Wild guesses regarding the output of the current cotton crop (2007-08) in Pakistan continue to float in the market with uncommon verve and vigour. Mealy bug, a newcomer to sundry pests and viruses has joined the list of bugs which has been pestering our cotton crop since the last two or three years.
Besides the old cotton curl leaf virus with which we are quite familiar. Be that as it may, the domestic mills have become fearful concerning the possibility that we may reap a very low cotton output this season.
The cotton production in Pakistan during the current season (2007-08) is being estimated variously from a lowly figure of 9.5 million domestic size bales to the more optimistic number of 12.5 million bales. The truth should thus veritably lie somewhere in between.
However, besides the mills, the growers, and indeed a fair sprinkling of speculators, there is also a creditable section of the cotton trade which is still counting on this year's lint output to be close to 12.5 million bales of local size on an ex-gin basis. This latter assessment of cotton output this year is closer to the official revised assessment of cotton production for the current year at 12.8 million bales on an ex-farm basis.
Of course, time will tell how we will end up at the close of the season, but until more credible data is available, we could presently rely on an output of 12.5 million bales which may be revised either way when more news regarding the sundry features and fundamentals become available with the passage of time.
Besides the size of our current cotton crop, other important determinants like the fall of the pitiable united states dollar against most other currencies of the world and the roaring prices of crude oil in the global markets which are poised to touch or transgress US dollars 100 per barrel, will certainly influence the pricing of cotton both locally and around the globe. Crude oil forms the raw material for many man-made fibres.
Downsizing Indian cotton output from earlier 33 million to less than 30 million bales (170 kgs) for the current season (2007-08) coupled with strong buying of Indian cotton by China which is expected to extend till the end of this calendar year (December 2007), may induce lint prices to maintain a steady showing. Relative strength of grains prices linked to the production of biofuels may also impart strength to cotton pricing.
Be that as it may, generally speaking we may not see frontal months on the New York cotton futures market advancing much beyond 70 cents per pound at present. However, any conflagration in the Middle East or further deterioration of the credit situation in the financial markets could influence the commodity markets detrimentally.
Business in our domestic market has been operating in jumps and starts in recent weeks. Sales have been taking place under perception of a shorter crop than earlier envisaged. Yarn prices have reportedly gone up generally by Rs 10 per 10 lb but leading mills now say that they can only achieve their parities if good cotton is available in the range of Rs 3000 to Rs 3100 per maund (37.32 kgs).
Seedcotton (kapas/phutti) prices ruled firm and extended from Rs 1600 to Rs 1650 per 40 kgs in Sindh, while in the Punjab they ruled anywhere from Rs 1600 to Rs 1700 per 40 kgs according to the quality. Lint prices in Sindh generally ranged from Rs 3075 to Rs 3150 per maund (37.32 kgs), but upper Sindh cotton was priced at Rs 3200 per maund. A sale of 400 bales of cotton from Shahdadpur was reported at Rs 3075 per maund.
Prices of ginned cotton from Punjab reportedly ranged from Rs 3175 to Rs 3200 per maund (37.32 kgs), according to the quality. Reports added that ginners may not be easy sellers of cotton. In Punjab, 1000 bales from Rahimyar Khan and 2000 bales from Khanpur sold at Rs 3200 per maund each. More business was expected latter in the evening.
According to market talk, seedcotton (kapas/phutti) between 4.2 million to 4.3 million lint-equivalent bales was estimated to have arrived by the end of October 2007 throughout the country. Brokers in Karachi added that some decline in cotton arrivals has been reported since the last couple of days.
The Karachi Cotton Association (KCA) kept its ex-gin price for Grade 3 (37.32 kgs) cotton intact at Rs 3050 per maund implying that the cotton prices are presently quite steady. The KCA has also mentioned in its daily market report of 1st November 2007 that Sindh styles were traded between Rs 3075 to Rs 3100 per maund on last Wednesday and Punjab lint was sold between Rs 3150 to Rs 3200 per maund according to the quality.
The All Pakistan Textile Mills Association (APTMA) called a meeting of its members on Thursday afternoon to discuss bulk imports of cotton to reduce the cost price of lint and also to discuss the strategy for import of all types of cottons through all the entry points in the country, including the land route at Wagah near Lahore, which should cut down on the cost of cotton in order to reduce the crisis being faced by the spinning and weaving industries.
According to the preliminary reports emanating from textile sources proposals to tackle the crisis include to cut down cotton buying for three days and import more cotton with a view to seek reduction in local lint prices. The points mooted at the millowners meeting were said to have been general in nature as it was felt than any mandatory compliance by members of the APTMA would be difficult to enforce.
This week Dr Thomas Paul Reinhart, the president of the leading cotton shipping group M/S Paul Reinhart of Switzerland accompanied by his senior executive Walter Ruegg met spinners and millowners at Karachi, Multan and Lahore.
The Reinhart group are doing cotton business since more than 200 years and are very active in Pakistan. They are supplying cotton from almost all the origins of the world where they have their own extensive offices and those of their agents and associates.