Cotton harvesting is getting momentum with the passage of time in dry and clear weather conditions. As per cotton figures of Pakistan Cotton Ginners' Association, some 20 percent crop has reached the ginneries by the close of the last month of September.
Lint quality in Lower Sindh stations has deteriorated possibly due to attack of Mealy bug on cotton plants and drastic reduction in cotton prices. Ginning / cotton activities have been resumed after long Eid holidays. Some of the ginning factories in late areas have further delayed operation due to wide fluctuation in cotton prices and some due to liquidity crunch. The banks offering cash credit facilities to ginners are doing so freely with taking account the drastic fall in cotton prices and so the stock valuation, one insider said.
However reportedly, these banks are to some extent restricting credit facilities to spinning mills. The banks should be very cautious in lending money lest the financial crisis and market turmoil adversely affect their liquidity position and banks credibility. Reports about the size of cotton crop appear divergent and damage is feared but to what extent. However, crop size is expected to be around 11.5-12.0 running bales.
In view of severe global financial crisis more in US, EU countries and lesser in other countries of Asian and African continents, increasing tendency of switching over to higher count yarn production and possibly drastic cut in our textile exports, our national cotton consumption is likely to be reduced considerably perhaps coming to the level of 14.0 million bales against last year's reported mill-use of 14.8 million bales, reducing the gap between cotton production and consumption equivalent to 2.0 million 170-Kg bales this season against equivalent to some 4.6 million 170-Kg bales imported last season.
Some trade circles fear even lesser cotton consumption in view of adverse finance and trade situation globally. Since major share of Pakistan's textile goods is exported to US and EU markets so our textile exports would receive setback proportionately.
In the local market, cotton prices decreased considerably from Rs 3,700 / 3,800 level down to 3,200 / 3,300 then recovered to 3,400 / 3,500 per maund of 37.324 Kg ex-gin in the last week. Global crisis in financial and economic sectors and poor local conditions such poor law and order situation, high cost of utilities, instable political conditions and poor economic performance are the main reasons for this abnormal situation. Recently, the Karachi Electric Supply Corporation (KESC) has reportedly increased the power tariff by 75 percent, the industries is very much disturbed as according to them it tantamount to closing down the industries.
The market conditions appear so weak that if a lower crop of 10.0 million bales is harvested, cotton prices may remain depressed. The global crisis is deepening and widening and is feared to become more and more dangerous. Prices of yarn and textile goods have also decreased considerably and export orders are very slow and in local market, liquidity crunch is a big problem.
New York Cotton values drifted down sharply on reports of decline in commodity prices, crude oil, edible oil prices and financial crisis globally. The ruling December,08 contract closed at 49.44 breaking the strong psychological of 50 and distant March,09 contract finished at 53.87 level both contract shedding 797 and 807 points respectively. The weakness in the market is strong that there appears no end to it. The prices may go even further to any extent as the conditions are very disturbing and disappointing. As long as such crisis like conditions continue, cotton market may face uncertain situation.
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Cotton Production & Consumption of important Countries
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(Figures in Mln 480-lb bales)
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Production Consumption
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2007/08 2008/09 2007/08 2008/09
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China 37.00 36.50 52.00 52.75
India 24.60 25.00 18.30 18.20
Pakistan 8.90 9.00 12.40 12.20
Central Asia 8.35 7.63 1.58 1.61
West Africa 2.42 2.95 0.61 0.19
Turkey 3.10 2.30 6.20 5.40
Brazil 7.36 6.50 4.60 4.60
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