Cotton output downsized dramatically

In one of the most significant moves on the cotton front, Federal Minister for Food and Agriculture Sikandar Hayat Bosan announced earlier this week that the government has scaled down the expected output to 12.5 million bales this year (2005-06) from the earlier target which had been set at 15 million bales on an ex-farm basis.
This assessment of tile current crop situation also appears to be in concordance with the estimation of a lower output in the private trade circles.
Bad weather in August and September in Punjab including storms, rains and floods damaged both production prospects and also reduced quality of cotton in Pakistan's premier cotton producing province. According to the brokers in Karachi, cotton received from Punjab during the past several weeks has about 1.5 to 2 percent more trash compared to the previous season (2004-05).
Besides these shortfalls and shortcomings in the output and quality of the current crop, some traders fear that the crop could be even lower than being presently estimated.
Thus this year (2005-06) the cotton crop could conceivably be up to 3 million bales less compared to the previous season. The three fortnightly seedcotton (kapas/phutti) arrivals reports issued by the Pakistan Cotton Ginners Association (PCGA) have clearly pointed to the deficit in this year's cotton output.
On the other hand, domestic mills in Pakistan may consume anywhere from 16 to 17 million bales (170 kgs) this season (2005-06). However, if we go by the consumption figures given by the All Pakistan Textile Mills Association (APTMA) acting chief Mushtaq Ahmad Vohra last week, spinners in Pakistan may gobble up a gargantuan 18 million bales of domestic size, which shows an emerging deficit of about 5 (five) million bales which have to be imported.
However, in this context we must keep in mind that several mills in Pakistan are shifting to produce higher counts of yarns which could reduce the lint requirements.
However, there is a fair amount of volatility and uncertainty regarding the long staple production ideas at certain origins. Both US Pima and Egyptian styles are scarce and there was hardly any carryover from the previous season.
Productions of both US Pima and Egyptian cottons are likely to be lower compared to the previous season which could keep long staple prices at higher levels.
Brokers variously said in Karachi that cotton prices ranged from steady to strong on Thursday, seedcotton (kapas/phutti) prices in Sindh reportedly ranged from Rs 1025 to Rs 1100 per 40 kgs, while in the Punjab they were said to have ranged from Rs 1075 to Rs 1125 per 40 killogrammes.
A couple of cotton sales reported in Sindh were 200 bales from Sanghar at Rs 2230 per maund (37.32 kgs) while 200 bales from Shahdadpur reportedly sold at Rs 2310 per maund. The general price idea for ginned cotton in Sindh ranged from Rs 2230 to Rs 2350 per maund while in the Punjab it ranged from Rs 2375 to Rs 2400 per maund.
The cotton season in Pakistan is in full swing and seedcotton (kapas/phutti) for about 100,000 lint-equivalent bales are arriving daily. Several mills made anticipatory purchases over the previous couple of weeks because Eid festival is arriving early next month for which the government has declared November 3, 4 and 5 (Thursday, Friday and Saturday) as public holidays.
The cost of trucks required to transport cotton from the ginning factories to spinning units has also gone up due to the approaching holidays.
Therefore, henceforth business activity will slow down with each passing day and will come to a virtual standstill within one week's time. It is therefore expected that full scale business will resume from the second week of November.
Under these circumstances, cotton business will remain dicey due to several uncertainties prevailing regarding size of the domestic crop, the unclear cotton consumption figure by the mills and the condition and size of domestic use of the Chinese cotton crop.
On long term basis, leaders of the Pakistan textile industry are very optimistic of obtaining sustained growth. In fact, the textile industry circles feel that for the time being the growth and development of the Chinese, Indian and Pakistani textile industries will be concurrent and thus grow simultaneously.
Large scale investment in the textile industry in Pakistan is continuing so that it is expected to grow and develop by diversifying and also improving its products.
International cotton prices remain uncertain as long as size of United States crop and Chinese consumption of fibre and not properly quantified. Thus the prices on the New York cotton futures market keep oscillating and will continue to move hither and thither till the basic fundamentals crystallise more clearly.
On last Wednesday the key December 2005 delivery settled for the day at US cents 54.76 per pound (down by 47 points), the March 2006 delivery ended the session at US cents 56.90 per pound (down by 29 points), while the May 2006 delivery closed for the day at US cents 57.69 per pound (down by 30 points).