Larger accumulation of yarn stocks and slower off-take depress cotton prices

Finally, cotton production of 2010-2011 season finished at 11.6+ million running bales ex-gin with expected average bale weight around 355 lbs (=161 Kgs) which if converted into international standard bale of 480 lbs, works out to 8.6 million bales. As per USDA report (February-2011), Pakistan's production has been placed at 8.8 million 480-lb bales against 9.6 million bales produced last season.
Accordingly, this season our cotton crop fell short by 1.0 million (480-lb each) bales ie 10.4% against last season's production. New crop sowings have already started in lower Sindh and in some parts of early sowing areas of central Punjab. There are reports that in farmers planted cotton in some areas as early as January/ February months with a view to avoid crop damage by floods and attack of pests specially leaf curl virus and avail the opportunity of getting best rates.
This much earlier sown cotton may attain maturity by the end of May or early June to be followed by its harvesting. This season, cotton prices remained historically high; seed-cotton around Rs 6,000 per 40 Kgs and lint cotton at Rs 14,000 per maund of 37.324 Kg ex-gin. As such, cotton growers were greatly benefited by price hike and are encouraged to increase cotton area considerably. Official sowing target for new cotton season has reportedly been fixed at 8.01 million acres = 3.25 million hectares.
In 2010-11 season, Pakistan lost some 18 percent of its cotton crop from its production target of 14.2 million bales in floods and now hope to harvest a bumper cotton crop of 14.5 million running bales approximately of Kgs 160 each with average lint yield of Kgs. 710 per hectare. If we look at the cotton production figures of the last five seasons, we get an average of 11.75 million running bales (Most probably with average weight of 160 Kgs per bale) whereas our average consumption of last five years is around 14.2 million bales. As such, every season, we are short of around 2.5-3.0 million bales, which are imported from different sources to meet our domestic cotton requirements. Our efforts and negotiations for adoption of GMO technology have been going on for the almost last one decade with many foreign companies and agencies and we have also signed many MoUs but so far there is no positive result. Our neighbouring country India adopted this technology in 2003 and since than it has increased its production from 10.60 million 375-lb bales in 2002 to 26.0 million bales in 2010 while their lint yield per hectare has increased from Kgs 269 in 2002 to 450 in 2010. Just see the spectacular increase in India's production and in productivity.
Pakistan's performance in cotton production is lacking behind and has deteriorated in last 7-8 years. There appears to cogent reason for this gross negligence in adoption of new GMO technology, which would not only increase our cotton production and productivity substantially but would considerably reduce our imports of pesticides. Adoption of this technology would decrease cost of cotton production, decrease cotton imports and increase its profitability and viability.
In 2011-12 season, most of the cotton producing countries would increase their respective cotton area to produce a record high crop. As per Cotlook (1st April, 2011), cotton production estimates of the world for 2011-2012 season are placed at 126.57 million 480-lb bales against 111.51 million bales in 2010-11 - increase is 13.5 % ( Australia -23.8 %, China-15.2%, India - 9.4%, Pakistan 22.2%, Turkey - 32.0% and USA 6.6%). In 2010-11 season world cotton consumption has been estimated at 114.27 million 480-lb bales and in 2011-12 season 121.27 million bales.
Lint cotton prices remained under selling pressure in local as well in international markets because of very limited off-take of yarn in both markets. July contract closed at 167.51 and new crop December contract at 132.14. Cotton prices in China, India and Pakistan showed dramatic decline. In Pakistan, present level of prices is Rs 9,000 - 10,500 per maund of Kgs 37.324 ex-gin. Export prices have also come down around 169 level for average grade cotton. The low international cotton prices may prompt local spinners, who were postponing their cotton purchases on higher prices, to go for booking foreign cotton to meet their requirements. This may provide a support to falling prices.
Spinners in Pakistan and India are holding large stocks of unsold yarn, which is squeezing their profitability. Liquidity crunch is a great problem pressuring the needy yarn sellers to lower their rates. In Pakistan, weather appears quite conducive to crop development and maturity and trade expects harvesting of earlier sown cotton in the second week of June month. Cotton sowing in most of the cotton areas is going on well and may extend to June month.