As the current cotton season (2006-07) draws to a close with a small number of unsold bales remaining with the ginners, cotton prices in the ready market are giving a steadier appearance. Furthermore, even though the government concessions and incentives are not to their entire liking, spinners and weavers in Pakistan have obtained some relief to their problems.
Moreover, with New York cotton prices consolidating above 50 cents per pound in recent weeks, they have imparted some firmness to domestic lint prices. Ginners now barely hold anywhere from 100,000 to 125,000 bales (170 kgs) of unsold cotton from the current season which can be disposed off easily. The advent of the new cotton crop (2007-08) in any significant way is still two or three months away.
Earlier in the season, mills in Pakistan did book sizeable numbers of cotton for import from Brazil, India, the United States of America (USA) and other origins when the prices were cheap and covered good quantities before the arrival of the next crop. Now all eyes are fixed towards the new season (2007-08).
Though the spinners obtained relief in the recent federal budget through reduction of income tax and also in bank mark-up retrospectively, announced last weak for the fiscal 2007-08, and the weavers also got concessions with the hope that many of them will benefit in Faisalabad and elsewhere, textile industry is still looking forward to further assistance from the government to make them still more competitive in the international textile markets. Officials have also stated that government is still considering the announcement of a textile package which should further rehabilitate the textile industry in the near future.
Upto now most of the forthcoming cotton crop (2007-08) in Pakistan is said to be performing well though some fear of milly bug in southern Sindh and pockets of pests elsewhere have been reported. Forward sales of new crop (2007-08) cotton from Sindh started about two months ago for deliveries during end of July to middle of August 2007 totalling 3000 bales.
Sales were initiated at Rs 2600 per maund (37.32 kgs) but prices later declined to Rs 2500 per maund. Recently, another 2000 bales of cotton from Sultanabad Sindh were sold at Rs 2505 per maund bringing total new crop sales to 5000 bales.
With restricted availability of both of current crop as well as new cotton at this time, lint prices are somewhat on the firm side but the turnover remains lethargic, in this situation, the response from most of the mills is also lukewarm. It may be mentioned that if the new crop in Pakistan remains in good shape and does not face any adversity of weather, it can arrive in appreciable numbers in August 2007 when the prices could go down to Rs 2400 per maund. New crop output estimates still exceed 14 million bales (170 kgs).
Most of Pakistan faced record high temperatures over the past week or ten days including the cotton belt. Therefore, some tender cotton plants in Shahdadpur, Sanghar and in Nawabshah side in Sindh wilted due to excessive heat necessitating resowing. Another factor being mentioned in the market refers to severe shortage of liquidity with the mills. In this connection, Governor of State Bank of Pakistan Dr Shamshad Akhtar made it amply clear recently that the federal bank will continue its tight monetary policy to rein in inflation in the country.
We can thus conclude that switchover from the current (2006-07) to the new (2007-08) cotton crop in Pakistan is likely to be a routine ritual. Government is trying to meet some of the fiscal demands of the various textile sectors but has not yet presented a coherent or a comprehensive textile package which could satisfactorily determine the sectoral apportionment of relief and also allocate responsibility between the various textile interests and the cotton economy at large. Moreover, a clear or convincing strategy regarding sowing of Bt cotton in Pakistan is still missing which has given rise to clandestine growth of transgenic cotton in a haphazard and uncertain manner.
The Karachi Cotton Association (KCA) continues to determine the ex-gin price of Grade 3 cotton of the current crop (2006-07) at Rs 2600 per maund (37.32 kgs) which signifies that lint prices are prevailing in a steady state.
One sale of 200 bales of current crop cotton from Shahdadpur in Sindh was reported at Rs 2600 per maund sold by an exporter to a mill on Karachi delivery basis. Another report stated that about three trucks of new crop seedcotton is expected to arrive in Jhudo in Sindh in about three days time.
Brokers added in the evening that rates of all the varieties of cotton waste have gone up due to its reuse by the domestic spinners. Some spinners also stated the due to drastic revaluation of the Indian rupee, the political turmoil and floods in Bangladesh and also some steps taken by the Pakistan government to improve the competitiveness of the industry, domestic textile performance should show improvement.