Cotton doom and gloom

With large swathes of farmland flooded and crops spoiled amid heavy rains, straws in the wind suggest that agriculture output for the current fiscal year may fall way behind targets.
Unavailability of damaged crop estimates, as the government is expected to release official estimates next week, has been causing a stir at domestic cotton market.
With the market unaware of the quantum of damage, the price of spot cotton jumped by Rs200 to Rs6500 per maund on Thursday. The price hike has been also attributed to supply side constraints stemming from the shutting down of ginning factories in Punjab due to floods and heavy rainfall.
"As flood stricken areas are still submerged, it is difficult to estimate the actual quantity of crop that has been damaged", an official at Karachi Cotton Exchange told BR Research, adding that the market is expecting cotton crop loss to amount to around 1 million bales.
If this is the case, then actual crop output will fall to 12-13 million bales against a target of 14 million bales set for the current fiscal year. Since local consumption is hovering around 15-16 million bales, a cut down in output will create severe cotton shortage in the country and in turn will lift prices even more.
With economy already in the fiscal turmoil along with towering inflation, higher fibre prices will likely pull the rug from under the textile sector, which had previously expected prices to ease from this month onwards on account of the then upbeat output prospects.
On the international front, the supply of white gold is also anticipated to remain tight amid rising demand for textile products by China and elsewhere as global economic recovery is gradually taking off.
Though world cotton output is seen improving by 15 percent this year to 116 million bales, according to International Cotton Advisory Committee (ICAC), prices will likely remain high as global cotton stock-to-use ratio will remain tight at 39 percent, down from 5-year(2005-09) average of 49 percent.
For local textile makers, the tides have suddenly seemed to change, are they prepared for it, is the next question.