The story of the current cotton crop is almost closing, and that of new crop is taking a start. Premature sowing intentions indicate more or less the same area--around 3.20 million hectares. Official circles have started working on estimation of the size of the new cotton crop for the 2007-08 season.
According to some reports, official estimate of the crop may be determined around 14.0 to 14.5 million bales on the ground of better quality seed, availability of fertilisers, better weather conditions, positive response of farmers and government's better support facilities.
Sowing of 'Bacillus thuringiensis' (Bt) cotton seed varieties is extending to more and more areas, particularly in Sindh, which would increase cotton productivity and total production. Prominent cotton producing countries like USA, China and India have immensely benefited in increasing their productivity, and production, by widely using GMO technology, but Pakistan has yet to take a start in this technology. However, unofficial use of smuggled Bt seeds has been growing in Sindh for the last three years, which has established its benefits.
Some reports from Punjab mention about early sowing of cotton on such areas where growers missed maize sowing. In early sowing areas of Lower Sindh, the process has taken a start but would take some time for bulk sowing. In areas where wheat has already been harvested and lands have been prepared for cotton sowing, recent rains would prove quite beneficial in early cotton sowing areas. But in other areas, where lands have not been cleared of wheat and the harvesting has been delayed, it would result in delay in cotton sowing. There may not be any shortage of irrigation water in the new cotton season, which may benefit next cotton crop.
Presently, drying up unsold cotton stocks with the ginners, delay in sowing due to recent rains, and fresh export inquiries have brightened up chances of increase in lint prices, but the dilapidated conditions in yarn and cloth markets, both at home and abroad, may resist further rise in local lint prices beyond the level of Rs 2,700 a maund (of 37.324 kg) ex-gin.
Fresh export sales have been reported in both low and better grades cotton, especially to Bangladesh and Indonesia. There appears shortage of low grade cotton in the export market which has increased its prices in local and foreign markets.
The extensive growing of Bt cotton seed varieties is one of the major causes of shortage of low grade cottons, as these varieties mostly produce high grade cotton. The ginners, holding unsold stocks, are offering cotton restrictively, while the buyers accept the price reluctantly. Trade circles estimate the level of unsold cotton stocks around 700,000 to 800,000 bales by the end of this month. New crop arrivals may not commercially be available to buyers before next August.
Total current season's domestic consumption is now estimated between 15.2 million and 15.5 million bales, against 15.0 to 15.5 million bales, due to slow spinning activity. Market report indicate that Pakistan has committed total cotton equivalent of some 1.8 million to 2.0 million 170-kg bales, of which some 1.2 million bales have already reached the destination. Some reports indicate curtailing of yarn production by many mills and some closures of mills, especially open-end mills, due to adverse market conditions.
Lint cotton prices on New York market remained under pressure and both May and July contracts were ruling around the level of 54 cents a pound. Due to slow export market conditions, US, the top cotton exporter, may not achieve its export target. By March 15, US export sales stood at 8.435 million (480-lb) bales, of which 4.971 million bales had been shipped. US has to make export sales of another 7.340 million bales in the remaining 4.5 months of this season to achieve the export target of 15.75 million bales. Main buyers of US cotton were: China 1.681 million bales, Mexico 1.607, Turkey 1.467, Indonesia 0.672, Korea 0.322, Taiwan 0.301, Thailand 0.291, Pakistan 0.252 and Japan 0.205 million bales.
The trend of cotton prices during remaining few months of this cotton season, and in most of the next cotton season, appears bullish due to many factors viz: mills coming back in the market; depleting world carry-over stocks; China has good buying potential; new crop area down; long-term outlook bullish and imminent release of more TRQ by China. Bearish factors are: bigger China/India new crops; and unsold US crop and Hedging of US loan cotton.
These factors indicate bullish trend the in coming months but deterioration of political situation in Middle-East and sanctions on Iran may counter the bullish trend, to some extent. The possibility of US restricted attack on nuclear installations of Iran may jeopardise the economic situation of the world at large, and of Middle-East and South Asia in particular, mainly due to high oil prices.