According to periodical cotton arrival reports of Pakistan Cotton Ginners' Association, total seed-cotton equivalent of 9.745 million running bales reached ginneries as on 1st January,09, against 6.866 million bales arrived same period last year - increase being 6.9 percent.
During the last fortnight of December month, seed-cotton arrivals amounted to equivalent of 0.654 million bales. The pace of arrivals indicates that total out-put may not touch the level of 11.5 million bales and the season's out-put may be closer to last year's out put of 11.3 million running bales ex-gin.
The official revised production target has been fixed at 12.1 million bales ex-farm - again a lower crop. Despite a lower crop, this time, our cotton imports would also be lower by 55-60 percent from last year to 1.5 - 2.0 million bales in view of global economic and financial sectors recession and deteriorating domestic situation in economic, law and order, economic, political, banking, border-security and terrorism sectors.
In the meantime, the government has made its entry into cotton market through its agency viz Trading Corporation of Pakistan (TCP) who is reported to have made purchase contracts of over 500,000 bales at fixed price of Rs 3,202 per 37.324 Kg ex-gin against which about 60,000 bales have been delivered to TCP at their warehouse in Karachi and Multan. Now, cotton rates have increased by more than Rs 500-600 per maund to Rs 3,300 - 3,400 per maund in the last two-three weeks which is higher than TCP fixed rate of Rs 3,202 per maund ex-gin. The ginners, finding spinner-buyers at higher rates of 3,300 - 3.400 per maund are reportedly holding up deliveries to TCP.
The TCP has not as yet started making ad hoc payment of some 80 percent to ginners against their deliveries and may not start making payments in this fortnight. The Public Accounts Committee of National Assembly has taken very serious notice of the old fire-case in which some over 40,000 bales of cotton were lost/damaged as element of some mischief is considered. In making contracts with the ginners when local prices were well below TCP rates, market rumours indicate some hanky-panky in such deals. The TCP has also floated a tender for purchase of 100,000 bale of clean cotton from interested parties which will be opened on 17th January,09. It means, any party apart from ginners can bid for selling cotton to TCP. One thing is clear that clean cotton is taken as Lint-cleaned cotton and the ginners are not reportedly operating Lint Cleaners so such cotton can not be produced.
Another point is that some over 80 percent cotton has already been ginned and pressed and only low grade cotton is left. It is an exceptional case that TCP this time want to purchase cotton in bulk not necessarily from ginners but from any interested party. The whole operation of TCP is meant for helping the growers to get them better price of their cotton but the situation indicates otherwise.
In local market, there may not be found one ginner who can offer 100,000 bales for sale to TCP and that even cleaned cotton. Trade is of the opinion that here some game will be played to serve some vested interests. There are reports that TCP may float tender for export of raw cotton. It is interesting to note that the International Cotton Association, Liverpool (ICA) (UK) has put TCP's name on its list of defaulters and as such no members of ICA will participate in cotton export tender, if any. Cotton trade is at a loss to understand as how TCP would help the growers.
Local cotton market has heated up perhaps on reports of lower cotton crop, scarcity of better grade cotton and firming up of prices in New York market. Some spinners purchased cotton anticipating closure of market due to Muharram holidays. Some cotton-men think the market does not have much strength to keep up this level of 3,300-3,400 prices and expect the market may retreat after holidays. The position of textile trade, whether domestic or foreign, has not showed any sign of recovery or improvement but is reported deteriorating in view of acute power shortage, liquidity crunch and very slow off-take. As such, cotton market may not maintain the present level of high prices and drift down. In export prices have also improved and export quotation have improved by 4 - 5 cents to the level of US Cents 53-54 per lb FOB Karachi basis.
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