Reports from upcountry stations indicate slow deliveries of seed-cotton to ginneries which may either be due to drop in cotton prices or due to reports of lower production, but its real cause is yet to be known.
One ginner from Sanghar district (Sindh) reported that they contracted for purchase of 8 truck load of seed-cotton from a cotton supplier (not a grower) who lined up all 8 trucks within 8 hours. He said whenever they make contract for supply of seed-cotton it is immediately supplied. Cotton arrival figures through 30th November,10. expected to be available by 3rd. December would speak the fact.
Some cotton professionals who extensively tour cotton areas speak of a crop around 11.0 million statistical bales. Now, when cotton prices in Pakistan are strictly following the foot-steps of New York Cotton Futures, increase or decrease of a few hundred thousand bales in our cotton production estimates would not have any significant effect on domestic cotton prices, said one cotton man. Whether you are a cotton growing country or a cotton consuming country, the level of cotton prices would be the same.
Cotton is an international commodity and its exports and imports are at zero-rated in almost world over so its prices are determined by international factors. Domestic factors do affect cotton prices but sparingly. Cotton prices in India which is producing a record high crop of 35.7 million 170-Kg bales with about 8.0 million bales as exportable surplus and in Bangladesh which feeds its textile mills all through on imported cotton, are almost at the same level. This is the beauty of a free world trade market.
Pakistan authorities do not appear serious in adoption of genetically modified technology for increasing its cotton productivity and production mainly on possible pressure of national and international companies involved in production, imports and distribution of agriculture medicines (pesticides and insecticides etc) and make roaring business and earn fabulous profits. India - our neighbouring country, adopted this new technology and increased its cotton productivity from 278 Kgs / hectare to about 600 Kgs / hectare and production from 14.0 million bales to 35.7 million bale in 2010-11 season in last 10 years period while Pakistan's cotton production and productivity has failed to make any remarkable headway.
This season, seeds of some eight new varieties purported to be Bt and hybrid seeds were distributed in Punjab province for commercial cultivation but the results appear to be very poor. Pakistan is more than one decade behind India in adoption of high yielding cotton technologies and in near future there appear scant hopes of any improvement in cotton sector. Pakistan's domestic textile industries from spinning to garments are facing very hard days; financial cost specially interest rates is very high, there is acute shortage of power and gas, high cost of raw material, deteriorating law and order situation, inconsistency in policies, instability in politics, weakening of Pak currency parity against major world currencies including US dollar, increasing debts on the country and deteriorating monetary, fiscal and economic conditions all paint a bleak future picture of our textile industry which is considered as backbone of our economy. Pakistan is losing its textile export market to Bangladesh, Sri Lanka, Vietnam and Indonesia who neither have their own cotton crops nor have sound textile base against Pakistan.
Import and use of pesticides in Pakistan increased fast, genuinely or in genuinely. Pakistan imported 20 thousand tons of pesticides in 1991, 40 thousand tons in 1995 and 130 thousand tons in 2004 and in 2009 it may be around 200 thousand tons costing billions of dollar. About 75 percent of pesticide is used on cotton. This season, our cotton crop is estimated between 10.5 and 11.0 million local weight bales, domestic consumption between 130.5 and 14.0 million bales, exports around 0.8 million bales and cotton imports around 4.0 million 170-Kg bales costing more than US $1500 millions.
In the domestic market cotton prices are prevailing around Rs 8,500 per maund of 37.324 Kg ex-gin after touching highest of the history at Rs 11,000 per maund. Similarly New York cotton futures touched US Cents 157.23 on 10th November and closed on last Saturday around 111 - the fall in cotton prices is 26 percent from November 10. The main reason for such a drastic fall in cotton prices is Chinese measures to counter its rising inflation by tightening credit policies. US weekly export sales dropped to 266,010 bales on November 18, down 46 percent from previous week sales. China being largest cotton producing, consumer and importer of cotton has enough power to influence cotton prices globally.
This season, India is expected to produce a record high cotton crop of 35.7 million 170-Kg bales against 29.5 produced last season while this season its total domestic consumption is estimated around 26.6 million bales. On the 4th September, 10, India decided to limit its raw cotton exports to 5.5 million bales and by the 11th October, 10, registrations of export contracts was completed; of these Luis Dreyfus and Cargill are among the companies that won export permits. Last date of shipments against these export sales has been fixed on 15th December, 10 by which cotton shipments would be only 50 to 55 percvent of export sales registrations and after this date, India would review export position.
There are enough chances of increasing raw cotton export limits in view of even larger production estimates around 35.7 million bales - more than 9 million bales larger than its season's consumption. The high rates of cotton would also encourage India to increase its cotton exports.
About more than 85 percent US crop has been committed at growers and merchants level which means that the selling pressure is already off. The weak economic conditions in Euro zone are adversely affecting commodity markets including cotton. While studying the factors affecting cotton prices with special reference to high export sales of US cotton, weak Euro zone economy, conflict between South and North Korea, possibility of increasing export limits of Indian cotton and China's anti-inflationary and tightening of credit facilities, it is concluded that for a couple of fortnights, cotton market may remain under selling pressure and thereafter make its place between 110-120 cents level.