The fears of a lower cotton crop this season have now appeared to have enough truth. The Pakistan Cotton Ginners' Association (PCGA) have released their periodical cotton arrival reports according to which total arrivals of seed-cotton is equivalent of 9.09 million running bales against 8.35 million bales received same time last year.
Apparently, there is an increase of 8.86 percent but pace of fortnightly arrival is quite slow and field reports indicate very little amount of cotton in fields and growers have harvested almost entire cotton crop and have sown wheat crop in hope of getting better price in the wake of more than 40 percent increase in Minimum Support Price of wheat in 2009 by the Government of Pakistan. Last week, the Cotton Crop Assessment Committee has reduced crop estimates from 12.5 million bales to 12.1 million bales ex-farm which is equal to 11.6 million bales ex-gin against 11.35 million bales produced last year.
Initially, this season's first official crop estimate was 14.1 million 170-kg bales. The reasons for a lower cotton crop this season are switch over of cotton area to sugar cane and rice crops, heavy rains in Punjab and pest attack, shortage of fertiliser, shortage of irrigation water, high cost of inputs and poor quality seed. Reliable cotton circles estimate cotton production between 11.0 and 11.5 million running bales this season, which means almost equal to last season's production.
Every season, we fix higher production target but get a lower one. Against this, our cotton consumption has been increasing steadily but this season, our consumption would be much lower than last season's gross consumption of some 15.5 million 170-kg bales. In view of deteriorating local and international economic, financial and political situation.
This season, Pakistan would have lower cotton consumption perhaps between 12.5 and 13.0 million 170-kg bales. As such, Pakistan may import cotton equivalent of some 1.5 and 2.0 million 170-kg bales against total imports of 4.6 million 170-kg bales last season. This season, some cotton areas of central Punjab produced some half a million bales of cotton in the months of June and July, quite earlier than normal season and got very good rate up to Rs2,200 per 40 kgs ex-gin for their seed-cotton beside getting higher yield and better quality.
This experience is encouraging the growers of this area to sow cotton crop in mid-January to February period and concerned quarters indicate such early production around 1.5 million in next cotton season. Some quarters think this poor economic situation would deteriorate further, badly affecting the textile industry and thus reducing cotton consumption.
Cotton prices in the local market have remained depressed despite the intention of the government to procure lint cotton from ginners through Trading Corporation of Pakistan (TCP) at a fixed rate of Rs3,202 per maund of 37.324 kg ex-gin for Grade 3 staple 1-1/32 inches with prime micronaire values. Lint prices are ruling between Rs2,700 and 2,900 per maund ex-gin depending upon quality.
The TCP is reported to have entered into contract for some 175,000 bales and has started first-stage sampling and evaluation to ascertain Grade, staple length and Micronaire values. The TCP will discount cotton finally graded below Grade 3 and staple length 1-1/32 inches with prime mic and would not pay any premium for better grade cotton. This tantamount to discouraging production of better grade cotton. In the local lint market, price of Grade 3 cotton is around 2,800-2850 per maund ex-gin while TCP has fixed Rs3,202 per maund of 37.324 kg ex-Karachi.
Apparently, TCP may not purchase cotton more than 400,000 bales out of 2.0 million unsold stocks plus about 2.5 million bales expected by the end of this season, totalling 4.5 million bales. Thus total TCP procurement may be around less than 9 percent but the ginners are reportedly quoting TCP rate of Rs3,202 / per maund less Rs152 for upcountry and other expenses = Rs 3,050 per maund ex-factory. The buyers complain that TCP was distorting the market rate and the ginners would incur carrying charges in hope to deliver to TCP. TCP may not be able to keep up the prices to Rs3,202 level for a longer time. Besides, the ginners would be forced to sell better grade cotton to spinners and exporters even at a rate lower than TCP.
Another point is that hardly less than 10 percent cotton crop is left in the fields and more than 90 percent has reached factories and market places so even if TCP rate of seed-cotton is paid to the growers then the benefit would go only to limited growers. This half-heartedly started scheme would on the whole not benefit growers proportionate to possible harm to cotton trade.
The future trend of cotton prices may not be considered bullish on the face of shorter crop but otherwise bearish in view large scale power shortage, high rate of interest, increased utility charges, liquidity crunch, accumulation of unsold stocks of yarn and cloth, low foreign demand, poor economic performance and deteriorating security conditions. Some of the mills have closed down while many have cut down 1/3rd. of their production, General impression is that textile mills are running in to loss as their production cost is higher by 10 to 12 percent than those of other competing countries like India, Bangladesh, and Vietnam.
The textile industry is demanding financial assistance of Rs500 billions to keep this industry alive and competitive. The government should take concrete measures to keep this industry competitive as fall of this industry would mean fall of our economy as this industry has more than 60 percent share in country's commodity exports.
Comments
Comments are closed.