Seed-cotton arrivals have reached peak in Sindh province in the first fortnight of this October month and may reach peak in Punjab this fortnight or next one. By the 15th of this month, Sindh had received about 60 percent while Punjab 30 percent of their respective expected seasonal arrivals.
Field reports continue to support the crop idea of 4.0 million bales in Sindh and about 8.5 million bales in Punjab aggregating 12.5 million bales in Pakistan.
However, some reports from Punjab indicate towards some improvement in lint quality. This season, high Mic problem aggravated in Punjab culminating around 7.0 and also persisted longer in both Sindh and Punjab provinces which is perhaps due to deterioration of seed and climatic conditions. The government is taking some measure to introduce Bt cottonseed for general cultivation although smuggled seed has been in use more in Sindh and less in Punjab in the last many years.
The best way is to evolve and develop our own seed best suited to soil and climatic conditions but simultaneously genuine imported seed may be tried. Unless we increase our cotton production to the level of 20 million 170-Kg bales in next five years, we cannot achieve target of US $25 billions from exports of cotton and textile products. Cotton has been grossly neglected for the last many years in terms of quantum and quality.
To improve cotton productivity, new technologies are to be adopted in seed, water management, morphology, pest management and other handling practices while ginning machines and lint packaging be modernised, Cotton Grading and Standardisation system be introduced at ginning stage and latest marketing system be adopted to bring overall improvement in cotton productivity, production, ginning, quality control and marketing systems.
It was sheer God-gift when Pakistan produced a record high crop of 14.5 million bales in 2004-05 against our production target of 11.0 million bales while a year back, Pakistan had harvested a crop of 9.95 million bales. The six years average production is 12.4 million bales and our domestic consumption this season is estimated around 15.0 million local weight bales. For improving the health of our economy, we should take drastic measures to upgrade cotton and textile sectors to the desired level as it is single major sector contributing largely to country's exports. To meet our shortfall in domestic cotton requirements, we have been importing cotton in large quantity for the last more than a decade and our exports touched its peak at 4.8 million 170-Kg bales in 2007-08 season costing over US one billion.
In view of this, share of cotton and textile sector in exports has decreased from 66 percent to 53 percent which is the main cause of weakness of our economy. We should pay full attention on improvement of textile sector. Although we are the fourth largest cotton producing country and larger cotton yarn exporter and Bangladesh meets cotton and yarn requirements through imports yet its garment exports is larger than that of Pakistan. Not only our textile sector performance has been hit by global recession including global economic recession but has been greatly impacted negatively by domestic factors such as high rate of interest and financial cost, high utility rates, frequent power load-shedding, deteriorating safety and security situation and political instability. The release of Rs 10 billion trench for improvement of textile sector has been delayed perhaps due to paucity of funds.
Pakistan is feared to miss substantial shipments of textile products for Christmas and New Year shopping, on production losses due to power load-shedding. Shortage of yarn and high rates in the local market are badly hurting the local weaving and towel industries. Now, Pakistan got an opportunity in export of textile products, which would not be cashed properly because of poor domestic factors. In the first quarter (July-Sept, 09) of FY 2009-10, Pakistan export performance was down by 13,86 to US $4.493 billions against 5,216 billions same period last year while imports declined by 29.85 percent at 7.587 billions from 10.814 billions same time last year. Textile's export performance in this period is reported even poor.
Lint prices showed some weakness in the end of last week perhaps in sympathy with easiness in NY cotton futures rates. The recent surge in the prices of international commodities such as food-grain, metals including gold, crude oil, edible oil. Soybean and other commodities have its strength from the increasing weakness of US dollar currency. The recent weakness in NY cotton futures may further increase and December, 09 contract is expected to come down to 65 level to boost up sales of cotton. Local lint prices are quoted between Rs 3,700 and 3,750 per maund of 37.324 Kg ex-gin against peak rate of Rs 3,825 in early days of last week.
The weakening Pak rupees currency against US dollar which is around Rs 83.20/30 level may go to 84.50 - 85 level by the end of this year, is lending a helping hand to exports of Pakistan. Total number of cotton bales committed in exports are estimated around 800,000 bales against which less than 50 percent has been shipped so far. If the weakness of Pak rupee against US dollar continues, there may be better chance for exports and by the end of the season total cotton export sales of the season may be between 1.0 and 1.2 million local weight bales.
The old and prominent cotton export houses which had nominal share in cotton exports in last many years have this season come up aggressively most of them with the support of some prominent international merchants. The new generation of cotton exporters, mostly cotton ginners from Sindh are also doing well so far. This cotton season is lucky for all the stakeholders as all are earning money.
Most of trade people expect fall of cotton market to the level of Rs 3,500 in end November or early December month when there may be selling pressure on peak arrivals in Upper Sindh and Southern Punjab, prominent area for cotton production. The spinning mills would take respite to take stock of their inventory of cotton. There would be scarcity of funds in December month and a larger unsold stock which may exert selling pressure. China is likely to take respite in cotton and yarn imports from Pakistan for engineering new cotton policy for 2010 year. All these factors may jointly create some bearish atmosphere which may reduce cotton prices by Rs 200-250 per maund to Rs 3,400 - 3,500 level. The export parity is around 60 cents FOB Karachi for T-1467 (close to SLM+), staple length between 1-1/16 and 1-3/32 inches, G-5 and 28 gpt. This season, there has been more high Mic cotton up to 7.0, more in Punjab than Sindh.
The local spinning mills are obliged to accept high Mic cotton without any discount. Even, in exports, the foreign buyers reluctantly accepted high Mic cotton mainly on competitive price consideration. Pakistan enjoys the benefit of producing cotton crop earlier than other prominent cotton exporting countries like neighbour India, Central Asian Countries specially Uzbekistan and USA, by the end of November and early December, there may be peak of arrivals in these countries and selling pressure may mount up tending cotton price to go weak to some extent. Our local cotton market has this season developed more positive correlation with NY cotton future market.
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