The second round of rains which lashed all cotton areas of Sindh and Punjab provinces sparked prospects of increase in cotton out-put in general but particularly in Sindh province.
It is a timely rain and has been widely welcomed by the growers except where harvesting has started. Arrivals of seed-cotton in Central Punjab have decreased considerably forcing closure of some 30 ginning factories. The pace of arrival of seed-cotton would be slowed down due to recent rains.
Hopefully, recent rains would help in washing out the pest / diseases like mealy bug and white fly. However, continued cloudy weather and high percentage of moisture in fields would help in upcoming of other pests and diseases. Presently, cotton plants are at different development stages in all cotton areas right from flowering stage to maturity but most of the crop is in flowering to squaring / boll-formation stages.
In view of tight supply position, lint prices are inching upwards slowly and gradually and has touched the season's peak of Rs 4,250 per 37.324 Kg ex-gin which works out to US Cents 73.25/lb. ex-gin and US Cents 77.75 /lb fob Karachi. This may be considered on high side in comparing NY cotton values. Last week, NY December,08 contract has broken the psychological barrier of 70 and cotton import prices would become viable against domestic prices and our spinner-buyers would certainly prefer imports on quality and prices advantages.
As such, local prices may rebound to the level of Rs 4,000 - 4,100 level to become attractive for buying. Local exporters are understood to have committed some 60-65 thousand bales in export sales, mainly to India, Bangladesh and Indonesia.
In 2006-07, Pakistan's total domestic cotton consumption has been mentioned as 15.23 million 170-Kg bales and in the outgoing season of 2007-08, it may be around 14.6 - 14.8 million bales lesser than previous season due to high cost of raw cotton, lower off-take of textile goods and high cost of production. In 2007-08, season, Pakistan harvested a poor crop of some 10.6 million 170-kg bales and to make up cotton shortfall, cotton imported was equal to 4.4 million 170-kg bales in eleven months period August 07 - June 08 and in 12 months upto July, 08, total imports may be around 4.6 million bales costing some US $1.2 billions. More than 50 percent imports of cotton reportedly came from India. If the growers are given some incentives in fertiliser and pesticide, given new seed of Bt cotton, and given due premia for better grade, the production may be increased to consumption level.
The Pakistan Cotton Ginners Association (PCGA) have called for a strike of cotton ginners from 1st. August and press reports claims some 1200 ginning factories have been closed. As a matter of fact hardly 50 factories are operating (8 factories in Sindh and some 40 in Punjab) out of some 1200 factories in Pakistan. The reported demands of the PCGA are levy of tax at the rate of Rs 5 per bale for Pakistan Cotton Standards Institute (PCSI), withholding tax on electricity bills and increase in utility bills. Presently, one bale of cotton costs some Rs 18,000 and tax demand is Rs 5, which works out to less than paisa 3 per Rs 100; just see the ratio that even for the promotion of cotton research.
Regarding charging of increased utility bills, the ginners are not specifically affected but its effect is general. Actually, ginning business is getting risky and mostly loss-oriented and the ginners are much worried. Actual reasons for losing in cotton ginning are: 1) There is cut-throat competition in ginning as cotton is decreasing and ginning capacity is about three times of the cotton production, 2) The ginning machines are and systems are of sub-standard quality so more power is consumed by the machines. 3)
The ginners are not operating as real ginners but have also assumed the job of cotton traders and hence are confronted with the risk of loss in cotton business. 4) The old and obsolete cotton marketing system does not provide any safety to the ginners' interests against undue market fluctuations. The operational cost including cost of machinery, land and rate of interest, cost of power and other utility bills are so high that making money from this business is very difficult.
A study in this matter should be carried out suggesting measures to make the ginning business profit-oriented and conducive to improving quality of lint cotton, increasing cotton productivity and production.
Forecast for market trend appears quite difficult as cotton crop has to pass through a difficult situation of possible attack of diseases and pests. However, instable conditions in home and abroad make it difficult to assess the market trend.