Concerned quarters think that cotton sowing process up to more than 90 PERCENT may be completed by the end of this month. Generally, this time, cotton sowing is facing many difficulties such as shortage of irrigation water, poor quality of sowing seed, abnormally high prices of inputs specially fertiliser and pesticides, switch over of cotton area to competitive crops of rice, cane and chillies and delay in sowing.
Conducive weather and climatic conditions would play very important role in producing a good crop despite many problems. In Upper Sindh, cotton has lost sizeable area to rice and cane crops and also in Southern Punjab. Field reports indicate that cotton area may fall short of 15 to 20 percent of the target area of 3.25 million hectares in 2008-09 season. Recent rains in some cotton areas of Punjab is reported to have increased prospects of a better cotton crop.
In very early cotton sown areas of Lower Sindh comprising of Judo, Degree, Badin, Mithi and Chachro cotton picking has started and arrival of seed cotton has commenced in very limited amount.
In central Punjab, picking in areas consisting of Pakpattan, Arifwala, Mianchunnu, Chichawatni, Gaggoo, Sahiwal is also reported to have started and a modest amount of seed cotton was sold at Rs 2,100 per 40 Kg ex-Mandi / factory. Cottonseed is reported to have been sold at Rs 900 per maund from new crop in Sindh.
Regarding size of next cotton crop, ideas differ widely, independent estimates put the crop size between 11.5-12.0 million local weight bales but conservative estimates restrict it around 10 million bales. Against our domestic consumption around 15.5 million local weight bales, our production falls short by some 4.6 - 5.0 million bales which would be met through import of cotton.
Stock of unsold cotton from 2007-08 crop has been reduced to nominal amount. New crop cotton is selling between Rs 3,800 and 4,000 per maund. Lint prices are steady to firm. In next couple of weeks, ginning operation in new crop would commence and deliveries to mills would start.
On the basis of seed cotton price at Rs 2,100 per 40-Kgs, the cost of lint cotton works out to Rs 4,000 plus. Since, almost all agri-products are selling at high prices and production cost has increased considerably, there no reason as why lint prices should be on the lower side. Price fundamentals are strong but political/ law and order conditions appear quite unstable and uncertain.
As such, price trend in new season is difficult to forecast. On international front, lint cotton prices may follow the world prices of other agriculture commodities under the influence of crude oil and gold prices. Political instability in the Middle East and fears of US/ Israel conflict with Iran may largely upset regional market.
Pakistan's internal political, economic and law and order situation with special reference to its relations with US and Afghanistan on terrorism are likely to affect its economic performance in coming season. Pakistan's economy in 2007-2008 season does appear achieving its targets.
Its imports are increasing fast at the rate of 29.56 percent in dollar terms in 11 months of the year 2007-08 while its exports are increasing at the rate of 11.37 percent. Deficiency in the trade balance has increased to 52.35 percent. The economic situation/ performance in new season may even more disturbing than that of this season. Increasing shortage of water, power, poor crops, abnormally high prices of grains, edible oils, petroleum products and gold may make prospects of a good economy bleak.
Trade circles concerned over cotton sowing, development conditions. Cotton sowing is in full swing; in some areas on time and in some areas late to too late. Early sowing areas particularly of Lower Sindh and Central Punjab are late while sowing in late areas of Upper Sindh and Southern Punjab is on time. Although, complaints of irrigation water shortage are common both in Sindh and Punjab provinces but early sowing areas have adversely been effected.
Sowing process is likely to extend to middle of next month but by the middle of June month, about 70 percent sowing is estimated to have been completed. However, sowing target of about 3.25 million hectares may not be achieved in view of shortage of irrigation water and switch over to better return crops like chillies, rice and sugarcane. The fall in sowing target is estimated 15 percent and may extend to 20 percent. The Federal / provincial agriculture departments should issue sowing reports periodically to keep the cotton growers / trade of the facts and to counter private speculations.
Recent heavy rains in Rahimyar Khan district reportedly damaged the newly sown cotton and necessitated re-sowing. Weather is reported partly cloudy in most of the cotton areas in Sindh and Punjab and rains are anticipated soon. In some cotton areas, blowing of gusty have caused some damage to saplings.
This time, only a very conducive weather and proportionate rains can produce a good crop on the face of shortage of irrigation water and use of poor quality sowing seed. Reports of attack of Mealy Bug from fields in Lower Sindh have been heard. Also in Tob Tek Singh area survey is being conducted on reports of possible attack of Mealy bug.
Cotton crop in Sahiwal, Mian Channu, Vehari, Arifwala and Pakpattan areas of central Punjab is reportedly reaching maturity stage and in some areas, harvesting has also commenced. It is stated that some months back in the month of March crop of potato was severely damaged and growers sowed cotton on such fields which is on maturity stage these days. Concerned circles estimate such cotton area between 100,000 and 150,000 acres which may jointly produce between 300,000 and 400,000 local weight bales.
Ginneries in central Punjab may soon commence operation in new crop in view of firm demand of cotton and just arrival of seed cotton. Reports indicate that academically seed-cotton arrivals have started from Degree and adjoining areas; being early sown area. Price of seed-cotton is quoted between 1,900 - 2,000 per maund of 37.324 Kg ex-godown / gin.
Lint cotton prices in the local market remained steady to firm on reports of higher values on New York Cotton Exchange and firm local demand. Present unsold stocks of cotton with the ginners and exporters are estimated around 50,000 bales.
Sellers are tight on price terms. Lint cotton prices in the out-going cotton season took start from Rs 2,600/- per maund but the exporters had sold cotton on parity lower than Rs 2,600 level in expectation of decrease in prices on ground of expectation of bumper crop but at the end of season in June, lint prices set high record of Rs 4,100 per maund ex-gin; increase being 57.69 percent.
Those exporters who went wrong in their assessment of prices made defaults in exports. Reports of over-charging weight in shipments are also heard and the exporters failed to pay cost of weight losses to the buyers. Reports of shipments of very low quality of cotton even mixed cotton-waste. Thus, the unscrupulous exporters brought bad name to Pakistani exporters as well as Pakistan.
Previously also some cases of gross misconduct or default in shipments had been reported but there is no institution or ant department, which can hear the complaints of the buyers. The new government should establish special commercial courts to hear and try such cases. In the in-coming season 2008-2009, seed-cotton prices are taking start from Rs 2,000 level and there would be no surprise if the seed-cotton prices touch the level of Rs 2,600 from lint cotton prices took start in 2007-2008 season.
In the 2008-2009 budget, the spinning industry received no concession rather were deprived of some concessions. The political, law and order and export / business conditions do not appear conducive to prospective textile business in coming months.
Also recession in US trade, record high prices of crude oil, high prices of grains, soybean and sugar in the international market would not help cotton trade. In view of small expected cotton crop around 11.0 million bales in the coming season, cotton export business would face challenges. However, cotton import business specially from India would get boost. Lint cotton prices in the local as well as foreign markets are expected to remain stable.
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Here are UDA/Cotlook estimates: (Figures Million 480-lb bales)
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Production Consumption
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2007-08 2008-09 Diff (%) 2007-08 2008-09 Diff (%)
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World 118.66 115.60 -2.57 122.11 123.79 +1.38
China 35.34 35.29 -0.14 51.04 52.75 +3.35
India 24.94 26.13 +4.77 18.61 19.06 +2.42
USA 19.20 14.39 -25.08 4.60 4.30 -6.52
Pakistan 8.62 9.11 +5.67 12.14 12.33 +1.57
Brazil 7.13 6.41 - 10.10 4.43 4.48 +1.13
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