New crop cotton harvesting is gaining momentum day by day and so the ginning operations. Last week some cotton areas of Lower Sindh received normal rains, which largely benefited the plants. In Punjab also rain was reported from some cotton areas of central Punjab which also has been mentioned as quite beneficial for cotton crop.
The stray attack of virus in some cotton areas in Punjab is reported to have been washed away by these rains. The rain time is short and is followed by clear sky and very good sunshine, which gives is ideal for plant growth and land fertility.
Germination percentage of Bt cottonseed in Punjab had been reported very high and now fruiting conditions are reported to be very good. Overall condition of cotton plants which are at different development stages from budding to harvesting is reported average to very good. The timely and adequate rains are supplementing the shortage of irrigation water in some areas. Seeing the present condition of crop, production estimates are now converging on plus 15.0 million bales in 2010-11 season.
The major increase in production would come from expected higher yields in Punjab due to first time sowing of Bt cotton seeds on vast area. The increase in cotton out-put is expected about 2.5 million bales in 2010-11 season which would save Pakistan's foreign exchange of over US $700 millions. This time, Punjab has taken lead over Sindh in commencing harvesting of new crop cotton and ginning operations, as some 50 ginning factories are in operation in Sindh while only two in Sindh.
Last week, cotton prices witnessed historical fall of over Rs 500 per maund from over Rs 7500 to Rs 7,000 per maund which shocked ginning factories. On the last day of the last week, one Sindh ginning factory reported sold out some 400 bales around Rs 6750 a maund and Punjab factory at 6,800 per maund perhaps out of despair. This analyst has already reported in its previous reports that cotton market in 2010-11 season would experience turbulence and one deep drop of over Rs 500 has been last week. Actually, cotton prices had spiralled up to historically high rates; seed-cotton prices up to of Rs 3,500 a 40-Kgs and lint prices up to Rs 7,700 a maund of 37.324 Kg ex-gin which were out of parity both for spinners and cotton exporters. The abnormally high cotton rates in domestic market prompted the spinning mills to place cotton import orders. In 2010-11, domestic cotton consumption is estimated around 15.0 million bales and there are strong hopes that production may be somewhat more than consumption level, first time in last five years and second time in last 10 years.
In 2004-05, cotton production was at 14.26 million 375-lb bales against production estimates of 11.0 million bales and mill-use was one million bales lower at 13.44 million bales. The hard fact is that unless we increase our cotton production to at least to the level of mill-use, we cannot be competitive in wor market. In fact, the government should give subsidy to cotton growers for improving cotton production for staying competitive in world market. USA give some US $230 per acre as subsidy to cotton growers for staying Top-most cotton exporter in the world. US has been cotton exporters perhaps for the last one century. In 1996-97, US mills consumed 11.349 million 480-lb bales highest in its history and in the same produced 18.793 bales.
After 14 years in 2010-11, its production is estimated at 18.3 million bales almost same as in 1996-97 while mill-use has been drastically reduced to 3.4 million bales from 11.349 million bales. Just see how strongly, US is supporting its cotton growers. We should also provide necessary impetus to our cotton growers to production cotton at least 2.0 million more than our domestic consumption for staying competitive in exports. By increasing our cotton area from 3.3 to 3.75 million hectares and improving the yield to Kgs 800 per hectares (In 2004-05, we have already achieved highest yield level of Kgs 760 per hectare), we can produce over 17.5 million 170-Kg bales. We should improve our indigenously developed Bt seeds to give average yield of Kgs 800 per hectare against 760 already achieved some five years back. The targets are not even difficult if since efforts made in the right direction.
In the local market, prices of seed cotton which had touched historical peak of Rs 3,600 per 40 Kgs and lint prices which had touched peak in Pakistan's life at Rs 7,700 crashed when spinier mill-buyers withdrew from the market. Actually, the cotton market had entered in dangerous price zone and necessary correction had become overdue. Now, seed-cotton prices are quoted between Rs 3,200-3,300 per 40Kgs and lint prices between 6,800 -7000 per 37.324 Kgs ex-gin. Of course, local mills are starving of cotton yet the spinning mills have attach high priority to profit-making.
Even present level of lint prices is above export parity level so there no chances of any export business at this price level which works out around US Cents 103 /lb FOB Karachi port for quality equal to 31-35-G5-28. At the domestic price level of Rs 6,000, FOB export prices comes around US Cents89- 90/lb while at Rs 6,500, it comes around US Cents 96-97/lb. However, when seed-cotton arrivals will increase tremendously in September / October months, cotton prices may come down to a reasonable level of Rs 5500-5700 per maund.
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2010-11 WORLD COTTON SUPPLY & OFFTAKE
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(July 2010 up-date) (Figures in Million 480-lb bales)
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Countries Beg. Production Imports Mill-use Exports Ending
Stocks stocks
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World 51.0 116.0 37.1 119.7 37.0 49.9
US 2.9 18.3 0.0 3.4 14.3 3.5
China 20.5 33.0 11.7 49.0 0.0 18.6
Pakistan 2.9 10.2 2.3 11.6 0.4 3.4
India 8.0 25.0 0.6 20.4 5.9 7.4
Central Asia 2.0 7.0 0.0 1.7 5.6 1.7
Australia 0.7 2.2 0.0 0.0 1.9 1.1
Brazil 4.6 7.0 0.3 4.6 2.2 5.3
Indonesia 0.4 0.0 2.2 2.1 0.0 0.4
Mexico 0.6 0.6 1.5 1.9 0.2 0.6
Turkey 1.8 2.1 3.3 5.7 0.2 1.5
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SOURCE: USDA-WAOB-JULY WASDE REPORT.
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