Now, cotton production estimates for this season appear quite realistic--around 13.0 million local bales. Here the question arises: ''What is the net weight of a local bale?'' The answer is that officially and academically it is 170 kg, or 375 lbs. But, practically it differs from season to season, and this season it is said to be around 166 kg, or 366 lbs, as per last PCGA fortnightly report.
This is perfectly within tolerance limits of 3 percent, but trade circles dispute it and place it between 160 and 162 kg (per bale). Official production estimates have been revised from 10.7 million bales to 12.1 bales, and now it is reliably learnt that it is now estimated around 12.4 million bales of 170 kg, or 13.175 million bales of 160 kg each.
Some time back discussions over standardisation of bale weight were held in many meetings in which all cotton stakeholders participated and finally it was decided that net standard bale should be of 170 kg, or 375 lb, with plus/minus 3 percent tolerance limit. It has NOT been put into practice so far.
The reason is that major buyers ie spinners and exporters, freely accept all cotton bales with net weight not conforming to standard weight. This season, Trading Corporation of Pakistan also accepted cotton bales which were not in conformity with standard bale weight of 170 kg.
It has been seen that everybody talks in terms of number of bales instead of weight. Production, consumption and all cotton estimates should be mentioned in universal standards of metric tons which facilitates all national and international agencies to understand it and make comparison with figures of other countries.
It is highly unfortunate that we have not been able to standardise out weights. Seed-cotton (phutti) is weighed in old maund of 40 seers each (= 37.324 kg) and lint is weighed in new maund of 40 kg each. For making plans for national economic development, reliable statistics is very necessary. Some private estimates put Pakistan''s cotton production of this season at 14.0 million bales.
As on November 15, 2004, total seed-cotton arrivals were 8.15 million local bales and by the end of November, arrivals are expected to touch the level of 10 million bales. In January, 2005 and onward, 3.0 million may be received which would finish total crop at 13.0 million bales.
Total domestic consumption is estimated around 13.0 - 13.5 million bales this season. Not only Pakistan is producing record high crop but other major cotton producing countries, like China, US, India and Brazil, are also producing record high crops of 29.5, 22.5, 14.2 and 5.9 million 480-lb bales in 2004-05 season respectively.
It means very fine weather for cotton production has been found globally. Some circles think that normally same weather cycle persists for 4/5 years and hopefully same cotton-friendly weather is expected in next four years. If this comes true, Pakistan may achieve production target of 15.0 million local bales in the next 2 to 3 years.
What remains to be explored very seriously is the quality aspect of cotton. Press reports indicate that World Trade Organisation (WTO) has made it mandatory to export only such commodities which are duly certified under ISO on WTO regime from January 1, 2005.
Pakistan cotton lacks proper application of grading system and standardisation and our lint cotton is discounted in export price to the extent of 10 to 15 percent.
Government''s all efforts to ensure payment of Rs 925 per 40 kg seed-cotton to growers have not succeeded although Trading Corporation of Pakistan (TCP) has been inducted in cotton procurement operation from the start of this cotton season and claims to have made purchase contracts of over 1.2 million bales, of which validity of about 50 percent of the contracts has already expired.
TCP has received delivery of only some 400,000 bales. As per terms of the Purchase Contract, if cotton is not delivered within 15 days of the date of contract, its validity would automatically expire.
The TCP has also sold, in export, 10,000 bales at the average rate of 41.775 cents per lb FOB Karachi, and is understood to have made a loss of $233,400 equivalent to Pak Rs 14.0 million. On this basis, total loss on one million bales would amount to $23.34 million = Pak Rs 1,400 million.
In view of the bearish trend in cotton prices in the coming months, TCP may incur even greater loss. People would have digested this loss if the growers would have received at least the ensured payment of Rs 925 per 40 kg of seed-cotton as Minimum Support Price.
Actually, cotton growers have not benefited as much from this scheme as the ginners. The unscrupulous TCP workers and agents are also reportedly minting money as TCP''s purchase price of Rs 2,159 per maund is higher than prevailing market price by Rs 250 per maund and the staff / workers have free hand to play.
Some rumours indicate that the Government is considering downward revision of TCP''s purchase price to Rs 2,050 per maund but the other day TCP spokesman and Federal Minister for Industries categorically denied any such move.
In Lower Sindh where quality has deteriorated considerably, TCP is making cotton purchases. Although, this season general quality of lint cotton is reported to be better than previous years but inside reports indicate that lint quality of TCP purchases may comparatively be lower this season.
While evaluating cotton in Karachi, TCP should adopt coding system to ensure objective and correct evaluation of cotton without fear and favour.
In the end of last week, lint prices eased down by Rs 50 on reports of go-slow by textile mills and TCP. It sounds quite unrealistic and strange that ginners are reluctant to deliver cotton to TCP against their contracts when TCP purchase price is higher by Rs 250 per maund than market price. Some ginners are continuously delivering cotton to TCP and minting money.
At close of the week, better quality cotton was selling around Rs 1,900- 1,925 per maund while lower grade cotton of lower Sindh was selling as low as Rs 1750 per maund. By the end of December, stock of unsold cotton is expected to swell to 2.5 million bales with 75 percent pressed and 25 percent unginned cotton and spinners would buy selectively and TCP may close its deliveries at 800,000 bales because of limitation in storage capacity and operational capabilities. Then pressure would develop on cotton prices.
Actually, trade circles see very critical situation in cotton market in the next two-three months. Possible failure of the Government in handling this bumper cotton crop of plus 13.0 million local bales would adversely and seriously affect the financial position of small cotton growers.
The Government should take necessary measures to avoid any possible crisis in cotton. Due to Thanksgiving holidays, New York cotton market worked only three days of the week where mixed trend was seen.
December contract finished at 48.40 cent per lb, up 57 points, and March contract closed at 42.92 cents, down 36 points.
International cotton market was looking for direction but global fundamentals are week on record high cotton production of 111.7 million 480-lb bales against record high consumption of 102.9 million bales in 2004-05 season.
Countries, specially US, with larger exportable surplus are in difficulty for its disposal. China imported 1,824,000 tons lint cotton = 8.375 million 480-lb bales in ten months from January to October--up 177 percent in same period of last year--mainly from US, Australia, Burkina Faso, Mali, Uzbekistan and Paraguay. China has declared cotton lint import quota of 894,000 tons = 4.105 million bales--in year 2005 which is less than 50 percent of cotton imports of 10 months in 2004.
Of this Chinese import quota of 4.105 million bales, 33 percent will go to its state-owned enterprises and balance 67 percent to private sector enterprises. In view of fast approaching WTO regime, prominent textile products (garments and other made-ups) importing countries, specially US and European Union, fear greater setback to their local textile industry against cheaper textile goods imported from China, India and Pakistan while these textile exporting countries hope to strengthen their economies on higher production and exports of textile goods in 2005 and onward.
However, US and EU are taking necessary steps to save their local textile industries from ruin. However, true picture of the situation in cotton and textile producing and exporting / importing countries would emerge when such countries would settle in WTO regime.
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