Under hot and dry weather with some moistening effect, progress on development of cotton plant continued satisfactorily during the last week.
When this analyst visited some of the cotton areas in Hyderabad and Sanghar districts in lower Sindh last week, generally all cotton plants were found quite healthy almost successfully completing the flowering stage; some of them entering into squaring stage. Local growers terms present condition of cotton plants as good to very good and better than last season.
New season's cotton production may reach the level of 14.5 - 15.0 local weight bales on present condition of the crop. As cotton plants reach boll-formation stage, the chances of damage to plants by rains get minimised. Second round of rains in Sindh is expected in this week and cotton crop is expected to be benefited from these rains also. One cannot ignore the aspect of some delay of two to three weeks in crop development. Due to some delay in harvesting, gins have also delayed operation in new season.
Last season's cotton crop almost exhausted and cotton stock inventory of many mills is thin, some mills facing temporary closure of spinning mills or curtailing daily working hours. Scarcity of cotton coupled with unviable high lint prices and slackness in yarn/textile markets are adversely affecting cotton market.
Although the spinner-buyers and the exporters are resisting the increase in cotton prices yet prices are inching upward slowly and last week, lint prices touched the season's highest level of Rs 3,225 per maund of 37.324 kg ex-gin in Sindh and Rs 3,200 in Punjab. The rates are there but bargains are limited. Over two dozens of factories; only 4-5 in Sindh and others in Punjab, have already resumed ginning operation in new cotton crop and more would join them in coming days.
The exporters who have commitments for shipments of cotton consignments in August 2007 may have to enter into market quietly to cover their immediate shipment requirements incurring loss or delay the shipments by a month or so in cooperation with their respective foreign buyers. As per trade estimates, local exporters have made total export commitments for about 50-60 thousand bales of new crop lint cotton; many of the bargains at prices lower than US cents 60/lb.
Local lint prices are expected to come down to the level of Rs 3,000 by the end of current month on increased arrivals and larger daily production. Quality-wise Sindh lint cotton appears better than that of Punjab as most of the cotton in Sindh is from Bt varieties. About 60-70 cotton area in Sindh is reported under Bt cottonseeds; of course not from basic seeds but second and third generations seeds illegally imported mostly from India.
Pakistan is yet to spend some years to produce its own Bt seeds and would lag 8-10 years behind India in adoption of GM technology. Pakistan's total domestic cotton requirements are estimated around 15.5 - 16.0 million local weight bales and unless Pakistan improves its cotton production it has to import around 20 percent of its domestic requirements to meet its shortfall.
This situation may not help our textile exporters in competing world textile market. Out textile industry does not appear to be in comfortable position respecting export viability and potentiality on increasing cost of production factors such as power and fuel, labour wages & salaries and financial cost, etc The export performance of our textile industry has not been promising as many economic targets were missed in the year ended June 2007.
The reports of US planning to establish and operate Reconstruction Opportunity Zone (ROZ) in Pakistan's northern areas comprising Fata area, including Waziristan Agencies bordering Afghanistan apparently to benefit the people of this area in providing jobs and business opportunities. In this scheme, important industries for producing surgical goods, leather goods and textile products would be established for which cheap raw material of Pakistan and China would be used.
This scheme would enjoy facility of free tax holiday for a longer period of 15 years. In this scheme, US would restrict exports of some of the hot-in- demand textile items of Pakistan and China to US as free exports of these items would be made to US market from Reconstruction Opportunity Zone in Pakistan.
At present, Pakistan's total yearly exports to US is around $5.80 billion of which about 89 percent consists of textile goods. Naturally when the ROZ scheme would become operational, Pakistan's own exports of textile goods would be decreased putting Pakistan's economy in difficult situation on the one hand and US consumers would get quality textile goods at competitive rates on the other hand.
A draft for this scheme has already been prepared and circulated among concerned stakeholders for their necessary opinions. The textile trade and industry should look into the pros and cons of the scheme with respect to Pakistan's interests and come out with viable proposals in national interests.