Field reports from lower central Sindh indicate that peak of cotton arrivals is over and not only arrivals have reduced considerably but quality has also deteriorated. Only some big cotton growers are holding better quality seed-cotton and are trying to get better rate.
The disease of reddening of leaves / bolls and plant has widely spread in large area and growers are expecting good return. Besides, cotton growers appear prepared to sacrifice their last pick cotton to avail of wheat sowing on comparative return advantage.
However, reports from Khairpur, Sukkur and Ghotki districts of upper Sindh show heavy arrivals of seed-cotton in the ginning factories.
Similarly, reports from southern Punjab, particularly Rahimyar Khan, Bahawalpur and Bahawalnagar districts--the prime cotton belt--also indicate heavy arrivals.
Spinners are lifting most of the pressed bales and no unsold stock of cotton is found in this area. One report says that micrnoaire values are coming down and some lots were found at 3.9.
The same report says that cotton from lower Sindh areas of Mirpur Khas / Tharparkar is reaching Rahimyar Khan area which is mixed with prime local cotton to reduce cost.
Another report indicated attack of boll worm, reddening of plants and virus on cotton plants in some areas of southern Punjab. As a matter of fact, heavy arrivals were also experienced in lower Sindh area which depressed cotton prices to Rs 1,700 per maund, and now the late sown area of upper Sindh and southern Punjab are following the same pattern.
Seeing the heavy arrivals in lower Sindh, some people had increased their crop estimates to 3.0 million bales in Sindh but now have reduced it to 2.5 million bales on reduced arrivals. By the end of November, cotton arrivals in this cotton belt may draw closer to the end of the season.
Some trade circles express fears of same situation in late sowing areas of upper Sindh and southern Punjab in end-December. It is observed that earlier cotton crop estimates of around 14.0 million bales in September have now been curtailed to 12.0 to 12.5 million bales.
The Government Crop Assessment Committee will meet on November 6, 2004, to review the crop situation on fresh developments and latest cotton arrivals figures. Present government official estimate is at 11.6 million bales but concerned government officials estimate it around 12.0 - 12.5 million bales.
In November and first half of December, there would be peak arrivals in Punjab and upper Sindh which may exert selling pressure on cotton market. As such, the prices may come down to the level of Rs 1,800 - Rs 1,900 for top available quality.
Some circles argue that when the market could not sustain selling pressure of heavy cotton arrivals of lower Sindh how the market would be able to sustain even larger pressure in November and December when spinning mills would already have made bulk of their purchases.
Like Sindh, cotton growers would be resorting to wheat sowing at the right time by the end of November, cleaning their fields of cotton plants. It is estimated that about 1.0 million bales of last pick of cotton would be lost to availing of wheat sowing. By the end of October, total arrivals of seed-cotton are estimated equivalent of 5.3-5.4 million bales.
Unlike last season, when last pick was extended abnormally to April, this season it may end by January. Last year, last pick of cotton had increased the crop size and this season it may decrease it.
The performance of agriculture sector has been below required level. The Trading Corporation is reported to have made purchase contracts for over 400,000 bales cotton and is reported to have received deliveries of about 65,000 bales in its Korangi warehouse at Karachi.
The TCP has offered 20,000 bales of raw cotton Grade III staple 1-1/16 Prime Mic for export sales and for shipment during November-January through international tender. Trade circles think best offer may be around 40.0 cents/lb fob Karachi as international merchants offer less than end-users.
This compares with break-even price of 48.0 cents /lb. Thus,, TCP would bear a loss of 8.0 cents /lb which is a subsidy not to growers but to ginners as in open market cotton was selling at much below government price and cotton growers were getting much below government's assured rate of Rs 925 per 40 kg for seed-cotton.
The commercial banks like Habib, UBL, Allied, Muslim and National Bank disburse about Rs 10 million to each ginning factory on zero margin as cotton growers loan which is used by ginners for purchase of seed-cotton from ginners. Thus on national level, total cotton growers loan amounts to about Rs 12.0 billion. Actually, this loan is used against cotton growers.
The other most strong stakeholder--the buyers (spinning mills and exporters) also deprive the growers of payment of due premium for better quality, which works out to about Rs 5.0 billion every season.
The cotton growers are looted by all other cotton stakeholders and the champions of the cause of growers keep silent. Even the people's elected representatives in Assemblies from agriculture sector do not speak of growers' plight.
In last two days of last week, cotton prices eased somewhat shedding Rs 50 per maund. Perhaps it was due to the pressure of larger arrivals of seed-cotton in southern Punjab and this pressure is expected to increase in the coming weeks. As such, lint prices may face further reduction of Rs 150 to Rs 200 per maund.
The PCGA's periodical cotton arrivals and disposal figures up to October 31 are likely to be released by November 4, which may depress lint prices.
Better grade cotton is selling around Rs 2,000 - Rs 2,050; average grade around Rs 1,900 - Rs 2,000; and low grades around Rs 1,850 - Rs 1,900 per maund (37.324 kg) ex-gin.
During last week, very few export inquiries were received which also kept prices easy. Karachi Cotton Association fixed Spot Rate on Saturday at Rs 2,015 for Grade III staple 1-1/32 inches.
Cotton is still looking for some definite direction in world market. New York cotton values are presently ranging between 44 and 49 cents per pound. Last week's poor US export sales performance impacted cotton prices down by 150 C/Pts.
International merchants are worried on very low cotton inquiries from south-eastern and far eastern countries.
The trend of world cotton prices is said to remain weak in the coming months in view of record high world production.
The high oil prices which may escalate to cross the level of US $60 per barrel crude oil, is adversely affecting the production costs in almost all sectors. However, low cotton prices would gain share in world fibre consumption against polyester.
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