Cotton prices continued their advance this week and remained firm on Thursday even if the reported volume of business remained low. Traders said that ginners still hold more or less 200,000 (Two hundred thousand) bales of unsold cotton with them from the current crop (2007-2008).
While these may be sold out soon, early varieties from the next crop (2008-2009) may start arriving by the next month from certain areas in Pakistan like Sahiwal, Pakpattan, Faisalabad, Okara or Chichawatni.
Within the last two months time, ex-gin price determined by the Karachi Cotton Assoication (KCA) for grade 3 cotton has risen from Rs 3,300 per maund (37.32 kgs) prevailing on the first of April, 2008 to Rs 3,700 per maund on Thursday (29th May, 2008), a whopping increase of Rs 400 per maund.
According to cotton consultant Nasim Usman, lint prices which were prevailing around Rs 2,500 per maund (37.32 kgs) last year (2006-2007) are today obtaining anywhere from Rs 3,800 to Rs 4,000 per maund, according to the quality. This denotes an increase in lint price by more than fifty percent compared to the previous season (2006-2007).
Nasim Usman added that cotton imports into Pakistan from August 2007 to April 2008 (nine months period) are being reported at 3,935,000 bales (170 kgs) compared to about 2,100,000 bales for the same period last season (August 2006 to April 2007) which shows an increase in cotton imports by nearly fifty percent. It is anticipated that about 200,000 to 300,000 more bales are likely to be imported between now and the end of July, 2008 when the current cotton season (2007-2008) ends. About half the quantity of cotton imports this year have been from India. This trend definitely denotes that despite the despair and despondency of the Pakistani textile industry, cotton consumption continued its upward drive.
The textile mills and its ancillary sub-sectors continue to proclaim their disillusionment with the current state of affairs prevailing in the industry. Amongst its complaints, the industry continues to cite high cost of doing business, untenable increase in bank mark-ups following recent decision of the State Bank of Pakistan (SBP) to increase the discount rate by 1.5 percent, the erratic and short supply of electricity and increase in its tariff, and also fears that any decrease in research and development (R&D) assistance or prevailing fiscal and other compensations could cripple their industry.
Increases in yarn and fabric prices have occurred for many counts of yarns and constructions of fabrics, which at least provide some relief to the textile industry. It is hoped that the government and the textile industry would find some via media to work together in order to provide the necessary fillip to this premier and basic industry of Pakistan. Exemption of 35 percent margin on cotton imports should provide some help to the textile industry.
Welcome news coming from the cotton fields is that overall sowing in the cotton belt both in Sindh and Punjab has been good and is progressing satisfactorily. In fact, the earlier fears of shortage of irrigation water have been considerably alleviated due to recent rains and melting of snows in the northern areas.
Widespread though sporadic rains in several parts of the cotton belt are cumulatively being construed to be good, though some resowing has been reported here and there and also some initial presence of the dreaded mealy bug in a few areas. Sowings have also started in upper Sindh (k-68) and lower Punjab areas like Rahimyar Khan. The official target figure of cotton output for the forthcoming season (2008-2009) remains 14.10 million bales.
Other drawbacks reported to be troubling the forthcoming cotton crop (2008-2009) include high price of di-ammomium phosphates (DAP) and other inputs, reports of supply of inferior, defective and spurious cottonseeds, but overall the growers are very enthusiastically planting and looking after their forthcoming crop (2008-2009) as they have been justifiably rewarded by the handsome increase in cotton prices.
If price of the lower grades of cotton from the current crop (2007-2008) are included, then the price of lint was being quoted anywhere from Rs 3,700 to Rs 4,000 per maund (37.32 kgs) on Thursday in both Sindh and Punjab. The new price structure of the cotton economy of Pakistan incorporates increase of prices of raw cotton and textile products to a sizeable degree in terms of Pakistani rupee which has lost its value by rupees eight to rupees ten against the United States dollar since the end of last year (end of December, 2007) till now.
According to textile selling agency Messrs Gold Mohur Corporation in Karachi, the local prices of cotton yarns have gone up by twenty five to thirty percent, while the prices of fabrics of different varieties have gone up by thirty five to forty five percent compared to the rupee prices prevailing last year.
The federal budget is scheduled to be announced on the seventh of June, 2008 which should address a plethora of issues to remedy and rectify the faltering Pakistan economy.
A sale of 400 bales of lower grade cotton from Mehrabpur in Sindh was reported at Rs 3,600 per maund (37.32 kgs), while 2,400 bales of relatively below average cotton from Shujabad in Punjab were sold at Rs 3,740 per maund. The overall impression of the price situation in the evening was reported to be stable and steady.