Weather has been dry and partly humid in almost all cotton areas during last week facilitating rather accelerating the pace of cotton picking in early sown areas of lower Sindh and central Punjab. It also helped the development of cotton plant.
Reports of mealy bug on cotton plants in Sindh have been received which is reported quite under control. Another report was about attack of leaf curl virus on cotton plants in Sindh but it lacked confirmation. Sometime weak and poor reports of pest-attack on cotton plants are circulated by the vested interests simply to increase their sales of pesticides.
Next round of rains has already entered into Pakistan via north and our northern and upper Punjab areas are under monsoon rains but it may take a couple of weeks to reach southern Punjab and Sindh and at this stage rains would benefit cotton crop.
Reports from India indicate conducive weather for cotton sowing and development of cotton plants and another record high crop of 30 million 170-Kg (23.4 million 480-lb) bales in 2007-2008 season 3rd consecutive record breaking crop. India has sowing target at 9.3 million hectares, which is 7 percent more than last season.
Indian farmers appear more inclined towards sowing of Bt. cottonseed which gives them better profit between Indian Rs 12,541 and 15,136 per acre against low profit of Indian Rs 4,784 per acre on use of conventional seed, as per recent survey. Weather in USA is also reported better and cotton plants are reportedly developing better than last years.
Cotton crop in China is also progressing well and cotton output is estimated at 30.0 million 480-lb bales in 2007-2008 season. China produced 28.7 million bales in 1984 perhaps breaking the US cotton production record of 1936-37 marginally. China brought revolutionary changes in its cotton policy in the form of various incentives for the farmers from start of 80s to increase its cotton production. China had produced only 10 million 480-lb bales in 1979 but as a result of its positive cotton policies its production touched the highest level of 28.7 million bales only in five year period in 1984.
As a result of increased picking in Pakistan, more and more factories are resuming ginning operation in new crop cotton and some 20 factories in Punjab and five in lower Sindh have started ginning operation but the mills which are starving of cotton are picking all lots at ginners' asking rates. Rates in new crop lint cotton have touched the levels of Rs 3,050 per maund of 37.324 Kg ex-gin in Sindh and Rs 3,150 in Punjab.
Quality wise cotton is good and can be graded as T-1467 to 1503 with staple length between 1-3/32 inches to 1-1/8 even more with micronaire values presently not exceeding the highest free limit of 4.9 and good strength between 26-28 GPT.
As reported last week, local exporters are understood to have sold some 40-50 thousand bales of new crop lint cotton at rates as high as around US cents 64 and as low as 57/lb for shipments from July and onward. Present level of prices goes against the exporters but in the fortnights to come, lint prices may come down.
This time spinners from Punjab may not rush to Sindh for cotton procurements as Punjab has taken lead in commencing ginning operation faster than Sindh. As such, exporters would find Sindh cotton more competitive than Punjab. Hopefully, the prices would break down on more production in coming weeks. However, the number of operating factories is expected to go up to 80 in the first week of next month of August.
The recent downturn in New York cotton advices would caste adverse effect on rising trend of prices in Pakistan on one hand and would make import more competitive on the other hand. Pakistan's booking of foreign cotton had stopped when asking prices crossed the level of 65.
In the last week, cotton prices on the New York Cotton Exchange lost heavily due to heavy selling. It appears the market was overbought and it burst. However, the coming week would indicate whether it was a correction or a downward trend in prices.
It is a fact that cotton prices on the NY cotton exchange are the strongest indicators for cotton prices the world over. Presently, six countries namely USA (17 mln bales), Central Asia (6.88), West Africa (3.25), India (3.50), Brazil (2.70) and Australia (0.85), are likely to export jointly 34.08 million cotton bales (83.5 percent) of world total estimated exports at 40.81 million 480-lb bales in 2007-2008 season.
The prominent importing countries are more than 15 in number which include China being the largest single importer of cotton with lion share of more than 41 percent while US has the same share in cotton exports. Other major cotton importing countries are Pakistan. Bangladesh, Mexico, Turkey, Indonesia, Thailand, Japan, Russia, Japan, Vietnam, Sri Lanka, almost all importing minimum close to one million bales.
As USA is the largest exporter with sufficient unsold stock of cotton from 2006-2007 crop 18.0 million bales while China is the main importer of cotton. Only once when China entered into world market as the biggest buyers some three years ago, the market shot up above the level of 80 cents and China had to lose heavily that season.
China, perhaps learned the lesson and in following seasons adopted such a policy which did not allow world prices go beyond the level of 60 cents in spite of that fact that China covered all its import requirements of more than 15 million bales each season comfortably. This season, the New York cotton prices have broken the barrier of 60 cents and have touched the highest level of 66.09 in October, 2007 contract and 68.80 in December, 2007 contract.
The high international prices are against China's interest, being top most importer of cotton. With a view to bring down cotton prices, China has taken various measures of which most important is the release of 300,000 tons (1.375 million bales) of cotton from government's reserve stocks. This cotton consists of cotton from old seasons beyond 1997, 2003 and imported ones. The government has sold some 3,000 tons (0.1375 million bales) in two days on 16-17th July 2007.
Sales through auction will be made almost daily. According to cotton China survey, the government's reserves of cotton are estimated between 500,00 and 800,000 tons and to bring down international cotton prices around the level of 60 cents, more reserve stocks beyond 300,000 tons can be released for auction sale. It appears that China is determined to bring down the cotton prices to a reasonable level in month or so.
China would start receiving new crop, which would add the availability of cotton for spinners. The spinners would prefer to buy local crop than to go for imports at least for some months and the cotton surplus countries especially US may have to wait for months to lure China for bulk buying. US Imports of cotton products is increasing year to year. In 5 month period January-May, 2007, US imports of cotton textile products increased by 9.2 percent compared to same period last year.
The increase in US imports of cotton products has been shared by China 64.7 percent, Vietnam 24.4 percent, Cambodia 20.2 percent, Bangladesh 19.4 percent, Indonesia 18.9 percent, Honduras 4.0 percent, India 2.6 percent and Pakistan only nominally 0.2 percent while share of Hong Kong was reduced by 40.2 percent and that of Mexico by 11.7 percent. Pakistan's textile sector has been facing with tough competition in textile exports from China, India, Bangladesh, Vietnam and Indonesia and had been asking for some relief or subsidy from the government but the spinning industry is not satisfied from what the government has given recently.
Our textile exports have not performed as per expectations and export target of the season 2006-2007 has not been achieved. The health of our economy mostly depends on comfortable working of textile sector. Reportedly, heavy financial expenses on textile has pumped out good amount of profit to banking sector. As a matter of fact neither the government nor the private sector give correct picture of the affairs so the official statistical figures lack credibility. Sincere efforts from both sides can only promote economy of our country.