Momentum of cotton arrivals is decreasing from last fortnight arrivals. The Pakistan Cotton Ginners' Association (PCGA) has just released their periodical cotton arrival and off-take figures. By the 16th December-11, seed-cotton equivalent of 11.036 million local weight bales reached ginneries against 9.377 million bales arrived same period last year - increase is 1.659 million bales.
However, total unsold lint cotton stocks remain almost at the same level of over 2.0 million bales while it was 1.107 million bales same time last year. It means that local spinning mills and exporters lifted cotton bales equivalent to fresh arrivals in the first fortnight of this month, which was around 1.386 million bales. The recent arrival figures provide strength to the idea of cotton production of 13.5 million bales this season. In view of larger arrivals, cotton growers may drop the idea of with-holding of seed-cotton supplies to ginneries in hope of better rate in future as the cotton prices are continuously decreasing in local and foreign markets. As such, the growers may decide to deliver maximum seed-cotton to ginneries. Unsold stocks are over 18 percent of total arrivals. On Saturday (17th December-11), there were strong rumours about approval of government plan for entering into local cotton market for procurement of one million cotton bales from local market to ensure better return to cotton growers.
The Minimum Support Price may be fixed next week. Of course, cotton prices are very low not only in Pakistan but globally. Last year, the growers got the historically high prices up to Rs 6,000 per 40 Kgs for their seed-cotton and the spinners had to pay highest up to Rs 14,000 for a maund of lint cotton. Resultantly, the growers and ginners amassed huge wealth but the spinners not only in Pakistan but in most of the countries of the world spinners suffered heavy losses and have not as yet recovered from the loss shock and today's low prices may be largely the result of artificial high prices of last year.
By the 15th December-11, about 82 percent of the crop has already reached ginning factories and by the end of this month, total arrivals would constitute 90 percent of total arrivals.
Actually, cotton growers have to recover partly the cost of their seed-cotton from ginning factories and generally rates have already been fixed. The ginners who are holding cotton stocks are in hot soup as the price are continuously decreasing. If the government materialises its proposed plan to procure about one million bales of cotton from ginners, most of the ginners would be benefited but cotton growers sparingly. The quality problem especially in Sindh where lint cotton rates range between Rs 3,300 and 4,700 per maund of 37.324 Kg ex-gin on quality differentials, would increase chances of corruption. On government intervention in cotton market, lint prices would improve artificially and the spinning mills and exporters would suffer heavily.
The export position of textile and clothing is already weak nationally and internationally and this governmental intervention would aggravate the bad situation. Reportedly, volume-wise exports performance of textile and clothing in recent months has been poor as in October month exports of yarn was found 26 percent lower, Cloth 32 percent lower, Knitwear 26 percent lower, Bedwear 28 percent lower, Towel 12 percent lower and Ready Made Garments 14 percent lower than exports in same October month last year. Total exports in November-11 month was found down by 18 percent against October-11 month. The decline in countr's export has increased the trade deficit to over US $9 billion in first five months of FY 2011-2012. For the current FY, our export target is US $26 billions and import target US $42 billions. Concerned Government officials and trade circles do not hope to achieve the export target of US $26 billions because of current economic crisis in Europe and US and unfavourable trade and industry conditions in the country particularly the power crisis and instability in political atmosphere of the country. Exports of RMG and clothing is feared to miss export target mostly because of severe energy crisis including load-shedding of gas more severely in Punjab.
On New York Cotton Market, future March-12 prices have drastically come down to 16-month low around 85 level from historically high of 227 in early March-11 and in domestic market to season's lowest of Rs 3,500 per maund (low quality of rain-damaged cotton of Sindh) from Rs 14,000 in March-11. Almost all predictions about cotton market rates proved incorrect in 2010-11 season and also in current season. As a matter of fact, the debt-crisis in European countries and increasing trade deficit in US are main reasons for heavy fall in cotton prices and other commodities in world market. The slow off-take of textile goods and garments in EU-27 and US in these peak-selling months coupled with serious sovereign debt problems especially in six EU-27 countries including Italy and Spain may be extending down trend in cotton prices to next year. The fear of down grading of French rating is also a matter of concern in world financial markets.
China and Japan which have larger exports over imports, are facing problem of slow exports due to increasing value of their currencies against US dollar while India, Pakistan and Bangladesh whose imports are higher than their exports by 50 to 100 percent, are facing loss in imports as their local currencies are depreciating against US dollar. The financial problem has assumed grotesque proportion almost globally more prominently in US and EU-27 countries of the West and East Asian and South Asian countries of the East.
The cotton market trend in coming months looks bearish on weak fundamentals locally and internationally. Below is Table 1, which gives some interesting general information about standards of Human Development Index (HDI). HDI index is calculated on the basis of health, education and general living conditions.
Comparative Data on Human Development Index of Some prominent countries of Asian Region
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Comparative Data on Human Development Index of Some prominent
countries of Asian Region
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HDI Rank Country GDP per capita Literacy Life Length Scientist-Engrs DP% Expenditure
out of 187 USD %age years per Mln. persons Education Health
countries
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2000 2011 2000 2011 2000 2011 2011 2000 2009 2009
9 12 Japan 26,755 32,295 ---- 83.4 4,960 8.3 8.3
23 13 H/Kong 25,153 44,095 93.5 82.8 93 -- --
25 26 Singapore 23,356 52,569 92.5 94.7 81.1 2,182 3.9 3.9
27 15 KoreaRep 17,380 28,230 97.8 ----- 80.6 2,139 6.5 6.5
59 61 Malaysia 9,068 13,155 87.5 92.5 74.2 154 4.8 4.8
70 103 Thailand 6,402 7,694 95.5 93.5 74.1 102 4.3 4.3
77 112 Philippine 3,971 3,478 95.3 95.4 68.7 156 3.8 3.8
89 97 Sri lanka 3,530 4,943 91.6 90.6 74.9 188 4.0 4.0
96 101 China 3,976 7,476 54.1 94.0 73.5 459 4.6 4.6
110 124 Indonesia 3,043 3,716 86.9 92.2 69.4 ---- 2.4 2.4
124 134 India 2,358 3,468 57.2 62.8 65.4 158 4.2 4.2
138 145 Pakistan 1,928 2,550 43.2 55.5 65.4 78 2.6 2.6
145 146 Bangladesh 1,602 1,529 41.3 55.9 68.9 51 3.4 3.4
World 7,446 10,082 ---- 80.9 69.8 --- 10.2 6.9
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