The report of season's estimated cotton crop continue to stands around 15.0 million local bales. Cotton growers of early sowing areas of Lower Sindh and Central Punjab are now doing their homework for availability of seed for sowing and necessary fertilizer beside preparation of land.
As already reported earlier, availability of sowing seed in Sindh especially Lower Sindh may be a serious problem as its own seed was damaged by heavy rains and floods in last August-September months. However, the growers would make available sowing seed most probably from Punjab where Bt cotton (Genetically Modified Organism) had performed well this season. In lower Sindh, some areas are still reported under stagnant food waters which may not be available for next crop sowing.
Cotton growers, despite comparatively low cotton rates this season due to damage to cotton crop, appear confident that higher yields and production may be achieved in 2012-13 crop hoping conducive weather condition in the season. This season, Punjab is expected to produce a record high crop of plus 12.0 million bales.
Encouraged by good return and high yields this season, cotton growers of Punjab may not voluntarily decrease cotton acreage next season. Subject to normal weather conditions, a record high cotton crop around 17.0 million bales may be achieved. As regards domestic mill-use, it is estimated around 14.0 million bales. The beginning stock in 2011-12 was around 3.6 million bales (Almost equal to one quarter of domestic consumption) which may be increased to 4.4 million bales by the end of this season. ( Beginning stock 3.6 + crop 15.0+imports 0.8 = 19.4 -mill-use 14.- exports 1.5 million bales=15.5 million bales. The End stock comes to 3.9 million bales (19.4-15.5=3.9 million local bales).
During the last week, lint cotton prices in the local market fluctuated within narrow range and by the end of week, Spot Rate of Karachi Cotton Association was Rs 5,300 a maund of 37.324 kg ex-gin. By the February 23,2012, Pakistan's total export registration was 1.06 million bales against which 55.66% was physically shipped at 0.59 million bales. India's decision of March 5, 2012, to immediately ban all shipments of raw cotton did not make any remarkable difference in local cotton prices except that good cotton buying enquiries from countries like Bangladesh, China, Vietnam and Thailand are pouring in which prompted the sellers to quote a bit higher prices. In view of larger domestic cotton production this season and good demand of cotton abroad, our annual exports may be increased to 1.5 million local bales.
If we look at the Table-1, depicting picture of production and off-take of the world and some prominent cotton producing and consuming countries, we find that in July-11, world crop production estimate of 2011-12 season was 123.2 million bales which was marginally increased to 123.6 million bales in March-12 against 114.5 million bales in 2010-11 in April 11. Thus production estimates remained same from beginning to end of the season. As regards global consumption, it was estimated at 116.8 million bales in July-11, but was reduced to 108.7 million bales in March-12 against 117.1 million bales in 2010-11 in April-11. Thus decrease in global mill-use was 6.94 percent largest decrease of 3.0 million bales was found in Chinese mill-use. The Beginning stocks was estimated around 51.0 million bales in July-11 which was revised upward to 62.3 million bales in March-12, increase being 22.15 percent whereas in 2010-11 beginning stocks was 44.0 million bales. The economic meltdown in US and Euro-crisis in European countries decreased retail sales of garments and other textile goods in western countries which forced the Asian countries to cut their production affecting badly the consumption of cotton and other cotton textile activities.
The European Central Banks, other world financial institutions like IMF and World Bank have pumped into their financial markets some US $ 1,300 billions to strengthen the credibility of some 8000 banks which were reportedly moving fast towards bankruptcy.
According to CCI Global fax of March-12, for 2011-12 crop, global mill-use was reduced by 1.0 million bales from February-12, figures which should have caste bearish effect on world cotton market but Indian ban on cotton shipments after March 5, 20-12, countered the bearish effect. Indian is reported to have shipped some 9.4 million 170-kg bales against total Export Registration of about 12.4 million bales leaving unshipped balance of 3.0 million bales. Recent reports of the Cotton Advisory Board of India have estimated cotton production at 33.5 million bales.
As per USDA March-12, CCI Global fax report of March,12, Indians Beginning stocks is equivalent to 9.73 million 170-Kg bales, production 34.55 million bales, import 0.77 million bales, mills-use 26.90 million bales and reported shipments 9.4 million bales (USDA exports 10.0 million bales). On the basis of these figures, end-stock comes to 8.75 million bales when shipment of 3.0 million bales is still pending. If India honours all Registered Export Sales and ship balance 3.0 million bales, its Ending stocks will come down to 5.75 from 8.75 170-Kg millions estimated bales.
According to one India press report, India shipped 8.0 million bales in 2010-11 and 9.4 million bales in 2011-12 against target pf 8.4 million bales. The report further mentions that if all registered contracts are homoured, India's ending stock will be reduced which is alarmingly low and would hardly be equal to mills-use of only 45 days. If next crop fails, Indian spinners may face severe cotton availability crisis. Another Indian press report said that local shippers anticipated the ban on export of cotton when export target of 8.4 million bales was achieved and the traders rushed to file export sales with DGFT which went up to 12.4 million bales on 5th instant. One report said that there were many contracts registered with DGFT in which sellers and buyers were mentioned the same and such contracts amounted to about 1.1 million bales. This shows that fake contracts were registered withy DGFT. When the target was for 8.4 million bales then why Registration of Contracts was not stopped. It appears that the export registration monitoring system of India has loop-holes which prompted registration of fake and excessive export sale contracts. The condition of the Guarantee for Performance of Export Contract should be incorporated in the Export Contract which should be equal to two percent value of the shipments. This would work as deterrent for registration of fake contracts.
On the reports of immediate Indian ban on exports of raw cotton, seed-cotton prices in India specially in Gujarat State decreased and so the lint prices but lint cotton prices in foreign countries, who are bulk export sellers such as CAS (Central Asian States), Australia, Brazil and South Africa, have appreciated reasonably. Australian Agriculture Minister Joe Ludwig said that recent Indian ban on exports of raw cotton provides an opportunity for Australian cotton farmers to build an overseas market and get handsome price. Australia has fixed export target of 1.1 million tons equal to 5.05 million 480-lb bales in 2011-12 season earning some $35.5 billions. Other exporting countries want to realise this opportunity. There are reports that on the local as well as foreign pressure, India may consider to reverse its decision of banning cotton exports in next couple of days.
When on 5th instant, the news of India's ban on exports of raw cotton was broken, New York Cotton Futures reacted bullish increasing value by 4.0 cents. Later, the news of one million bales decrease in world mill-use countered Indian news and the NY. Futures May contract closed at US Cents 88.48 on last working day of the last week. When the news of withdrawal of India's ban on export of raw cotton would break, it may depress world cotton market and prices may drop limit down.
NB. Just after writing this report (5 P.M. PST), the news of reversal of India's ban on cotton exports was broken on the today at noon Pak Time. This news was announced by BBC at 10.52 GMT on 11th instant only after one week.
Table 1
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2011-2012 World Cotton Supply & Off take( Million 480-lbs bales)
Beginning Stock Production Import Exports Mill use End Stocks
July March July March July March July March July March July March
2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012
World 44.4 47.3 123.2 123.6 38.3 38.8 38.3 38.8 116.8 108.7 51.0 62.3
U.S 2.8 2.6 16.0 15.7 00 00 12.0 11.0 3.8 3.4 3.0 3.9
China 11.6 11.6 33.0 33.5 15.3 18.5 0.1 00 46.5 43.5 13.3 20.1
Pakistan 2.7 2.7 10.3 10.6 1.2 1.0 0.4 0.7 10.5 10.3 3.2 3.3
India 5.9 7.6 27.0 27.0 0.5 0.6 5.0 7.8 19.5 21.0 7.4 8.0
Central Asia 2.0 2.4 7.2 6.8 00 00 5.0 4.3 1.9 2.0 2.2 2.9
Australia 2.5 2.6 4.5 4.8 00 00 4.4 4.0 00 00 2.7 3.5
Brazil 8.2 8.0 9.3 9.3 0.1 0.1 4.4 3.9 4.6 4.0 8.7 9.7
Indonesia 0.4 0.4 00 00 2.0 2.0 00 00 1.9 2.0 0.5 0.4
Mexico 0.5 0.5 1.1 1.2 1.2 1.1 0.3 0.4 1.9 1.7 0.6 0.8
Turkey 1.6 1.7 2.9 3.1 3.4 2.5 0.2 0.3 6.0 5.3 1.8 1.8
Source: USDA-WAOB-WASDE Reports
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