During the last week ending on September 17, 2005, vast cotton areas of Sindh and Punjab received rains, somewhere benefiting and elsewhere damaging the cotton crop. The negative aspect of the rains was that the gusty winds preceded rains, causing fruit-shedding in areas where the crop was either at flowering stage or at squaring stage.
The net impact of rains on cotton crop would only be determined when monsoon season gets retired around second week of October.
However, present crop position appears to be yielding some 13.0 to 13.5 million bales. If no further rains are received and bright sunshine is seen everywhere then one can hope for some improvement in cotton production estimates.
In Sindh, Bt cotton varieties have been sown on more area despite the fact that sowing of this variety is prohibited. Bt cottonseed is reportedly smuggled into Pakistan from India.
This variety gives very high field yield--of around 50 maunds (2000 kg) per acre--against average yield of 20-25 maunds from traditional varieties, while its ginning out-turn (GOT) is reported quite promising--around 40 percent against 32-33 percent of traditional varieties. Fibre properties of Bt lint cotton are reported much better. Such lint cotton commands premium up to 4 to 5 percent of its value. Prominent cotton growing countries, such as USA, China and India, are already sowing these varieties on large areas. Pakistan is lagging in adoption of new technologies.
Through adoption of new agronomic and seed technologies, including GMO, India has doubled its yield in last four yeaRs In 2005-06, India is going to produce a record high crop of 25-26 million bales after producing a record high crop of 22.5 million bales last year.
Pakistan may take 4-5 years, or even more, in adopting this technology.
Trading Corporation of Pakistan (TCP) received poor response for its international tender for sale of 50,000 bales. Only 5-6 companies, not quite known in cotton trade, participated in the tender with highest bids of 43.77 cents per lb for Grade III plus -34 and 44.27 cents per lb for Grade II - 34 f.o.b Karachi, against which TCP countered with 45 and 46 cents, respectively, but nobody responded.
Actually, world cotton prices are under pressure and yarn market is also weak. Another factor for poor participation in the tender was TCP''s default status in the eyes of International Cotton Associations Ltd, Liverpool, and its membeRs Unless the matter of TCP default is settled, the international cotton community would continue to boycott TCP.
On the close of the week, new crop lint prices had come down to the level of Rs 2,125-2,150 per maund and these may go down further when seed-cotton arrivals get a boost. New crop lint prices had already touched the low level of Rs 2,050 about two weeks before. No wonder if the lint prices even drop to the level of Rs 2,000 soon when seed-cotton arrivals are accelerated in the next fortnight.
The main setback to cotton prices is from the falling yarn prices and poor demand in local as well as in export market. When ginners demanded lint price of Rs 2,200, the spinner-buyers refused to oblige them and the ginners had to sell cotton at lower rates.
The spinners are not expected to absorb the increasing lint production in the coming weeks. The level of lint prices around Rs 2,000 would attract export business as it happened about two weeks ago when about 15,000 bales were reportedly sold in exports.
The Karachi Cotton Association fixed spot rate at Rs 2,150/maund on Saturday. Arrivals of seed-cotton in some Lower Sindh areas increased on reports of clear sky position. Exporters who had committed sales would also like to cover their requirements when the lint prices maintain the level of Rs 2,100. Punjab style cotton is quoted on premium of Rs75-100/maund over Sindh prices. As ginning operations in Upper Sindh and Southern Punjab starts, spinners would shift their purchasing to these areas on ground of better quality.
Lower Sindh areas remain quite attractive for exporters. In the early months of the season, the prices are likely to remain bearish on weak yarn prices, fairly large cotton inventories with the spinners, liquidity crunch, weak New York cotton advice and reports of large cotton crops in US, India and Pakistan. This situation would attract export sales and discourage cotton imports.
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