Following New York cotton futures (ICE) prices which had fallen from a crest of US Cents 157.23 per pound on November 10, 2010 to just 110.85 cents surrendering 46.38 cents per pound some days ago for the December 2010 contract, local lint prices also conceded nearly Rs 3000 per maund (37.32 Kgs) during the corresponding period, only to rise again in tandem.
The stark fact is that physical cottons are short globally with the reported reduction of Chinese output to just 29.25 million bales accompanied also by marginal losses in Pakistani's cotton production for the current season (2010-2011) to level only about 10.5 million to 11.5 million domestic size bales.
Hedge funds intervened to support the cotton futures prices. However, the fundamentals of cotton availability remain on the bullish side. Therefore, in the net analysis Pakistan needs to import three to four million bales (170 Kgs) during the current season (2010-2011), from which one to 1.5 million bales may already have been booked and/or received, leaving the necessity of importing about another 1.5 million to two million bales (170 kgs) during the remainder of the season viz. till the end of July, 2010, with estimates of domestic mills consumption of 14.5 and 15 million bales, total deficit of cotton for the season (August 2010-July 2011) is therefore estimated at three to four million bales.
Traders said on Thursday that due to proximity of the two countries, much of the remainder of cotton imports into Pakistan could be from India, but nearby shipments are not available from that origin. If fresh Indian cotton exports resume in January, 2011 it might become increasingly late because some commercial quantities, though not enough, of new crop (2011-2012) in Pakistan may start arriving in February/March 2011 as it did during the prevailing season (2010-2011).
In the meantime, local seedcotton and lint prices shot up on Thursday. Seedcotton (Kapas/Phutti) prices in both Sindh and Punjab reportedly ranged between Rs 4,100 to Rs 4,350 per 40 kilogrammes. Lint prices in both Sindh and Punjab also moved up to range between Rs 9,000 to Rs 9,500 per maund (37.32 Kgs). Traders said that seedcotton (Kapas/Phutti) equivalent to nearly 8.5 million domestic size bales may have entered the ginning factories in the country by the first of December, 2010.
In ready sales, 400 bales of cotton from Mirpurkhas Sindh reportedly sold at Rs 9,200 per maund (37.32 Kgs), 1000 bales from Nawabshah sold at Rs 9,200 to Rs 9,300 per maund, while 1,000 bales from Khairpur sold between Rs 9,300 to Rs 9,500 per maund, according to the quality.
In the Punjab, 400 bales from Sadiqabad, 600 bales each from Rahiyar Khan and Rajanpur, and 4,500 bales from Noorpur Nauranga near Ahmadpur East, all sold at Rs 9,500 per maund in a tightening market. There is a general perception that output of cotton in Pakistan has stalled since the past many years and that nothing positive has been done in this regard.
Such a situation has brought a crisis into the cotton economy of Pakistan including an annual estimated loss of US Dollar four to five billions arising out of short output of not only cotton, but also its by products such as cotton seed and cotton seed oil and cakes which has stunted the positive growth and development of desired proportions in the production of cotton, modernisation of ginning industry, regulation and supervision of the cottonseed industry, and last not least the entire chain of the textile industry from the spinning and weaving to the dyeing, printing and garment producing subsectors of the industry.
These views were expressed at the seminar arranged by Pakistan Cotton Forum (PCF), a federation of cotton related organisations such as the All Pakistan Textile Mills Association (APTMA), The Karachi Cotton Association (KCA), the Farmers Associates Pakistan (FAP) and the Pakistan Cotton Ginners Association (PCGA) on the 27th of November, 2010 in Lahore at the premises of the APTMA Punjab Zonal office.
Those who attended the Seminar included Seth Muhammad Akbar, Chairman of PCF, Gohar Ejaz, Chairman APTMA and Secretary Agriculture of Punjab, Dr Arif Nadeem and the representative of Agriculture Research and Advocacy Centre (ACAC), Muhammad Ahsan Rana, besides various representatives of the growers, ginners, millowners and the KCA.
The agenda before the discussants was to deliberate upon the introduction of insect resistance and herbicide tolerant technologies, proposed research collaboration between Monsanto and the various Pakistan Research Institutes, the capacity building and improving the performance and capabilities of the local seed companies and the Technology fee payment by the Punjab government for any unauthorised spread of Monsanto propriety technologies.
All the issues were discussed threadbare after an initial presentation by Dr Ahsan Rana of the dismal situation of the cotton crop in Pakistan, the unsuccessful attempts by various government and private sector institutes and organisations to put Pakistan on the road to install and propagate BT (Bacillus Thuringiensis) technology in the country. The seminar audience was told that over the past several years the federal government was handling the subject and had considered using domestically developed BT varieties of cotton and was simultaneously in touch with Monsanto Company of USA, However, nothing positive came out from these deliberations.
Now the subject of agriculture has been given to the provinces so that Chief Minister Shahbaz Sharif of Punjab is actively involved to speed up the process and has held detailed discussions with the domestic cotton trade and industry including all the stakeholders on the one hand, and the foreign companies, on the other. Though there are a couple of other foreign companies dealing with the development of BT seeds technology besides the local know how, it appears that Monsanto is the leader in the field and its technology to provide BT technology, its use and administration to ensure purity of seeds leading to high germination seems appropriate for our needs. Stress was also laid on developing seed companies on modern lines to ensure high germination of seeds, avoid mixing of seeds and providing agricultural know-how to the growers with requisite agriculture extension services. It was noted in the seminar that both China and India are still relying heavily on Monsanto for their BT cotton programmes.
It thus appears that Monsanto is likely to be inducted into the process of introducing BT Cotton technology in Pakistan without further loss of time as already precious time has been lost in this regard. The Punjab government is reported to have put emphasis on the introduction of BT cotton seeds at an early date and is expected to finalise its arrangement with Monsanto soon. The first BT seeds of Monsanto technology will be imported from India through Monsanto and are expected to be sown on 50,000 acres by 2012. Thereafter, the quantity of areas sown would grow from year to year.
By the year 2016, Monsanto would develop Pakistani seeds with a single gene planted into it and thereafter, double genes will be introduced into the cotton seed not only to protect cotton from bollworms, but also cotton curl leaf virus to avoid use of expensive and widespread use of pesticides. Thus, not only the cost of planting would go down, but plants would yield higher outputs as a consequence. Later on, such BT cotton seeds would be developed as would make them drought resistant.
Thus it is now quite likely that soon Punjab Chief Minister will put the process of introducing BT seeds on a fast track so that Pakistan is likely to see its cotton output grow from eleven million domestic size bales to about 20 million bales over the next few years.
On the global economic and financial front where equity markets are aflush with oodles of American Dollars, share prices continued to make fresh gains. Laudable as it might seem, some economists, however, see a clear divide between the actual economy where little new investment or industrial activity is apparent and the increasing values of shares on the various bourses around the world. This disconnect is not only worrying, it may lead to fake hopes that the global economy is turning the corner.
In addition to the persisting economic woes in Ireland, Spain, Portugal, Greece, Italy and Great Britain, the Eurozone economic and financial structure decidedly remains in the doldrums. The alternating ups and downs of the US Dollar, the Euro or the yen simply signifies the extreme volatility of the leading currencies of the world. Besides, the specter of currency wars continues to haunt the economic managers around the world. Now even Australia has reported a downturn in the growth of its economy following its high borrowing rates. Dubai also continues to be worried with huge debt problems and remains stonewalled with little hope of restitution of its economic condition.
Strong centrifugal forces appear to be throwing the global economic elements away from a coherent and co-ordinated structure raising fears of more economic and financial downturn before any restitution of normalcy. Thus, the gaping black holes are rendering the global economic condition more vulnerable than ever before.
Eurozone countries continue to face a twelve year high rate of unemployment as Portugal and Spain go to the market to seek financial help needing a financial bailout. Perforce, the United States is now moving toward adopting austerity measures much like the Eurozone countries hitherto. The United States government had been spending exorbitantly and thus delving in monumental debts.
It seems strange that the United States is continuing to provide economic stimulii on the one hand and now is trying to make drastic spending cuts and reducing conspicuous consumption on the other. In brief, despite the external manifestation of rise in equity markets in the USA, Far East and elsewhere, the real economic condition is essentially deteriorating around the world.