Upcountry reports of slow seed-cotton deliveries to ginneries gives strength to the estimates of cotton crop close between 11.0 and 11.5 million running bales, we produced last season. The latest cotton arrival reports of PCGA put total cotton arrivals at equivalent of 10.322 million running bales as on 16th Jan, 09 - still 3.367 percent more than last season's arrivals same time.
As the pace of arrivals is slow, final production figures may come between 11.0 and 11.5 million bales. Presently, total unsold stocks are put at 1.798 million running bales and some one million more are expected which would make total saleable stocks around 2.8 million bales.
Last week, lint prices remained firm to steady in the local market. Prices for Punjab style cotton were quoted between Rs 3,000 and 3,300 per maund of 37,324 Kg ex-gin while Sindh style is quoted between Rs,2,900 and 3.300. The difference between prices is increasing on quality considerations. Export quotations have also tightened up around US Cents 52-53 per lb f.o.b Karachi for T-1467 staple 1-1/16 with prime mic values. As cotton season is coming to an end, quality of lint cotton is deteriorating and there is scarcity for better grade and staple cotton.
Local spinning mills are also quite active in lifting quality lots. The Trading Corporation of Pakistan (TCP) is understood to have received deliveries of some 138,700 bales against purchase contract of over 600,000 bales but hardly TCP has started making payments to ginners. Of course, the ginners appear annoyed with TCP on undue delay in payments.
The Pakistan Cotton Ginners. Association (PCGA) is reportedly asking TCP to start payments to the ginners immediately failing which they would stage protests before TCP office. It is not understandable as to why the TCP entered into cotton market for cotton procurement when funds were not available. The ginners owe TCP some rupees over two billions. This appears the case of poor planning and poor management. Reportedly, the TCP is handicapped by sufficient technical and general staff to handle different jobs right from making contracts to final payments to the ginners. The ginners have held up further cotton deliveries to TCP and are selling their cotton in local market at reasonably better rate and terms.
Those ginners who have delivered cotton to TCP are financially in difficult situation. The TCP has extended the opening date of tender for purchasing 100,000 bales of Cleaned raw cotton by one week to 22nd. Instant. When the season is coming to an end, quality of cotton has deteriorated and lint cleaners are not operating then how cleaned cotton would be made available. There appears no logic in inviting tender for purchase of cleaned cotton at this stage of season. People smell something otherwise.
Cotton prices on New York Future market resisted further decline in values and operated between narrow margins. Ruling March, 09 contract closed at 49.00 and distant May, 09 finished at 49.58. US cotton production is now estimated at 13.0 million bales down 6.2 million bales from last year while its domestic consumption has come down to 4.02 million bales and US exports are targeted at 12.0 million bales of which some 5.0 million bales have already been committed. This season, world cotton production is estimated at 10.9.8 million bales while consumption is estimated at 115.2 million bales.
There is a strong perception in cotton trade that figure of consumption at 115.2 appear quite high in view of deteriorating economic and financial conditions because of running global depression and place the consumption figures between 105 and 108 million bales. As a matter of fact, the depression is deepening and economists think that the depression may continue whole 2009 year. Recent report indicated that US retail sales this December were at record lower in last four decades. The general perception is that net exporting countries specially of textile goods such as China, India, Pakistan, Vietnam, Bangladesh and Sri Lanka being major trade partners of US and EU countries would suffer more than countries having low trade relations with US and EU countries.
The major exporting countries will have to create local demand for consumption of goods otherwise the industry would suffer creating unemployment and other social and economic problems. According to one latest report, 60,000 Chinese enterprises, mostly small and medium sized ones were forced to close. So will made-in-China products lose its foreign market share? World cotton consumption may come down from last season's level of 122.69 million bales to the level of this season's cotton production around 108-109 million 480-lb bales.
Apart from effects of global recession, Pakistan is also adversely impacted by local factors such as power crisis, high inflation rate and high interest rates, high cost of utilities, instability in politics, high rate of unemployment, deteriorating social conditions, poor law and order situation and war-like situation on country's Eastern and Western borders. As such, our textile industry is fighting got its existence. Its performance is going down aggravating social, economic and political problems. Things do not appear improving up to second half of this year. The banks are tight in lending money to textile mills.
The credit limits are tied-up with the high inventory of mill products and ginners are not ready to give cotton on credit. For importing cotton, position hardly allows credit for opening LCs. Last season's dispute between the cotton exporters and mill-importers remain to be settled which would clear the way for fresh foreign cotton trade. Of course, this season we may require to import some 2.0 to 2.5 million 170-Kg bales to meet our domestic requirements. Presently, US cotton equal to Middling Grade and staple 1-3/32 to 1-1/8 is quoted around the level of 56-57 and some bargains have reportedly been concluded recently even lower than this level.
Present level of lint cotton prices between 3,200 and 3,400 per maund may be maintained in coming couple of fortnights in view of clear-cut shortfall in local crop. TCP's entry into market has given some support to the ginners who may hold prices to this level.
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