After Eid holidays, cotton activities have completely returned to normalcy. Ginneries in idle and lower Sindh are receiving heavy arrivals of seed-cotton to the extent of closure of gates of some of the factories while arrivals in Upper Sindh and Southern Punjab have also increased.
Upcountry reports indicate towards pest attack in Punjab. When this analyst visited some districts of Sindh, some cotton fields were spotted with minor pest attacks but others were exceptionally good. Overall crop prospects in Sindh are very good and Sindh may yield production around 3.5 million bales. The humid and hot weather in this month of September has certainly created favourable conditions for pest attack, which has damaged cotton crop to limited extent. The hot weather is prompting cotton bolls to forced opening, which may reduce field yield. Hope moderate hot-dry weather in daytime and wet-cold weather in night-time with Southern winds would prevail soon to improve crop conditions. As such, the crop estimates are now put around 12.5 million bales while some pessimistic estimates put the crop size around 12.0 million bales. The Sindh ginneries report ginning out-turn to be quite good.
However, next fortnight is crucial for Punjab cotton crop and reliable crop estimates cannot be made before the 15th October. Obviously, we may again miss the chance of harvesting a bumper cotton crop this season. If this inclement weather continues for another fortnight specially in Punjab, it may damage cotton crop. There are fears that quality of cotton may deteriorate due to inclement weather. Estimates of Indian cotton crop which had gone down below 30.0 million mark due to poor rains last month have improved well to cross the level of 30.0 million 170-Kg bales when wide-spread rains were received in cotton areas of South - west states.
In view of better prospects for cotton production, production estimates have been increased to 31.5 million bales while some optimistic estimates put it around 3.25 million bales.
Of course, the worry of damage to cotton crop is apparent in the market. The spinner-buyers have become enough active to lift as much cotton they can also fearing deterioration of quality after October month. Another factor is that substantial difference in prices of local and foreign cottons. Ex- spinning mill price of local cotton equivalent to US standard 31 - 35/36 - G-5 and GPT-28 is around US Cents 53.0/lb while cost of imported cotton same quality is 10 to cents higher. As such, the spinners would cash this opportunity by playing their active role in cotton purchases.
The spinners also know that Pakistan cotton being cheapest in the world would easily find way into countries like Bangladesh, Indonesia, Thailand, Vietnam and Hong Kong so they would like to keep local prices above export parity. Some of the exporters who had sold lot of cotton at local price parity of Rs 3,200 per maund ex-gin and did not cover it would be in hot soup. There are reports of delaying shipments in hope of fall in local prices but in view of latest developments in crop size, there is little of local prices decreasing to the level of Rs 3,200/maund ex-gin.
The foreign buyers who have sensed the latest situation appear worried about their cotton shipments. Market reports indicate export sales of raw cotton around 200,000 bales and in view of tight prices, defaults in performance of exports contracts are feared. Yarn prices have also improved and the local yarn exporters have enough margin in export sales. This factor also encourages the spinners to inflate their cotton inventories reasonably.
Cotton crop in India has started moving into markets or ginneries. This season, India's carry-over stock is 7.15 million bales of 170-Kg each and its estimated production at 31.5 million bales + import of 1.0 million bales. This total availability comes to 39.65 million bales and total domestic consumption is estimated around 24.0 million bales. Thus surplus comes to 15.65 million bales and India government has export target of 6.5 million bales.
Thus ending stocks will be 9.15 million bales which is quite high. The purpose of mentioning Indian cotton data is to determine the possible effect of Indian cotton factor on India's domestic prices as well as international cotton prices. As cotton arrivals increase in India, selling pressure would develop and local prices would decrease. Certainly, China who is expected to produce 34.0 million 480-lb bales, consuming some 44.0 million bales will import some 7.8 million bales to meet its shortfall of cotton in 2009-10 season. In 2009-10 season, US has production target of 13.071 million 480-lb bales, consumption at 3.47 million bales and export target at 10.0 million bales of 480-lb each.
China, Pakistan and Bangladesh would be the main buyers of Indian cotton, On New York market, cotton prices have many attempts to cross the level of 65 but to no avail. The factor of global economic crisis is still vibrant in US and European markets where it has been halted in Asian economies. Recently, one more prominent bank has declared bankruptcy making total of large banks 8 and total 95 bank in US. Thus, recovery in some of the important Asian economies has already started but in US and EU economies, it may not show sign of recovery before 2010.
Pakistan's economy is under the influence of domestic factors rather than foreign factors. Power shortage is the main cause of concern for industries specially the textile industry. Increase in power rates appear to be on anvil and gas-shedding in winter specially in Punjab and Sarhad provinces would adversely affect industrial production. Deteriorating law and order situation along with unstable political conditions pose great threat to dwindling economy. The government is fighting with day to day matters / problems and do not find much time to look into the affairs of cotton / textile industry. Recently, some incentives and concessions to textile industry have been announced and its real implementation would have positive impact on textile industry.
Here are two tables: Table No 1 gives China's cotton data of eight years: 2002/2003 to 2008-10. This would give the readers a clear picture of the progress China has made in cotton and textile sectors in the new century. Table No 2 gives four years world data on cotton production, consumption and import/exports. Hope the cotton data would let the readers have broad cotton picture globally.
Table No 1.China Cotton Supply and Demand (Season Beginning August 1)
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Unit: 000MT
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2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
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Beginning Stocks 4,143 3,417 3,333 3,190 3,991 3,592 3,199 3,364
Production 4,916 4,860 6,324 5,714 7,740 8,000 7,910 7,400
Domestic supply 9,059 8,277 9,656 8,904 11,731 11,592 11,109 10,764
Imports 687 1,929 1,395 4,201 2,306 2,511 1,523 1,700
Total supply 9,746 10,206 11,051 13,105 14,037 14,103 12,633 12,464
Domestic Consumption 6,165 6,836 7,855 9,106 10,426 10,890 9,250 9,600
Exports 164 38 7 8 19 14 19 17
Total Consumption 6,329 6,874 7,862 9,114 10,445 10,904 9,269 9,617
Ending Stocks 3,417 3,333 3,190 3,991 3,592 3,199 3,364 2,847
Stocks/Use Ratio (%) 54.0 48.5 40.6 43.8 34.4 29.3 36.3 29.6
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August forecast of 2009-10
Table No 2.Global Cotton Supply and Demand (Season Beginning August 1)
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Unit: 000MT
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Jul Aug
2005/06 2006/07 2007/08 2008/09 2009-10 2009-10
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Beginning Stocks 11,613 12,303 12,699 12,333 12,880 12,680
Production 25,639 26,718 26,171 23,421 23,450 23,560
Domestic Consumption 24,951 26,368 26,347 23,015 23,430 23,530
Imports 9,610 8,142 8,316 6,360 6,530 6,790
Exports 9,732 8,101 8,356 6,420 6,530 6,790
Ending Stocks 12,303 12,699 12,333 12,680 12,910 12,710
Cotlook A Index 56.15 59.15 72.90 61.00 56.00 60.00
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Resources: ICAC, August 2009
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