Despite anticipation that offtake of leftover cotton (2007-08) would be brisk trading has remained somewhat slower than expected. Thus the ginners could still be holding anywhere from 400,000 to 500,000 bales of unsold cotton with them.
In another report quoting the Federal Bureau of Statistics of the Government of Pakistan, domestic mills have imported about 4,121,000 bales (170 kgs) of cotton from July 2007 to March 2008 so that spinners in Pakistan could end up by importing close to 5,000,000 bales during the fiscal period July 2007-June 2008. With this scenario, most mills in Pakistan are likely to be comfortably covered for their lint requirements till the arrival of the new season (2008-09).
According to Naseem Usman, a cotton consultant at Karachi, domestic mills have already expended $1.6 billion on the import of cottons from July 2007 to March 2008. Anyhow, local lint prices for the higher grades remain quite steady because some spinners who are not well stocked are inclined to lift local cotton still floating in the market. While better grades and cotton sales made on credit are fetching higher prices, routine prices of cotton are quite range-bound and remain unlikely to flare up.
On Thursday, the general price idea for ginned cotton from Sindh reportedly ranged from Rs 3250 to Rs 3500 per maund (37.32 kgs), while in the Punjab the cotton prices were said to have ranged from Rs 3250 to Rs 3550 per maund (37.32 kgs).
In ready business, 400 bales of cotton from Ghotki and 600 bales from Daharki in upper Sindh (K-68) both reportedly sold at Rs 3600 per maund (37.32 kgs) but on deferred payment basis. Earlier on last Tuesday, 200 bales of new crop (2008-09) cotton from Shahdadpur in Sindh reportedly sold at an all time high price of Rs 3700 per maund for delivery on the 1st of August 2008.
Thus we see that there is moderate but steady turnover of cotton in the ready market but the domestic mills are not displaying any avid appetite to lift any and all cotton offered to them by the ginners. So the cotton is being traded slowly but lifting of the lint from the market continues steadily. Government has reportedly set a target of ex-farm output for the next cotton season (2008-09) at 14.10 million domestic size bales from a cultivated area of 3.2 million hectares on farmgate basis.
However, according to trade talk, due to uncertainties of proper supply of unadulterated cottonseeds and also paucity of irrigation water, Pakistan may achieve an estimated output of only 12 million domestic size bales during the next season (2008-09) on an ex-gin basis. Pakistan has certainly been left behind in adopting the cultivation of Bt cotton which is proving detrimental to its cotton economy as well as its textile industry.
Sowing for the new cotton season (2008-09) in Sindh has been late by about one month, but early sowing in such Punjab stations like Sahiwal, Vihari, Okara, Pakpattan, Faisalabad and Depalpur may provide cotton arrivals and even roll out ginned cotton by the middle of July 2008.
Thus with local supply of cotton from the previous season coupled with sizeable imports of cotton accompanied by prospects for almost usual arrival of the new domestic crop (2008-09) in Pakistan, the transition from the current to the new cotton season should be smooth.
On Thursday the Pakistani rupee plummeted to an all time low of Rs 65.50 against the United States dollar in the open market and at one time sank as low as Rs 65.80 per dollar. Similar is the deterioration of the Pakistan rupee against other currencies like the euro, pound sterling, the Deutsche mark, the Japanese yen and the Swiss franc.
The crash of the Pakistani rupee is remarkable as almost no other currency in the world is facing a similar fate. This phenomenon can stoke unbearable inflation in the country and thus disturb smooth functioning of trade and industry possibly leading to economic anarchy giving rise to social tensions.
Domestic textile industry continues to express its concerns regarding its various problems extending from shortage of gas and power supply to high cost of production. We are on the eve of the incoming federal budget (2008-09) expected to be announced sometime at the end of May or the first half of June 2008.
Due to massive trade deficit collected during the outgoing fiscal period (July 2007-June 2008) and high cost of imported fuels, edible oils and sundry other goods and commodities, a very harsh federal budget is being expected regarding which early intimations have already been doled out by the government.