The first round of heavy rains in cotton belts of Sindh and Punjab has ended without inflicting any sizeable damage to cotton crop. Field reports indicate overall better impact of recent rains on cotton crop as more than 90 percent crop is in plant development stage. Only in limited area in lower Sindh and Central Punjab where harvesting was in progress or in offing, cotton picking has been deferred for a week or so.
In Central Punjab, some 15 ginning factories have started operation in new crop while in Lower Sindh only 4-5 factories. Second round of monsoon rains has started from North West side and it may take a week or so in reaching cotton belts of Punjab and two to three weeks in cotton areas of Sindh.
Meantime, cotton plants would attain development stage successfully. Last Saturday's meeting of Minfal officers also confirm no damage to cotton crop so far.
The anxiety is there but there is also hopes for a record high crop. The government has fixed production estimates of 14.14 million 170-lb bales ex-farm and chances and hopes are there to meet the target. In Sindh, some more than 70 percent area is reported to have been covered by Bt. Cottonseed of which seed was smuggled from India and Australia.
The performance of Bt. cottonseed has been found very successful in respect of field yield, production and ginning out-turn (GOT). One Sindh Ginner reported that in testing, he obtained 14.5 kilograms of lint cotton from 40 kgs of seed-cotton in new crop arrivals. The Government of Pakistan has not as yet officially allowed sowing of Bt. Cottons.
The Government of Pakistan wants to adopt this technology but through indigenously developed Bt. Seeds and not through Monsanto company which is mother of this technology. In USA, China and India, Monsanto company initially introduced Bt. Cottonseed but later local companies obtained this technology and the developed their own seeds. Reportedly, the governments institutions namely National Institute of Bio-technology and Genetic Engineering (NIBGE) Faisalabad and Centre of Excellence of Molecular Biology(CEMB)Lahore have evolved Bt.
cottonseeds IRFH-901 and CIM-482 respectively which have not been released by the government for commercial sowing on grounds of further tests and trials. As a matter of fact, some strong groups of seed developers are strongly resisting the introduction of Bt. Cottonseeds on fears of losing their monopoly in seed-breeding and some unscrupulous concerned government researchers are supporting them. We are already five years behind in cotton growing from India and fear to lose another couple of years before adopting this new technology.
India has become net cotton exporting country by adopting this technology and Pakistan has become cotton importing country by not adopting new cotton growing technologies. How long the vested interests resist the amelioration of poor farmers' conditions and promotion of Pakistan's economy only for the sake of their personal ulterior motives? We feel ashamed of calling Pakistan an agriculture country as we regularly import cotton, edible oils and other agri-produces to meet our shortfall and very frequently import wheat, potatoes, onion and etc. Till the time our poor exploited farmers remain poor, our country cannot achieve self-sufficiency in agricultural commodities.
The stocks of unsold cotton of current crop are reaching nominal stage. Those holding unsold stocks are demanding high prices and the hungry buyers are paying up to Rs 2,900 per 40 kg ex-gin while new crop lint in lower Sindh is selling at the same level but Punjab lint is commanding premium of Rs 200 - 250 per maund. Almost daily, more and more factories are starting ginning operation in new crop as arrival of seed cotton is increasing.
Market reports indicate that some exporters anticipating low rates committed substantial amount of cotton in export at low rates up to US Cents 57 / lb CNF Fareast / Bangladesh. Prices of new crop lint cotton have appreciated on increased buying interest and low supply and exports sales are heard around the level of 63/64.
The exporters appears worried for July shipments as the price level may be quite high to the export rate parity. However, prices may start receding in August month and absence of strong support may keep the prices down. This season, Punjab has started its ginning operation quite parallel to Sindh and also aggressively.
This situation would not allow the Punjab spinners rush to Sindh for buying cotton rather they would prefer to cover their nearby requirements from Punjab. This situation would discourage cotton prices in Sindh and the present level of prices in Sindh and Punjab confirms this situation. Trade circles mention the total new crop export commitments around 40,000 / 50,000 bales.
The present price situation may be quite disadvantageous for those exporters who sold cotton at low rates below 60 but this price situation may ease down when rush of arrivals starts sometime by the end of August or early September month. The position of spinners is not good except that some improvements in yarn and cloth prices was seen which have increased chances of its disposal.
The present level of high lint prices is not viable but hand-to-mouth working mills have to do it on cost of closing down their mills temporarily. The spinners are planning to stage protests and long processions to press the government accept their demands which are reportedly viz: a) Reducing interest rates to 7.5 percent level on short / long term loans, b) Abolish 6.5 percent duty on import of polyester staple fibre, c) Allow 25 percent discount on all utility bills and c) Allow 5 percent subsidy on research and development.
If the operating efficiency and business viability of our spinning /weaving sectors do not improve to a level which may make our exports competitive with India, China, Bangladesh, Sri Lanka and Vietnam, health of textile sector cannot keep cotton prices at high level.
On the other hand, expert opinions think that saturation point / point of return is not far after the level of 70 and the record high open position in hedge in December contract may not hold up the market at high level for longer period. The sufficiently large unsold stocks of US current crop cotton and high target of 17.0 million bales export in new cotton season may put the New York Futures in the reverse gear touching the level of low 60s or high 50s. One experts says the return may be in 30 days.
One obvious reason for this surge in cotton prices in US is switching over of cotton area to more profitable crops like corn and soybeans. Corn is being used for producing ethanol for fuel as the prices of crude oil are heading towards record high level of prices. China is top one importer of raw cotton and US is the largest cotton exporter.
This period is generally considered cotton-dry and hand-to-mouth running mills have to buy expensive cotton to keep their mills running. Recently, China has released 300,000 tons of its some 8 year old cotton stocks to its hungry mills.
In couple of months, China will harvest a bumper cotton crop and would its spinning units would prefer to buy local lint cotton instead of buying foreign cotton at high rates. The speculators have pushed the cotton prices to the level quite unacceptable to the buyers. Rates are there but bargains are absent. The arrivals of new crop cotton would ease the prices as the spinners also want to earn profit.
The two tables provide some latest data on cotton situation and it would help the readers to form opinion about cotton prices on short-term and long-term basis.
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Cotton Balance-sheet 2007-2008 season
(million480-lb bales)
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Country End.Stock Production Consumption Imports Exports End
Use
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World 57.32 115.79 127.16 41.30 40.81 50.78
USA 9.80 17.50 4.40 0.02 17.00 5.90
China 15.09 32.50 54.00 16.50 0.05 14.54
India 7.36 22.50 20.00 0.40 3.50 6.76
Pakistan 4.29 10.40 12.00 1.80 0.30 4.16
Cent. Asia 2.22 8.18 1.37 0.00 6.88 2.14
Brazil 5.47 6.00 4.10 0.25 2.70 4.92
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Cotton Production & Consumption (Mln Bales)
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Countries Production Consumption
2006-7 2007-8 2006-7 2007-8
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China 32.50 32.50 50.00 54.00
India 21.50 22.50 18.50 20.00
Pakistan 9.90 10.49 11.80 12.00
Cent. Asia 8.17 8.18 1.46 1.37
West Africa 4.25 4.23 0.60 0.59
Turkey 4.02 3.70 7.20 7.30
Australia 1.10 0.90 0.06 0.05
Brazil 6.50 6.00 4.15 4.10
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