton was seen in many factories which was said to be Bt Cotton by the factory workers.
For a couple years, of there have been reports of sowing of seed of Bt Cotton, reportedly smuggled from India and Australia.
The ginners sell the lots of so-called Bt. Cotton at premium price and may be paying premium to growers/suppliers. One grower confirmed that Bt Cotton has higher productivity and better fibre characteristics.
As per law, sowing of seed of Bt. Cotton is perhaps prohibited; so, the Provincial Agriculture Departments some time raid factories.
India has officially allowed sowing of Bt. Cotton seed which has increased its productivity and growers' profitability. Bt. Cotton remains generally almost free from attacks of boll worms; so, the cost of sprays is drastically reduced.
Dr Jessomal, of Sindh Cotton Ginners, Shahdadpur, said that this season the quality of cotton is very good, being free from diseases and yellow starins. Jessomal explained the crop position and commented on marketing of cotton saying that presently ginners are oversold.
He holds optimistic ideas about crop size and quality of cotton. He has a good knowledge of cotton marketing.
Seed-cotton was selling at Rs 950 per 40 kg ex-gin, and lint cotton at Rs 2,300 per maund of 37.32 kg ex-gin and cotton seed at Rs 380 per maund in Sanghar district.
Ginners find these rates quite profitable. Spinners/buyers are lifting all the production. Sanghar district is top most cotton producing district of Sindh. In 2003-2004, Sanghar district produced 637,772 bales out of Sindh province total production of 2,129,553 bales--almost 30 percent.
The Pakistan Cotton Standard Institute, Karachi, under Ministry of Food, Agriculture and Livestock (Minfal) is reported to have decided to establish a modern Fibre Testing Laboratory in Sanghar.
Although Sanghar is the district headquarters but has no rail link and is one-side close to Indian boarder. Instead, Shahdadpur is on main railway line, is in the nawab of the district and is well connected by roads with main cotton producing stations like Tando Adam, Nawabshah, Sarhari and Shahpur Chakar.
The demand of the ginners is to locate the fibret-testing laboratory in Shahdadpur instead of Sanghar.
New crop lint cotton prices remained steady around Rs 2,300- 2,350 per maund ex-gin during the week but was reported weak on last day of the week. The present level of local lint prices is quite viable for the local spinners in comparison with equal quality foreign cottons.
The Trading Corporation of Pakistan is making arrangements for procurement of lint cotton. The Government's Minimum Support Price for seed-cotton is Rs 925 per 40 kg but has not fixed price of lint cotton.
Trade circles say that TCP should enter the cotton market when lint prices fall below the level of Rs 2,000 per maund. Ginners are still holding stocks of unsold cotton from last season's crop which is estimated around 150,000 bales.
Those ginners and exporters, still holding old crop unsold stocks, are losing hope of any government move to lift these stocks. Business circles consider the present level of lint cotton prices quite viable for ginners as well spinners. Sizeable fall in world cotton prices would certainly affect local prices.
Pakistan's domestic cotton consumption is estimated around 13.0 million local bales and estimated cotton production of 11.5 million bales and 1.0 million bales re-use of waste cotton would leave a shortfall of only half a million bales. Local cotton yarn prices are viable but offtake is not in bulk.
New York cotton futures market, which had boosted cotton prices by over 7.0 cents /lb on speculative Fund buying, had come down half way last week. October Contract settled at 47.90 cents and December at 48.44 cents a pound, losing 2.90 cents and 2.79 cents, respectively.
New crop US cotton is reported to be facing a lot of pressure from other countries, like CIS, South / West Africa and Brazil and in the week ending August 27, US export sales stood at 115,600 Running Bales. Prominent buyers were Turkey 28,200 bales, Indonesia 21,500 bales, Mexico 14,300, China 14,000 and Hong Kong 13,600 Running bales.
US export sales (2004-05 crop) is now reaching the level of 5.0 million bales including more than 50 percent of the carry-forward of unshipped 2003-04 season cotton.
US appears committed to defending US agriculture interests in every forum and has no intention of taking any unilateral step. Talking on US/Brazil dispute decision in favour of Brazil. National Cotton Council chairman, Woody Anderson, is reported to have said that the WTO decision against US is a disappointing development and further said that it did not change the provision of current laws. US is producing a bumper crop of 20.14 million 480-lb bales, China 30.0 million bales, India 14.0 million bales, Pakistan 9.0 million bales and CIS countries 7.4 million bales - these top five countries are producing about 3/4 of world total production of 106.0 million bales. Global cotton consumption is said to be around 100 million bales.
Last season, the market started from 50 cents and went above 80 cents and came down below 50 cents level. The trend of market is reported weak in this season and some traders expect it may go down to 35 or even 30. Till the end of the last season, cotton trade was maintaining long position in physical cotton business and short position in hedge.
Cotton merchants lost heavily on unsold stocks. Last year heavy damage to cotton crop in China and China hectic cotton buying played important role. Now, the world is hungry for news from China which affect cotton but the time is going tight for possibility of such news.
According to Indian Cotton Advisory Board, prospects for a bumper cotton production in 2004-05 have brightened up and the negative effect of dry weather in southern Indian states, especially Gujarat, has died down. In 2004-05, India cultivated cotton on 76.14 million hectares and is expecting total out-put of 17.946 million 375-lb ( 14.02 million 480-lb) bales, achieving record high yield of 400 kg/hectare, up from traditional 322 kg per hectare.
Apparently, this breakthrough is due to adoption of new technologies in seed and agronomy. India is sowing hybrid seed on 35 percent of its total area and is producing about 1.3 million bales of Bt. Cotton. China is mainly manufacturing coarse to medium fine yarn. The position is as under:
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2001-2002 2002-2003 2003-2004
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Total Yarn 2212 m kg 2177 m kg 2121 m kg
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1 - 10 counts 23.69 21.08 20.60
11 -20 counts 19.85 20.44 19.09
21-30 counts 20.61 21.86 23.29
31-40 counts 24.77 (88.92 %) 24.48 (87.96 %) 24.42 (87.40 %)
41-60 counts 6.65 7.39 7.54
61-80 counts 2.76 2.80 3.02
Above 80s 1.67 1.95 2.04
Total percentage 100 100 100
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According to one report, cotton fibre characteristics / quality parameters required by modern high speed spinning machinery for operating at maximum efficiency, in relation to US Grades, are as under:
1. Grade : Strict Middling White
2. Staple length : 27.4 mm
3. Micronaire : Min 3.8 Max 4.4
4. Strength : 28 g/tex
5. Length uniformity : 83 percent
6. Fibre Maturity : 80 percent
7. Elongation : 6 percent.
High grade, longer staple length, suitable micronaire range and higher fibre strength contribute to production of finer and stronger yarn.
Chinese economy, particularly textile industry, is confronted with tight liquidity position, frequent power breakdowns, higher cost of raw material and slum in local buying. These factors have led Chinese economy to go slow.
Economies of European Union countries are not performing well. Germany is facing chronic unemployment problems. Reportedly its economy is largely depending on exports to USA and China but its home-grown economy is not recovering.
Italy is also more or less facing same situation. Only France is enjoying consumption boom and other economies are depending on foreign markets.
Fundamentals of world cotton market appear weak in view of record high crop estimates of 106 million 480-lb bales, slowdown of prominent economies, high oil prices and critical Middle-East situation.
Cotton merchants / traders and growers favour a bullish market and look towards China for any upset in production estimates.
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