Cotton output heading towards record level

According to the latest assessments in cotton trade, there is a possibility that output during the current season (August 2011-July 2012) may reach a record level exceeding the earlier highest production of figure of 14.265 million domestic size bales in 2004-2005 on an ex-gin basis.
The possible cotton output in record numbers in Pakistan this year will be because of larger acreage, better inputs applied by the growers and record high prices received by the farmers last season (2010-2011). It may be remembered that a very high cotton output in Pakistan may be achieved despite the excessive rains and floods in the cotton belt, particularly when southern Sindh province suffered earlier in the season.
Prices of lint in Pakistan have been mostly steady recently following improved enquiries both from the domestic mils as well as from abroad, particularly for the lower grades of cotton. However, traders said in Karachi on Thursday that most of the lower grades have been sold out. Turnover has become some what slow but the market is now skeptical if the government will really induct the Trading Corporation of Pakistan (TCP) to purchase cotton with a view to lift lint prices to a higher level.
Willy-nilly, most of the mills in Pakistan are apparently operational except some smaller units or weavers with a small capacity. Despite some hesitation now and then, buying by both the mills and the exporters comes up again and again. Though the demand for the lower grade of cotton remains persistent, it has been mostly sold out.
The seedcotton (Kapas/Phutti) arrivals report for the current season (2011-2012) released on last Wednesday by the Pakistan Cotton Ginners Association (PCGA) till 15th January, 2012 shows total receipts of 12,829,619 lint equivalent bales compared to 10,760,252 bales during the previous season, (2010-2011), or an increase of 19.23 percent. From this total, the domestic mills have lifted 10,769,904 bales, and the exporters have picked up 613,014 bales. That leaves an unsold stock of 1,446,701 bales lying with the ginners.
The best grade of cotton selling today in Punjab is at a rate of about Rs 5,700 per maund (37.32 Kgs) ex-gin which is around 75 cents per pound. Due to lower recovery of local cotton compared to the Indian fibre J-34, the cost of local cotton may be deemed to be priced higher at 78 cents per pound to compensate for the deficiency. Such Indian cotton as J-34 as a replacement lint currently costs around 100 cents per pound.
The general price idea for seedcotton (Kapas/Phutti) in Sindh reportedly ranged from Rs 1800 to Rs 2350 per 40 kgs, while in the Punjab the seedcotton prices on Thursday were said to have ranged from Rs 2,000 to Rs 2,650 per 40 Kgs.
Lint prices were steady and reportedly ranged from Rs 4,300 to Rs 5,500 per maund (37.32 Kgs) in Sindh and in the Punjab from Rs 5,200 to Rs 5,700 per maund. The main problem with the textile industry during the previous several months has been lack of adequate power supply and gas. However, a number of mills are said to have installed their own generators to improve their production and overall performance.
In actual ready cotton sales on Thursday, 400 bales from Mirpurkhas in Sindh are said to have been sold at Rs 4,300 per maund (37.32 Kgs) bought by an exporter and 400 bales from Tando Adam also brought by an exporter at Rs 4,400 per maund. In the Punjab, 400 bales of cotton from Fort Abbas sold at Rs 5,400 per maund (37.32 Kgs), 400 bales from Khanewal sold at Rs 5,500 per maund while 200 bales from Sadiqabad sold at Rs 5,600 per maund. Traders said in Karachi imports of cotton into Pakistan are mostly at a standstill.
On the global economic and financial front, it has been reported that Asian equities and also in other parts of the world were mostly higher since a couple of days on the belief that better business data in the United States and Germany has been forthcoming and successfully bond auctions in Greece and Spain warrant a better financial outlook. Also, reports from China that the last quarter performance was better than expected in 2011 and thus merits a modicum of optimism.
Be that as it may, the long term economic outlook not only remains unimpressive, it is very gloomy. In the United States, Goldman Sachs has reduced the pays and bonuses of its employees and fears that its profits would be reduced by about fifty percent. Eastman Kodak Company, 130 years old manufacturers and seller of photographic goods and equipment has filed for protection from the banks due to its bankruptcy. The International Monetary Fund is being considered for increase in its lending base because the global economic ills have not gone away over the past four years and need extended lending to several countries around the world.
Computer firms making personal computers (PC's) are feeling the heat as several customers are switching their purchases to smart phones which are relatively cheaper and are becoming more sophisticated. The Eurozone continues to remain under phenomenal pressure. In fact, the credit rating of France and a bunch of other European countries has been downgraded with Hungary being in a very precarious economic and political position leading to large fears on the entire continent.
France being in a leading economic position after Germany has to remain financially stable to stave off the collapse of the euro, or the Eurozone as a whole. The previous several years, some say the previous several decades, show the irresponsibility of the Western countries who have built up massive government loans and debts and now cannot manage their repayments in a convincing manner. In fact, questions have been raised regarding the irresponsible behaviour of the capitalism in vogue over the past several decades compared to a more successful economic model in communist China. Unemployment remains stubbornly high in most of the capitalist countries.
With this disturbing background, the World Bank has rightly warned the developing countries that the economic and financial deterioration in the larger economies is bound to adversely effect the less developed world. Now it is also being reported that Chinese growth has come down to its lowest over the past couple of years.
Even the EFSF, the Eurozone bailout fund has been downgraded by Standard and Poors rating agency. Moreover, in a global village, it should not surprise us to know that China's imports and exports are going down due to the decrease in the performance of the Eurozone economies with which China has a sizeable business relationship. It may thus be surmised that the incoming years viz, 2013, 2014, 2015 or even beyond will be globally consumed by a weak and treacherous socio-political outlook.