Relevant field reports from Punjab and my tour to some of the cotton areas of middle and lower Sindh do confirm the possibility of a bumper cotton in 2009-10 season. Presently, the new crop position is seen spread from sowing to harvesting - time difference of some 100-129 days.
The recent rain-showers in many cotton areas of Punjab and Sindh have had very beneficial impact on cotton plants. In some fields, this analyst found lower germination percentage of seed. In Sanghar district, many cotton fields were found at flower stage while other were at lower stage.
On the same basis of yield obtained in 2008-09, production estimates for 2009-10 season work out to around 12.9 million bales and if take advantage of 9.0 percent increase in area under cotton, the production for 2009-10 season may be assessed at 14.0 + million running bales. One should not get aback, if new cotton crop may prove to be record high crop.
In short, very conducive weather conditions and very healthy crop development are the main features of present cotton crop. Harvesting in early sown cotton areas of lower Sindh and some parts of central Punjab provinces have already commenced and half a dozen of factories have already resumed ginning operation in new crop. While inspecting the quality of new crop cotton, wide variation in micronaire values was found, staple was found lower than 1-1/8 inches but gpt was found around 28. It is all because early picking which contains more immature cotton.
However, cotton quality would be improved next fortnight to M to M+ with Rd between 75 and 78, staple length 1-1/8 to above, Mic values 4.5 to over 5.0 and gpt 28 and above. Lint cotton of this specification would find easy foreign buyers in Bangladesh, India, Indonesia and Thailand etc, beside being attractive in price.
On the basis of Rs 3,300 per maund of 37.3245 Kg ex-gin, the f.o.b. Karachi works out to US Cents 54.0/lb and CNF-C1 Chittagong US Cents 57.0/lb for T-1503, 36, 28, G-5 while India growth of almost same quality cotton is being quoted on same terms and for same destination around 60.50. A difference of more Cents 3.5 id quite big and Pakistan has good prospects of getting foreign cotton business even from Indian buyers and there market reports of some new crop cotton business with Indian buyers around 57 level.
Presently, there are some 470,000 bales unsold in the market (250,000 bales with the ginners, 185,000 bales with Trading Corporation of Pakistan and about 35,000 with exporters). Reportedly, TCP accepted the bid of 1000 bales at the highest bid of Rs 3,440 per maund ex-TCP Karachi warehouse against their sale tender of 15,000 bales. In the meantime, lint prices in local market have decreased by Rs 150 to 200 per maund to the level of Rs 3,250 - 3,300 for old crop. New crop cotton is cheaper than old one by Rs 100 to 150 per maund.
The TCP should dispose of its cotton through tenders regularly but the cotton price trends indicates further fall in cotton prices and the TCP cotton operation would cost TCP rather the government heavy financial losses. It appears that the TCP and the private sector holding stocks of unsold cotton is caught in mid-stream and would pay heavy cost. Because of depreciation in Pak rupee at 80.80 a US dollar, decrease in prices and weak demand from local spinning mills, the exporters have good opportunity to commit good amount of cotton in exports but shipment period to be limited to one month only. The position of Pakistan's spinning / textile mills is weak on weak demand, liquidity crunch and high cost of production.
Recent sizable fall in cotton prices on New York / world cotton also affected our cotton and textile markets adversely. The government of Pakistan's decision to withdraw entire subsidy on electricity would increase the power bill by 17 percent from next month. This would be another blow to dilapidating textile industry.
The weakness in economic condition of Pakistan is evident from the recent budget arrangements which shows deficiency of Rs 722.5 billion (about 25 percent of the total budget) of which Rs 265 billions would come from external borrowings and balance Rs 457.5 billion from domestic borrowings. Economic growth rate in 2008-09 is 2.0 percent while projected growth rate in 2009-10 would be 3.3 percent of the GDP which is doubtful for many economists.
In 2008-09 fiscal deficit was 4.3 percent while in 2009-10 it would be increased to 4.9 percent of the GDP. Pakistan is reported to have incurred some more than US $35 billions on joining war against terror with US. In the budget heavy reliance appears on foreign borrowings from friends of Pakistan countries and international agencies.
Pakistan had already borrowed some US $7.6 as economy bail-out arrangement from International Monetary Fund (IMF) and the Federal Finance Advisor has already indicated that Pakistan would ask IMF for borrowing of another US $4.0 billion if the donor countries and agencies failed to meet their loan commitments. Textile exports, the engine of our economy is already showing negative growth and may be facing even difficult situation in 2009-10 year, which may further reduce its share in exports and in economic growth.
The door of borrowing from IMF is open which would prompt the government to take larger projects and expand its spending. Increasing cost of living, deteriorating law and order situation, increasing inefficiency, corruption in public and private sectors, extending war and terrorist activities in other settled areas of Pakistan, displacement of millions of people, their resettlement, poor economic performance, large defaults in non-performing loans, political instability in the country and insecurity on Eastern and Western borders are the main factors posing serious threats to our economy, safety and security of the country and welfare of the people of Pakistan. If the valuation of pledged or hypothecated stocks of commercial goods, real estate, machinery and other related items is conducted and checked thoroughly by independent reputed companies, there may be even larger shortfalls leading to major defaults resulting the credibility of banks lending system.
Last week, not only the prices of major world commodities have shown ample weakness after recent rally but cotton prices have also decreased. Retiring July contract settled at 51.56, down 2.31 and new crop December,09 contract finished at 56.38 losing 2.76 cents. The world economies including US, Germany, Japan, China and EU countries are still fighting the adverse impact of global financial and econ0omic recession.
The more than B-Pound 100 billions of worth, the giant automobile General Motors of USA is in trouble and the US government is planning to buy its share by pumping some 30 billions. The step would not save the jobs of its workers but some hundred thousand jobs may be lost. As a result of banks' policy of discouraging loaning to corporate or individual, economic activities have curtailed down considerably rendering people out of job.
The intention of major capitalistic economies to accept small scale nationalisation of industries / companies to restore the confidence of the people on such giant companies may face severe opposition. In short, the developed economies have not yet shown some remarkable recovery from the impact of global recession.
History has proved that wrong political decisions spark battles - wars. The countries which provide ground to such battles or wars destroy not only their infrastructures but also face economic disaster. The examples of World War I and II and other battles are before us in which Japan, India, Russia, Germany and Britain etc fought for years and their infrastructure was badly damaged and their economies sustained unbearable loss. The Russian Union fought in Afghanistan for about ten years and not only sustained heavy economic loss but faced disintegration and its seven states declared independence. As a result of wrong political decision, Pakistan lost its Eastern part starting indigenous war then converting it to war between Pakistan and India. Iran and Iraq fought for years. Now, US is fighting war in Iraq, Afghanistan and also in Pakistan against terror and may lit it in Iran. This has jolted economy of not only US but other EU countries.
The global recession came from over-expansion of economies of prominent developed countries like USA and EU countries and the war on terror squeezed world economy to the extent that other economies of the developing and under-developed countries. The countries providing battleground would lose dually while countries providing finance to warring countries would find big holes in their economies.
There are signs, which indicate towards financial default of some prominent economies. The economic and infrastructural losses of the countries providing battleground to the war would be beyond estimation. Some economies heavily gain in war of others while fighting economies lose heavily. The coming years appear dreadful for this region and if the situation is handled diligently, correctly and wisely, crisis could be averted to some extent failing which the result may be horrible.