The field reports keep on strengthening the general perception of a larger cotton crop. Reports of larger cotton arrivals continue pressurising the cotton market along with bearish trend on New York Futures and other prominent cotton markets. Local trade circles estimate total seed-cotton arrivals by the end of this November month equivalent of 10.0 local weight bales with total unsold stocks around 2.5 million bales.
The latest total cotton arrivals and the estimates of balance in the field give credence to the crop estimates around 13.5 million local weight bales in 2011-12 season against 11.6 million bales produced last season. The problem of cotton quality deeply persists almost in Pakistan more in Sndh and less in Punjab. The huge quality difference among various stations of Sindh is manifested through price variance which goes as high as Rs 1,500 per maund between Rs 3,700 (lowest quality) and Rs 5,200 (best quality). The main quality problem lies in the parameters of Colour Grade and Staple length. It should not be understood that due to lower quality our cotton will not attract buyers. Each quality is traded on its own price based on its demand and supply situation.
Upcountry reports indicate seed-cotton prices range between Rs 1,700 and 2,200 per 40 Kgs in Sindh while in Punjab it is quoted between Rs 2,400 and Rs 2,559 per 40 Kg. ex-gin. Last year same period these lint cotton prices ranged between Rs 3,400 and Rs 3,775 per 40 Kg ex-gin. Karachi Cotton Association's spot rates on 25th instant was Rs 5,400 against Rs 8,300 same date last year. This time lint prices are about 47 percent lower than last year but New York Future are only 20 percent lower from last year. This is a valid point to prove that this season the deterioration of cotton quality is taking its toll in the form of about 25 percent of its price.
All know that this season, quality of cotton has badly been damaged by heavy rains and floods in Sindh. This time, seed-cotton prices are also lower than those of last season by about 22 percent. The present level of seed-cotton prices i,e Rs 1,700-2,500 pr 40 Kgs ex-gin is below cost parity level and our growers especially of Sindh are heavily losing money. Above this, Sindh growers would face disaster next year when they would have nothing to go for cultivation of cotton crop as this season they have already missed wheat crop.
In India, the position of cotton market is more or less the same as is in Pakistan. India fixed Minimum Support Price for medium staple at Rs 2,850 per quintal of 100 Kgs which in Pakistani rupee is equivalent to Rs 2,011 per, and of 37.324 Kg and Rs 3400 per quintal of 100 Kgs for long staple cotton which is equivalent to Rs 2,411 per maund of 37.324 Kg ex-gin. On 15th November, 2011, seed-cotton prices in Indian markets was equivalent of Pak Rs 3,200 per maund of 37.324 Kg (Shanker-6) and that of long staple cotton equivalent to Pak Rs 3,350 per maund of 37.324 Kg ex-gin. The latest position in India is that cotton prices are decreasing fast and there are fears among cotton growers that seed-cotton prices in India may fall below their Minimum Support Prices fixed by Indian government. There is increasing concern among cotton growers across the country to intensify their agitation for higher government support prices. According to one report this issue is fast turning into a political hot potato in India. By 15th November, 11, seed-cotton arrivals in India are equivalent to 3.5 million cotton bales of 170-Kg each. India has some 8.0 million bales for sale during this season. There reports that in 2012-13, cotton sowing area may be reduced significantly due to low cotton rates this season. In 2010-11 season, some 12.1 million hectares were sown to cotton in India for producing some more than 35.5 million 170-Kg bales.
Local exporters are understood to have registered over 200,000 bales in export sales against which some 62 percent have been shipped. Prominent buyers are China, Indonesia, Vietnam and Thailand. This season, Bangladesh is slow in buying as the spinning industry and other textile goods manufacturing companies have not as yet come out of the position of financial set back they met last season when they had to buy lint cotton at historically high rates of US Cents 200-240 per lb. As a matter of fact, almost all cotton and textile sectors in most of the countries faced losses last year but those in countries which have their own sizable cotton crop suffered less than those countries which do not have heir own cotton crop. The impact of exceptionally high cotton prices is being felt now when the high prices of cotton made end-use products are constraining retail sales despite peak sale season in Europe and America. The Eurozone crisis is still impacting retail buying in Europe. US is also facing hard days in controlling its inflation rate, unemployment rate, weak property and sock prices. Prominent Asian countries such as China, India, Pakistan, Bangladesh, Vietnam and Sri Lanka are the main manufacturers and exporters of textile and clothing goods and European countries and USA are net consumers. When retail customers buy less then the manufacturers also slow down their production. This is happening now and this situation may continue for a couple of months and perhaps up to next March.
Domestic cotton market shed some Rs 1,000 per maund during last week when good quality cotton of Upper Sindh and Punjab was available around Rs 5,000 level which works out around US Cents 76.0 /lb f.o.b. Karachi basis. One spinner says that present level of lint cotton is workable but yarn off-take is very slow and they fear further fall in yarn prices. Indian cotton Shaker-6, is quoted around 85 FOB Mumbai. The ginners appear much worried on decrease in cotton prices which is putting them under losses. In Pakistan, the situation is not supportive of business and industrial activities. Severe energy crisis, increasing power charges, deteriorating law and order situation, unrest in people, poor political situation, increasing production cost and poor offtake, make business situation very difficult. The domestic cotton consumption may be even lower than what is estimated in view of business working hazards. As such, cotton prices may go further down in coming weeks up to 10 percent of present prices.
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