Cotton sowing operations of new crop have almost been completed by the end of June. In Punjab, cotton sowing is expected to have surpassed the official target of 2.558 million hectares against last season's sowing of 2.610 million hectares because of better supply position of irrigation water.
In Sindh province, water supply position was not found satisfactory and very hot weather persisted which led to reduced sowing specially in lower Sindh.
As such, the sowing target of 0.64 million hectares in Sindh is likely to be missed by about 10 to 12 percent.
When this Analyst surveyed cotton areas in Tharparkar district of lower Sindh in the second week of June 6, cotton plants were found to be of lower height. Sanghar which is the largest cotton producing district in Sindh is also likely to miss the sowing target by at least 15 percent, private sources indicate.
In short, lower Sindh crop is late by four to six weeks and sowing area lower by about 15 percent.
During my visit to India in early June, it was revealed that cotton sowing is late by three to four weeks and the sowing target was not achieved in Rajasthan province bordering Sindh - Pakistan while cotton sowing was satisfactorily completed in Indian states of Punjab and Haryana.
Recent rains in lower Sindh have been found very beneficial to cotton development. Monsoons have entered into Pakistan and are likely to cover entire cotton area by the 10th of this month. These timely rains would greatly benefit cotton plant developments. Weather forecasts are for lesser to normal rains during cotton season and this would help cotton production.
In the new season, cotton crop in catchment's areas is expected to remain intact in view of the expectation of lesser rainfalls while in 2005-2006 season it was lost to floods. My observation is that timely rains and conducive weather would play a great positive role in producing a bumper cotton crop of 14 to 15 million bales in 2006-2007 season.
Depleting unsold cotton stocks with the ginners and TCP are worrying the spinning mills. Total unsold stocks are now estimated between 250,000 and 300,000 local bales and the spinning mills have to wait till the end of August for regular availability of new cotton crop. There are reports of start of cotton picking in some very early sown areas of Badin district in lower Sindh and Sahiwal district of Central Punjab.
Because of delayed sowing in lower Sindh and early to timely sowing in Central Punjab, ginning operation in Punjab may be started before Sindh and spinning mills of Karachi/Hyderabad would have to run to Punjab for cotton procurement in the early cotton season. Local spinners have already sensed the in-coming cotton situation and have booked foreign cotton recently when cotton prices on New York and world markets dropped. By the end of this retiring cotton season, Pakistan's total import of cotton is estimated around 1.8 million bales. As such, the local prices may not break the level of Rs 3,000, which was considered earlier. Presently, lint cotton prices are running between Rs 2,400 and Rs 2,700 per maund ex-gin.
The TCP is also getting better price for its cotton sold through tenders. The Corporation has floated fresh tender for sale of 42,000 bales. TCP is now perhaps left with little quantity of unsold cotton which may be offered for sale in the next last one or two tenders. The running situation of high temperature and interruption in power supply to industry would have negative impact on cotton prices.
Cotton crop in US is reported to have been damaged due to inclement weather especially in Texas State.
SOME INFORMATION ABOUT PRODUCTION AND CONSUMPTION OF COTTON ARE BEING GIVEN BELOW: (All figures are in million 480-lb bales).
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Country Production Consumption
2005-2006 2006-2007 2005-2006 2006-2007
China 24.22 28.00 47.30 51.88
USA 23.60 20.28 6.00 5.50
India 19.00 19.50 16.78 17.48
Pakistan 9.45 10.00 11.86 12.16
World 113.47 113.05 117.50 122.70
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From the above figures, it is clear that cotton production prospects appear better in China (+15.60%), India (+2.63%) and Pakistan (+5.82%) while in USA production estimates in new season are reported about 14 percent lower than the last year's production.
If we look at the system of estimation of cotton crops, we find USA starts its production estimates from lower side and gradually increases it as different risk-to-crop stages are over and lastly finish at higher level. In such situation, cotton prices remain high during early period and the growers get its benefit while later it goes high when cotton is transferred to merchants or spinners.
In Pakistan, we generally start our production estimates from high level and as time passes these estimates are lowered and finally finish at low level. In this system, cotton prices remain subdued on higher production estimates and when cotton is transferred to ginners and partially to spinners, cotton prices firm up gradually on lower estimates of crop. Thus our growers lose and ginners or spinners gain because our agricultural-economy is industry-dominated while in USA it is grower-dominated.
USA has been giving huge subsidy to its cotton growers for the last more than seventy years while Pakistan benefited its spinning industry and penalised its cotton growers by levying high rate duties on export of raw cotton from 1948 to early nineties.
Presently, Pakistan's cotton production is lacking behind our requirements and we have been regularly importing cotton between 1.5 to 2.5 million 480-lb bales for the last many years. Unless we increase our cotton production to match our increasing domestic cotton consumption for which chances appear quite far, our cotton imports would continue to increase making our textile industry lose the edge of availability of cheaper domestic raw cotton.
Under present system of restraints to industrial growth, our textile industry may not be as competitive as that of India totally based on domestic raw cotton and China with high labour and working efficiency along with benefits of cheap power supply and other in-puts.
The study of world cotton production and consumption figures reveals some interesting points. World cotton production estimates in 2006-2007 season have almost maintained the same level of 2005-2006 season while consumption for the next season is estimated to be higher than the retiring season by 5.2 million 480-lb bales (4.425 percent). There are chances of lower final cotton out put than what has been estimated now but there are better chances for some increase in final domestic consumption world-wide.
In such situation, cotton shortfall would increase. Even if cotton production and consumption estimates of new season come true then 5.2 million bales would fall short of requirement. This would boost cotton prices in the world market next season and the New York Cotton Exchange may maintain the level of 60 cents which would stabilise world cotton prices at a higher level. Again, Chinese cotton policies would play a pivotal role in determining level of cotton prices.
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