Perhaps, last week was the peak of monsoon rains across the cotton belts of Pakistan especially Lower Sindh where cotton fields were flooded with rain water. Breaches in rivers and river branches have been reported from different cotton areas of Sindh which have inundated agriculture crops including that of cotton.
On the 7th and 8th of this month, Lower Sindh districts of Sanghar, Hyderabad, Nawabshah and Mirpurkhas received unprecedented heavy rains almost continuously for some 25-hours and severely damaged crops.
Sanghar being the largest cotton producing district (about 1.5-1.8 million bales) in Pakistan, was severely hit by these rains. In only 24 hours, some of the places received rains up to 360 millimeters. Even on last Saturday, some of the cotton areas of Lower Sindh received moderate to heavy rains. The Met. Office is reported to have forecast for another system following these rains. Rains from Punjab cotton areas have also been reported last week. The recent unprecedented rains and river breaches in Sindh specially in Lower Sindh are also producing devastating floods which is likely to damage cotton crop severely.
The process of monsoon rains and floods is going on and may be extended to another fortnight or so. As such the reliable estimates for cotton damage may not be possible till middle of next month. One report mentioned that the standing crops on 1.5 million acres have been totally damaged of which cotton may be on 1.0 million acres, producing some 2.0 million cotton bales. The heavy rains and floods have badly affected all cotton areas of Sindh except Sukkur and Ghotki districts and cotton production estimates in rain affected areas was more than 4.0 million bales. If we consider cotton damage to 50 percent in these area then it also comes to 2.0 million bales. As such, provisional damage to cotton crop in Sindh may be taken as of 2.0 million local weight bales and 1.0 million bales loss in Punjab totalling 3.0 million bales in Pakistan out of 15.5 million bales production estimates before rains, putting fresh production estimates around 12.5 million bales.
Lint prices in the local market appreciated from pre-Eid vacation level (27th -29th August) from Rs 5,600 (Sindh style) to Rs 7,300 per maund of 37.324 Kg ex-gin on Saturday, the 10th September, 2011. The rise in lint prices is due to tight supply of cotton as recent rains have forced ginning factories in Sindh to suspend their operations. There may be further increase in cotton prices even up to Rs 8,000 level as some of the spinning mills running hand-to-mouth do not want to close down their operations. The quality of cotton has been damaged by rains. Pakistani exporters are understood to have sold some more than 120,000 bales of new crop to different countries like China, Indonesia, Bangladesh, Thailand and Vietnam of this about 50 percent has been registered by the end of August month with the concerned Government authorities.
The recent hike in cotton prices has confused those exporters who have not covered their export sales from local market. If the rains persist for a longer time, the local cotton prices may register further increase in view of tight cotton supply. Yarn prices have also firmed up in view of its tight supply and the spinners are forced to buy cotton at higher rates but perhaps not more than this level of prices as cotton imports may become quite viable at this price level.
Indian Commerce Ministry on last Friday indicated their intention of allowing export of 2011-12 crop raw cotton on Open General License (OGL) with no quantitative restrictions from coming October month. India is the second largest exporter of raw cotton in the world after US. In 2011-12 season, it is expected to produce 27.0 million 480-lb bales (=34.5 million 375-lb bales) consuming domestically 20.5 million 480-lb bales (26.25 million 375-lb bales) and exporting 5.0 million 480-lb bales (6.5 million 375-lb bales). US is expected to produce 16.6 million 480-lb bales, mills-use at 3.8 million bales exports at 12.3 million bales. China is expected to produce 33.0 million 480-lb bales, consume locally 46.0 million bales and import 15.0 million bales.
Mill-use estimates in 2011-12 season in Pakistan may be taken as 13.0 million bales in view of adverse conditions prevailing in business and industries sectors. One latest encouraging and positive report came from European Union where India is reported to have agreed to drop its objections at the World Trade Organisation (WTO) against the European Union's decision to allow duty-free access to 75 Pakistani textile and leather products.
However, a formal announcement may be forthcoming by the end of this month. European Union-27 have decided to allow custom duty exemption to Pakistan on its import of value-added textile and leather products into the EU for the next three years. Presently, the export earnings from these 75 products of textile and leather is around Euro 900 millions which may be increased by Euro 140 millions to Euro 1,040 millions annually after application of custom-duty exemptions. It is worth mentioning that this facility or concession has been exclusively designed for Pakistan and is not available to our competing countries like Turkey, India and Bangladesh.
In FY 2010-11, Pakistan's total exports of textile goods stood at US$ 14.0 billions out of total national exports of US$ 25.0 billions. In 2010-11, the prices of commodities were very high which helped Pakistan achieving the export target of 25 billions. One garment exporter indicated that in FY 2011-12, our textile exports may be restricted to US$ 11.0 billions as price factor would work adversely and so the export quantum factor in view of deteriorating business and industries conditions.
In 2011-12, the Government of Pakistan has fixed export target of US$ 26.0 billions. The Prime Minister of Pakistan is understood to have approved the recommendations of Trade Policy 2011-12 last Saturday, the 10th September, 2011.
On New York cotton market prices have registered an increase of US Cents 7.85 a pound during the last week in ICE December, 11 contract. This increase is understood to be the result of reported cotton damage in Pakistan due to rains and floods and in US due to inclement weather conditions. NY December 11, contract closed at 113.63 on 9th September against 105.78 on 2nd September, 11. During the last week, good local US mill demand of cotton was on higher side. If this demand trend continues further or not, will have to be seen.
India is also reportedly receiving heavy rains in the northern and central zones delaying picking operation in the north by about three weeks. Heavy rains in the western zones are also forecast in next two weeks. In China, cotton prices have improved in sympathy with world cotton prices and the growers find it more profitable to sell their proceed to private mills than to Chinese Reserve which offer lower price.
More rains are forecast also for some cotton areas of China. The crop situation is to be watched minutely in next 3-4 weeks. Chinese textile exports are facing resistance in US and European Union markets due to some financial difficulties and high price factor. The adverse affect of abnormally high prices of cotton in 2010-11 season, would be seen this season when volume of exports may shrink to some extent.
We have to monitor the behaviour of monsoons and weather minutely and cautiously till middle of next month to come to a reliable cotton crop estimate which would also help cotton market in determining the price trend in coming months.
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5-Year Cotton statistics of prominent cotton countries
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World Cotton Exports
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(Millions of 2007/08 2008/09 2009/10 2010/11 2011/12 2011/12
480 lb. bales) July August
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United States 13.6 13.3 12.0 14.4 12.0 12.3
India 7.5 2.4 6.6 5.0 5.0 5.0
Australia 1.2 1.2 2.1 2.6 4.4 4.3
Brazil 2.2 2.7 2.0 2.0 4.4 3.7
Uzbekistan 4.2 3.0 3.8 2.7 3.2 3.0
African Franc Zone* 1.7 1.5 1.4 1.3 1.6 1.3
EU-27 1.6 1.0 1.1 1.0 1.3 1.4
Greece 1.3 0.8 0.9 0.8 1.1 1.1
Turkmenistan 0.8 0.6 1.1 1.0 1.0 1.0
Burkina 0.8 0.8 0.8 0.7 0.8 0.7
Mali 0.5 0.3 0.4 0.5 0.5 0.6
Tajikistan 0.5 0.4 0.5 0.4 0.4 0.4
Zimbabwe 0.4 0.3 0.4 0.4 0.4 0.4
Benin 0.5 0.4 0.4 0.3 0.4 0.3
Egypt 0.6 0.1 0.4 0.4 0.4 0.4
Rest of World 4.5 3.6 4.2 4.1 4.2 4.4
World Total 39.0 30.1 35.6 35.3 38.3 37.6
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Source: USDA
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Note: *African Franc Zone includes Benin, Burkina Faso, Cameroon,
Chad, Cote d'Ivoire, and Mali.
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World Cotton Production
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(Millions of 2007/08 2008/09 2009/10 2010/11 2011/12 2011/12
480 lb. bales) July August
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China 37.0 36.7 32.0 30.5 33.0 33.0
India 24.0 22.6 23.0 25.4 27.0 27.0
United States 19.2 12.8 12.2 18.1 16.0 16.6
Pakistan 8.6 8.7 9.6 8.8 10.3 10.3
Brazil 7.4 5.5 5.5 8.5 9.3 8.7
Australia 0.6 1.5 1.8 4.2 4.5 4.5
Uzbekistan 5.4 4.6 3.9 4.1 4.5 4.3
Turkey 3.1 1.9 1.8 2.1 2.9 2.9
African Franc Zone 2.3 2.2 2.1 2.2 1.8 1.5
EU-27 1.7 1.2 1.1 1.1 1.7 1.7
Turkmenistan 1.3 1.4 1.3 1.6 1.6 1.6
Greece 1.6 1.2 0.9 0.9 1.4 1.4
Argentina 0.7 0.6 1.0 1.3 1.4 1.4
Mexico 0.6 0.6 0.4 0.7 1.1 1.1
Burkina 0.7 0.9 0.7 0.7 0.9 0.7
Rest of World 7.8 6.8 5.9 6.1 7.2 7.6
World Total 119.7 107.1 101.4 114.6 123.2 122.7
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World Cotton Consumption
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(Millions of 2007/08 2008/09 2009/10 2010/11 2011/12 2011/12
480 lb. bales) July August
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China 51.0 44.0 50.0 46.0 46.5 46.0
India 18.6 17.8 19.5 20.0 21.0 20.5
Pakistan 12.0 11.3 10.8 10.3 10.5 10.3
Turkey 6.2 5.1 5.8 5.8 6.0 5.9
Brazil 4.6 4.2 4.4 4.4 4.6 4.6
Bangladesh 3.5 3.8 3.8 3.6 4.0 3.7
United States 4.6 3.6 3.5 3.8 3.8 3.8
Indonesia 2.2 2.0 2.1 1.8 1.9 1.9
Mexico 2.0 1.9 1.9 1.7 1.9 1.8
Vietnam 1.2 1.3 1.6 1.7 1.8 1.8
Thailand 2.0 1.6 1.8 1.7 1.7 1.7
Uzbekistan 1.0 1.0 1.1 1.3 1.3 1.3
South Korea 1.0 1.0 1.0 1.1 1.1 1.1
Taiwan 1.0 0.8 1.0 0.9 0.9 0.9
Argentina 0.8 0.8 0.8 0.8 0.9 0.9
Rest of World 11.6 10.1 9.5 9.2 9.1 9.2
World Total 123.3 110.1 118.4 113.9 116.7 115.2
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Source: USDA
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World Cotton Imports
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(Millions of 2007/08 2008/09 2009/10 2010/11 2011/12 2011/12
480 lb. bales) July August
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China 11.5 7.0 10.9 12.0 15.3 15.0
Bangladesh 3.5 3.8 3.8 3.5 4.0 3.7
Turkey 3.3 2.9 4.4 3.4 3.4 3.4
Indonesia 2.3 2.0 2.2 1.8 2.0 2.0
Vietnam 1.2 1.3 1.7 1.7 1.8 1.8
Thailand 1.9 1.6 1.8 1.8 1.7 1.7
Mexico 1.5 1.3 1.4 1.2 1.2 1.1
Pakistan 3.9 1.9 1.6 1.5 1.2 1.1
South Korea 1.0 1.0 1.0 1.1 1.1 1.1
Taiwan 1.0 0.8 1.0 0.8 0.9 0.9
Russia 1.1 0.9 0.8 0.5 0.6 0.6
Egypt 0.4 0.4 0.6 0.6 0.5 0.5
India 0.6 0.8 0.5 0.5 0.5 0.5
Japan 0.6 0.4 0.3 0.4 0.4 0.4
Colombia 0.2 0.3 0.2 0.3 0.3 0.3
Rest of World 5.0 3.8 4.0 4.4 3.5 3.5
World Total 38.9 30.2 36.2 35.2 38.3 37.6
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Source: USDA
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