Cotton sowing in Pakistan has almost been completed. However, some re-sowing due to rains and delayed sowings are in progress. Official figures about the area sown for 2005-2006 season is yet to be released but private estimates put total area around 2.95 - 3.08 hectares. Presently, weather can be said satisfactory but fears are there about more than normal monsoon rains. The monsoon rains in India, Bangladesh and China is showing violence causing damage to crop, property and lives.
Unlike last season, this time lands have enough moisture, water dams are almost full of water and canals are flowing well so eve with small rains and melting of snow on mountains, flood like situation may be created inundating river-bed area and other low lying areas.
The high temperatures ranging above 45 degrees Celsius in some cotton areas of Sindh is quite undesirable. The high humidity in the atmosphere would help pest development. However, the growers and concerned agencies are appear alive to the situation to meet any exigencies. The official production target for next season has been fixed at 13.0 Million bales ex-farm almost equal to cotton production achieved this season.
Stocks of unsold cotton with the ginners have almost evaporated but Trading Corporation of Pakistan (TCP ) is still holding unsold stocks of about 1.175 Million bales out of 1.6 million bales. Local spinners are evincing keen interest in buying TCP cotton stocks in open tenders.
The local spinners have offered to buy cotton stocks lying in TCP Multan warehouse at the best price of Rs 2,385 per maund ex-warehouse and at some lower rates for cotton stocks in Karachi and other warehouses. In export, only two bids were received the best one at US Cents 43.0/lb and the other 41.0;/lb FOB Karachi.
The equivalent of best local price of Rs 2,385 ex-warehouse comes to US Cents 50.50 (Rs 2,385 + 100 for FOB exp = 2485 per maund divided by 49.20 = USCents 50.50/lb fob Karachi). The difference between the two best bids; local and export comes to US Cents 7.50/lb. The export market is quite week on larger world unsold stocks and trade row between China and US / EU whereas the local spinners are active in buying TCP cotton stocks at high prices on fears of late new crop and expectations of poor performance because of bad weather conditions more than normal rains.
However, the TCP may not be able to dispose of its balance unsold stocks before end of 2005. Market Reports indicate that on arrivals of new crop in August,05, TCP may stop offering its cotton to local spinners and start selling in export market. TCP had already sold some 60,000 bales in export but deliveries are lagging behind.
The merchants who had bought cotton from TCP are finding it difficult to sell cotton to end-users in this falling market. Also, LCs are not coming from Bangladesh, Indonesia and Thailand. Actually, the merchants who had bought cotton from TCP at high prices, had taken long position and now are facing difficulty in unloading the long position.
A hot debating is going on between those who are favouring restoration of hedge market and those who are opposing it. As a matter of fact, the matter was discussed among all the cotton stake-holders particularly the growers, ginnersm spinners and exporters and a decision was unanimously taken in respect of restoration of Cotton Hedge Market under the Karachi Cotton Association. Accordingly, necessary amendments in the KCA bye-laws were discussed and agreed upon.
On the persuasion of the KCA, the Government of Pakistan has given green signal to KCA for making necessary arrangements for restoration of hedge market. Now, the Pakistan Cotton Ginners who made good fortune by selling their cotton to TCP at rates higher from prevailing market rates by Rs 200 - 300 per maund fear the elimination of TCP role when Hedge Market would re-start its operation. When the writer discussed the matter of Hedge Market with many ginners, spinners and growers, it was found that most of the people were found quite ignorant of the working of hedge market.
It is an established fact that trading risk is either reduced or eliminated through Future Trading and is going on not in cotton but in so many commodities. However, through discussion and debates, the reservations and objections should be settled so as to develop a contentious for restoration of cotton future trading.
New York Future Market remained under selling pressure almost through out the week. The ruling July 05 contract further declined by Cent points 138 and October05 contract by 155 to settle at 46.96 and 49.60 respectively. US has sold in export 14,175,200 bales including 770,600 bales of Pima cotton and has shipped 10,337,900 bales including 755,000 bales of Pima cotton.
For 2005-2006 season, US has fixed export target of 15.0 Million bales and mill-use at 5.8 million bales. The cost of lint cotton production in USA is the highest around US $1.48 per Kilogram and if subsidy on is reduced drastically or abolished, then cotton production would become un-viable in USA due to higher cost of production.
The quota-restrictions imposed by USA and European countries on import of textile goods and apparels from China and China's measures for the safeguard of its cotton and textile industry against USA and EU countries have created an atmosphere of uncertainty in world cotton and textile markets. USA have sent its delegation to China for resolving the trade disputes with China. China's peoples daily reports that China would loose 400,000 textile jobs if US restrictions on import of Chinese textile goods would continue. China is confident that despite all odds its textile exports would cross the mark of US $100 billions in 2005. The recent rains in China have inundated an area of 4.4 million acres and more than 200 lives are reported to have been lost.
The rains in Bangladesh have also been quite violent and a dozen of lives have been lost in floods. Also in Pakistan, the rains appear quite violent and fears of damage to cotton are there. As a result of row on cotton and textile trade, yarn market is quite slack.
The merchants are reportedly trying to unload their long position which has caste easy effect on cotton price. The present situation may not improve till trade disputes between China and US / EU are settled amicably.
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Cotton Production and Consumption Figures
(Mln bls - 2005-2006 season)
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Country Beg. Stock Prod. Mill-use Exports Imports End Stock
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USA 7.50 19.50 5.80 15.90 0.04 6.20
China 8.93 25.50 41.00 0.03 15.00 8.76
India 7.11 15.50 15.80 0.80 0.60 6.61
Pakistan 3.31 9.50 10.80 0.65 1.15 2.48
Central Asia 2.52 7.44 1.86 6.00 - 2.03
Brazil 5.33 6.70 4.20 2.20 0.20 5.93
Frch.W.Africa 1.92 4.28 0.19 4.61 - 1.41
World 48.74 106.19 111.53 38.89 39.24 44.05
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