International factors support high prices while local factors react otherwise

Seed-cotton arrivals and disposal figures up to 15th December, 10 released by Pakistan Cotton Ginners' Association (PCGA) on 18th instant mention total seed-cotton arrivals equivalent to 9.377,263 running bales against 11,291,140 bales same period last season.
Since start of this cotton season, fall in cotton arrivals from last season was seen in every fortnight but first time increase of 18 percent has been seen in the arrivals of first fortnight of December month as compared to last season. Now, there appears good hope of harvesting cotton crop of around 11.0 million running bales. The crucial point remains to be seen is the average weight of bales. In my last report when I mentioned Average weight of bales around 160 Kgs, my friend S M Sibtain - a cotton merchant pointed out that as per his calculation the average weight of a bale this season comes around 152 Kgs. Thus on conversion of 11.0 million bales of average 152-Kg each in to standard weight bales of 170Kgs each, our crop comes to 9.835 million bales.
Last year we produced 12.7 million local weight bales. Our total domestic consumption is estimated around 12.5 million 170-Kg bales in this season. Our total cotton exports may be around 0.7 million bales of 170-Kgs. Thus, our import requirements may be around 3.5 million 170-Kg bales (12.5 -9.0 million 170-Kg bales).
There are reports that Pakistan may be sending its delegation to India to explore the possibilities of importing Bt cottonseed from India as India has more than doubled its production by adopting new seed-technologies. This season, some eight new seeds of cotton (7-Bt and one Hybrid) were sown in Punjab on commercial basis but these new seeds failed to produce the desired results. Pakistan government is understood to have entered with Chinese company for developing and supplying Bt cottonseed.
Chinese Premier Wen Jiabao who is presently on Pakistan's tour with a large Chinese delegation, signed more than a couple of dozens of Trade Agreements and Memorandums of Understanding (MoUs) with Pakistan Governments involving investment of some 36 billions of US dollars. Of these, a few agreements are on agriculture, may be for the development and supply of Bt cottonseed for boosting cotton production. The year 1979 marked a turning point in Chinese cotton production. China - formerly a cotton importer managed to increase its cotton production from 10.0 million 480-lb bales in 1979 to 21.3 million bales in 1983 and to 28.7 million bales in 1984 - record high crop of a country in the world that time. The high increase in cotton production is attributed to three times increase in cotton procurement prices viz: 8.9 percent in 1978, 15.2 percent in 1979 and 10.0 percent in 1980.
Again in five-year period, it increased its cotton production from 23.8 million 480-lb bales in 2003 to 37.0 million bales in 2007. This increase was mainly due to adoption of Genetically Modified technology of cotton-seed. This season (2010-11), China is expected to produce a cotton crop of 30.0 million 480-lb bales. Since 2000, China textile industry after eight years of rapid development, textile fibre processing amount from 13.6 million tons in 2000 increased to 36.0 million tons in 2008 accounting for 40 percent of world. China's per capita fibre consumption in eight-year period of 2000-2008, has jumped from 6.6 kilograms to 15 kilogram. If China increase its per capita use of cotton by one kilogram, it may require 6.4 million cotton bales of 480-lb each extra every year. Now, China's textile industry has become the main pillar industry of national economic development and peoples' livelihood industry. According to one report, in 2008, China's garment and textile industry, the direct employment figure is 20 million people, of which 80 percent workers came from rural areas, In 2008, export value of China's cotton textile and apparel was US $71.769 billions.
China has still lot of room for development and promotion of textile goods domestically and internationally.
The most unfortunate aspect is that being very close to China, having very good relations and China having desire to help Pakistan, Pakistan and its people have not been able to dully benefit from China. If we had taken due advantage of the China's friendship, our economy would have been very strong in the region. Instead, we preferred to remain attached with Western countries specially USA and European countries and now feel that we did blunder, perhaps it may be too late to come out of their control.
Cotton prices in the international markets rebounded from the level of US Cents 113.0/lb to over 150 level, only 7 cents below last peak. USA has almost sold out all its 14.0 million surplus cotton of this season. However, shipments are lagging behind.
All eyes of cotton market are focused on India which has to decide whether it would extend the shipping period of balance 3.0 million bales beyond 15th December or would cancel all unshipped cotton contracts and offer for fresh sales. Some circles in India want that in view of larger amount of surplus cotton, India should increase its export target from 5.5 million bales to 9.0 million bales to take full advantage of the abnormally high cotton prices. Last date of shipments (15th December, 10) has passed away but as yet no decision has been taken regarding extension in shipping period and increase in export quota. However, decision may be made in the next week in the meeting of the concerned ministries. The increase in cotton prices in New York Futures is also attributed to the delay in India's decision. If Indian decision comes in favour of cotton exports, cotton prices in international market may show bearish trend and in domestic market bullish trend and if decision taken in favour of domestic spinning industry then domestic prices would go down while up on international market.
Cotton prices in Pakistan are following international prices. However, deep power and gas crisis in the country specially in Punjab. Production of textile goods would be adversely effected and we may fail to meet the textile shipments. Also in the long run, our export targets particularly of textile goods may be missed. Local factors may depress cotton market.
Here below are two table showing exports and domestic consumption of raw cotton of great India (including Pakistan and Bangladesh) and supply of cotton yarn to Indian mills from different countries. The readers may find some interest in these figures.

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   The source of supply of yarn to Indian mills and India's own yarn production

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                                         ( 400-ib bales)

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Country                   1930-31     1931-32     1932-33     1933-34     1934-25

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UK                         25,787      29,781      33,393      24,881      24,481

Netherlands                    38           -           -           -           -

Switzerland                   184         128         165          34           -

Italy                         161         356          14          45           -

China (Include Hong Kong)  29,358      33,038      33,313      25,573      31,920

Japan                      17,237      15,515      45,372      29,210      28,348

Others                         85         119         502         394         306

Total yarn imports         72,850      78,937     112,759      80,137      85,055

India's own prod.       2,168,197   2,416,017   2,541,045   2,302,653   2,501,890

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Source: Department of Overseas Trade , Commercial Reports on India 1930-35

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                 India's Raw cotton exports and domestic consumption

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                                  ( Bales of 400-lb each)

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                         1929        1830        1931        1932        1933

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To UK                 233,000     286,000     274,000     125,000     242,000

Continent (Europe)  1,429,000   1,505,000   1,003,000     424,000     862,000

China                 456,000     555,000     626,000     243,000     169,000

Japan               1,722,000   1,409,000   1,753,000     757,000   1,426,000

Others                 93,000     113,000      73,000      33,000      42,000

Total               3,933,000   3,868,000   3,729,000   1,582,000   2,741,000

Home Mill-use       1,992,000   2,373,000   2,271,000   2,346,000   2,360,000

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Source: Department of Overseas Trade, Commercial Reports on India, 1930-34

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