There have been reports of rains on cotton belts of Sindh and Punjab, besides northern Punjab and Northern Areas of Pakistan. In lower Sindh and in some parts of northern Punjab, re-sowing has been reported due to untimely rains. Monsoons are likely to start from June, and forecast is for heavy rains. March rains had delayed harvesting of wheat crop, and now cotton planting has been delayed. Unfortunately, the present weather does not appear to be friendly to cotton sowing. Weather is frequently changing. Humidity in the atmosphere is on higher side while temperature is on lower side.
There is also shortage of seed. Sowing of inferior seed with lower germination percentage would adversely affect cotton productivity. The start is not good which may jeopardise the prospects of a second bumper cotton crop of 15.0 million bales (of 170 kg) next season. Even, cotton planting in Sanghar district has not yet been completed. However, the process of land preparation, moisturising and sowing are well in progress in Sanghar and Nawabshah districts.
Against this season's cotton production of some 14.4 million bales, a nominal stock of about 200,000 bales remains unsold with the ginners, while Trading Corporation of Pakistan (TCP) is still holding some 1.5 million bales. TCP is selling cotton to local and foreign buyers through tenders, and local spinner and other buyers are evincing enough interest in buying this cotton.
In TCP's last tender, which opened on Saturday, May7, six bids of 45.07 to 42 cents from six foreign companies were received for 30,000 bales, against which the TCP has countered to all tender participants at 47.90 cents, while there were scores of local bids.
The best ones were of Rs 2300 per maund (of 37.324 kg) ex-warehouse for D G Khan warehouse, Rs 2291 for TCP Karachi warehouse, Rs 2250 for Chinchawatni warehouse and Rs2,106 for TCP Sanghar (Sindh) warehouse against which TCP has countered Rs2,300 for cotton in Karachi and D.G. Khan, Rs 2.250 in Chichawatni and Rs 2200 in Sanghar warehouses. The validity of the counter-offer is reportedly till 3 pm Pakistan Monday, May 9, 2005.
Although, TCP has offered all its cotton as Grade III staple 1-1/16, but the buyers are bidding different rates. In its previous tender TCP had sold cotton at different rates. When quality, grade and staple length are the same, then why cotton is sold at different rates? This time, lowest rate of Rs 2106 was offered for cotton stored in TCP warehouse at Sanghar (Sindh). This shows that quality of cotton stored in Sanghar is quite inferior to that stored in Karachi warehouse. Previously, there were reports of TCP purchasing low grade / inferior quality cotton from ginners of Mirpur Khas, Sanghar and Nawabshah.
TCP should hold an inquiry in this matter and take necessary actions against the concerned people. The TCP is speeding up the local sales but local spinner-buyers are reportedly facing lots of problems in selection of cotton, weighing and delivery of cotton bales, especially from Karachi warehouses.
The labour contractor, supposed to perform all labour jobs up to loading of cotton into trucks on behalf of TCP, is demanding five times charges from the buyers and is refusing delivery without payment, one brokers working for some spinner-buyers said.
Actually, the infrastructure facilities in TCP warehouse in Karachi are very poor and cannot cope up with the heavy load of weighing / delivery of cotton bales. Unscrupulous TCP workers are misguiding and creating difficulties in delivery of cotton bales for extorting money from the spinner-buyers The ginners are much worried on the delay of some 4 to 5 months in getting final payment against their cotton deliveries to TCP. Reportedly, less than 15 percent final payments have been made and the ginners are not allowed to visit concerned offices for their final payments.
The Karachi Cotton Association (KCA) is making all efforts to complete its homework for re-opening of Cotton Hedge Market in the next couple of months after 30 years The Pakistan Cotton Ginners' Association ( PCGA ) and Farmers Association of Pakistan (FAP) have some reservations in restoration of Cotton Hedge Market and are reported to have intention to move the matter to Federal Shariat Court of Pakistan for its legality on Islamic point of view.
The KCA version is that PCGA and all other important cotton stakeholders had participated in meetings and discussions on arriving at a mutual agreement to re-open Cotton Hedge Market. The Hedge Market of cottonseed oilcake is already operating very successfully since long, and so is the Stock Market for futures deliveries.
Futures Trading in different commodities is going to start under National Commodity Exchange from new Financial Year 2005-06. After all, Cotton Hedge Market would be an additional / optional marketing channel for all cotton stakeholders apart from the existing marketing system and it would not be compulsory.
The Cotton Hedge Market would ensure immediate full payment of cotton price to ginners and an opportunity to sell or buy as much cotton as is required. Perhaps, due to ignorance to Cotton Hedge Market, people are holding reservations. So, there should be programmes for holding lectures, seminars and courses on Cotton Hedge Market for general awareness and knowledge of the concerned cotton stakeholders. We are already a signatory to WTO agreement, and would have to adopt international measures to ensure transparency in our marketing system, especially of those commodities which are traded internationally.
It seams that reservations against re-start of Cotton Hedge Market are based either on some misunderstanding or some whimsical opinions, which should be cleared through dialogues and discussions.
New York cotton eutures remained under selling pressure after touching 10-month highs. May contract finished at 53.79 cents losing 4.21 cents, and July contract closed at 53.49 cents decreasing by 3.56 cents.
In the week ended April 28, USA was able to make robust export sales of 931,000 Running Bales mainly 666,800 bales to China and 262,300 bales to Turkey. On April 29, Long Position in Hedge had increased to 40.1 percent and the fall came.
US has made season's total export commitments of 13,356,000 bales (12,596,500 bales of Upland cotton and 759,500 bales of US Pima cotton) and shipments of 8,967,500 bales (8,222,500 bales of Upland and 745,500 bales of US Pima cotton). Main buyers were China 2,841,300 bales, Turkey 2,123,100 bales, Mexico 1,772,000 bales, Indonesia 1,155,500 bales, Thailand 779,600 bales, Pakistan 698,500 bales inclusive of 182,500 bales of US Pima, Korea Rep 691,000 bales, Taiwan 552,900 bales, Canada 428,800 bales, Japan 389,900 bales, Hong Kong 235,500 bales, India 189,000 bales and Bangladesh 166,300 bales.
Since the start of WTO regime, from January 1, 2005, imports of textile goods and apparels into USA from China, India, Bangladesh have increased substantially and different US trade associations are pressurising US administration to restrict such imports, especially from China, to save US textile industry from closure, and industrial / commercial workers from losing jobs. The present system of providing subsidy to agriculture sector would continue till 2007. Under pressure from WTO and other countries, particularly European Union, US may consider reduction or abolition of subsidy to agri-growers, particularly cotton, in phases.
Because of high cost of lint cotton production around 70 cents/lb, US growers may not compete with low cost cotton producing countries like India, Pakistan, CIS and China in free market. About 15,000 jobs are reported to have been lost in textile sectors in the last four months, and many textile mills have been closed down due to heavy operational losses.
This is a grave situation for US textile and agriculture, and some alternative measure would have to be taken by US to save its industry and growers' prospects for doubling the cotton production to 40.0 million bales in the next 3-4 years.
India appears quite promising as it is pursuing new agronomic techniques, new production-oriented methods, bio-technology and wide use of Hybrid Bt. Cotton seed. India has already achieved productivity of 415 kg/hectare and it can easily double it.
Pakistan's average yield per hectare is 750 kg and introduction of Bt cotton seed appears a matter of remote. It is likely that India may lead the world in cotton production by 2010.
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