According to latest cotton arrival report of Pakistan Cotton Ginners' Association up dated as on 15th November, 10, total seed cotton arrivals are equivalent of 4.588 million bales in Punjab against 5.890 million bales same time last year, in Sindh 2.865 million bales against 3.371 million bales last year.
Total arrivals of seed cotton is 7.453 million bales against 9.261 arrived last year same time. Thus, this season's shortfall in cotton arrivals against last year comes to 14.91 percent. Some of the ginners have shown reservation to the correctness of the arrival figures as these were collected in haste. One ginner said he suspected some manipulation in figures as he expected total arrivals around 7.7 million bales against reported arrival of 7.453 million bales. The downward trend in prices would force the suppliers to boost deliveries. Upper Sindh report indicates that some arrivals from some pocket areas have not yet started.
Reports from Bahawalpur area say that stocks of pressed bales are accumulating at platform which may force the ginners to lower cotton prices and on the other hand Phutti-suppliers appear reluctant on selling seed-cotton to ginning factories at rate below Rs 4,000 per 40Kgs which does not match with ruling lint cotton prices. Some field reports indicate crop between 11.0 and 11.5 million local weight bales against 12.7 million bales produced last year. Suppliers of seed-cotton have sensed the situation and would try to unload the burden of seed-cotton stocks at ginning factories sooner fearing further fall in cotton prices.
This season, the government released varieties of cottonseed purported to be genetically modified were sown in Punjab province, results of which did not come to the expectations. To increase production and productivity of cotton, most important component is of seed. India adopted GMO technology in 2000 AD and more than doubled its yield in 10 years period from 278 Kgs/Hectare to around 600 and production from 14.0 million bales of 170-Kg each to 35.7 million bales (As per Cotton Corporation of India) in 2010-11 season. Pakistan produced 10.7 million bales in 2000-2001 and is also estimating its production around 11.0 million local weight bales in 2010-2011 but our yield remained almost stagnant around 650 level.
However, in 2004-2005 season, Pakistan did achieve record high production of 14.3 million local weight bales. Just compare our performance in cotton with that of India. India has become second largest exporter of raw cotton in the world and Pakistan some time second some time third largest importer of raw cotton. Perhaps we have merged our culture with agri-culture and result is deterioration. Indian seed companies are asking Indian government to allow export of Bt cottonseed for sowing in Pakistan as its trials and experiments have been very successful in Pakistan specially in Sindh province of Pakistan which borders India.
Cotton prices in our local market touched historical high of Rs 11,000 per maund of 37.324 Kg ex-gin last week and is now quoted around Rs 8,500 per maund. Cotton futures in New York market ICE touched highest of the history at US Cents 157.23 / lb and on 18th November closed at 133.90. on the 18th instant. March, 11 contract closed at 129.15 against 139.18 last week. Reasons advanced for this free fall in prices is attributed to Chinese measures to curb inflation and Ireland's bailing out programme from financial crisis after Spain which was supported with loan of some US dollars 150 billions to bail-out its economy. These measures have strengthened US dollar currency position against other prominent currencies.
Another factor of this decline in prices of main commodities including cotton is of profit-taking. May be this phase of decrease in prices may prove short-lived while some other think the prices may go down to 110 level.
Indian report says that its 50,000 textile mills are protesting against high cotton yarn prices while its apparel and garment sector is demanding of the Government of India to put ban on export of raw cotton. The purpose of India's domestic spinning and value-added sectors is to make the raw material available to local industries at reasonable rates. In other words, domestic industries should be given preference of procurement of raw material over exports. India has exportable surplus of some over 7.0 million bales but have delayed cotton shipments to ease down cotton prices in domestic market while Pakistan, being deficient in cotton, is very liberal in exports of raw cotton. Pakistan may import some 3.0 million bales of 170-Kg each to meet its cotton sort-fall in production. On the other hand, Pakistan may export some 800,000 bales of raw cotton as some 400,000 bales have already been committed in exports. Pakistan's weaving / knitting industries and other value added sectors are protesting against low availability of raw material to these industries at very high rates and industrial units are closing down but the government is not taking any step to safe guard its local textile industry. India has to ship about 5.5 million bales already sold out. US has already committed 12.9 million 480-lb bales having in hand 3 to 3.5 million bales for sale but have shipped only as little as 2.4 million bales. Main buyers of US cotton are: China 4.215 million bales, Turkey 1.817, Mexico 1.331, Indonesia 0.796, Thailand 0.605, Brazil 0.519, Vietnam 0.484, Korea Repub. 0.461, Pakistan 0.352 and Bangladesh 0.315.
According to one foreign report, cotton consumption in developed countries is decreasing while its is increasing in developing countries. In the period 19981-99, developing countries' share in world cotton consumption was 78 percent which increased to over 80 percent after 2000 and is estimated around 94 percent by 2010. After World War II, cotton consumption in developing countries increased substantially mainly because of increase in cotton production in Developing countries and comparatively lower labour cost. In cost of yarn production, labour has 17 share, which increases as value addition increases. Element of labour cost is the highest in garment manufacturing. US was consuming 11.234 million bales (highest in US history) in 1997-98 which was 61.57 percent of its production but its consumption reduced to 3.5 million bales (less than 20 percent of its production) in 2010-11 season.
More and less, same is the position of other European countries. Cotton and textile leadership which West enjoyed for couple of centuries has returned to its original home - the East. In US, some mills can make profit even at US Cents 150 /lb lint cotton price but other mills have lower break-even price. One report says that some mills in US are understood of cutting their production capacity and convert their part of cotton stocks into cash, making good profits. The textile business has become so risky that the mill managers very frequently use calculators to know viability of textile business many times a day. China is concerned over increasing inflation in the country and is taking necessary measures to check it, which would ultimately block the rising trend in prices. The abnormal increase in prices will ultimately be reflected in the prices of end-use such as garments and home-use textile products after three months. Ultimately, the end-user will have to pay more for the product on one hand and the retailer will have to suffer from shrinkage of volume of retail business. Cotton trade people expect some reduction in cotton consumption mainly due to abnormally high prices of raw material, high cost of production and slow and reduced off-take.
World Cotton Supply and Distribution (Million 480-lb bales)
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USDA Estimates
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2008-99 2009-10 2010-11
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Production 107.13 101.36 116.68
Consumption 109.94 117.74 120.77
Exports 30.07 35.54 38.07
Ending stocks 60.42 46.69 44.66
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Source ICAC release 1st.October,10.
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