On the 18th instant, the Pakistan Cotton Ginners' Association released its periodical report for the fortnight ended on 15th October-11. Necessary details of the report is appended below in Table No 1 According to this report seed-cotton arrivals equivalent of cotton bales are higher than last season by 12.99 percent.
The main feature of the report is that arrivals in Punjab are larger than last years by more than 57 percent due to positive affect of rains while in Sindh it is short by 32.22 percent due to heavy rains and floods. Cotton sales is higher by 2.28 percent against 12.99 percent increase in cotton arrivals from last season. Glaring feature is that unsold stocks this season are about 56 percent higher than last season.
Number of ginning factories in operation during the first fortnight of October month was 1,057 ( Punjab 810 and Sindh 247) against 776 factories last season ( 561 in Punjab and 215 in Sindh). It means 36 percent more factories were operational this season against last season.
Field reports and cotton arrival reports indicate, if there was no heavy loss of crop in Sindh due to heavy rains and flood,, Punjab crop being already bumper, Pakistan's cotton crop could be record high to over 16.0 million bales. My analysis of crop and market price based on field reports and personal last week's visit to Sanghar, Hyderabad and Matiari districts of Lower Sindh are as under:
In most of the Lower Sindh, growers have already missed winter wheat crop as sowing could not be carried out because lands could not cleared from cotton plants and standing rain water. The growers, therefore, decided to keep cotton plants standing in the fields till last boll opening and its picking to compensate the loss of wheat crop. Generally, plants in upper half are alive and leaves are green.
In many fields, again flowing is going on. Plants where bolls have opened are wearing a white look. On the roadside, cotton activities such as cotton picking, roadside shops accepting cotton, movement of transport loaded with cotton from fields or warehouses to factories, have increased considerably. This time, cotton season in Lower Sindh may unusually extend up to eight months beyond December month.
Despite interruptions in cotton plant maturity, picking and other activities in Lower Sindh, more than 2.5 million bales being 50 percent of the revised estimate of 5.0 million bales have already reached ginneries while in Punjab only 3.35 million bales have reached factories which amounts to 30 percent of the estimated crop of 11.0 million bales.
My idea is that Sindh may produce more than 2.5 million bales and Punjab also higher than estimated 11.0 million bales. Field reports from Punjab confirm that cotton plants are yielding per hectare seed cotton much more than previous seasons. Luckily, Punjab cotton crop remained almost free from pest or disease attack. What I want to say is that our cotton crop size may exceed the record high production of 14.26 million bales already achieved in 2004-05 season to set a new high production record.
The disturbing matter is that Sindh may be producing lot of poor quality (below average) cotton which may be as high as 70-80 percent of total production. Equally disturbing factor is that Sindh's rain damaged seed-cotton is being mixed with sound cotton of upper Sindh and Punjab in ginneries.
This will reduce the percentage of availability of better grade cotton as compared to normal seasons. The buyers would become skeptical of quality of lint cotton. The general perception of the cotton trade about cotton arrivals by the end of first fortnight of October month was that it should be somewhere between 4.2 and 4.5 million bales but as per PCGA report it was 4.72 million bales.
Many trade people thought the figures may be inflated because last year it was 4.17 million bales. This season, the increase in arrivals is around 13 percent despite loss of 50 percent in Sindh . Anyhow we have to accept these figures as there is no alternative for rechecking these figures.
On the news of such unexpected heavy arrivals of seed-cotton, the ginners were caught aback and thought of reducing their asking cotton prices. Resultantly, one cotton bargain of lower Sindh station was concluded at as low as Rs 5,000 per 37.324 Kg ex-gin and other stations followed the suit with quality differentials.
The trend of cotton market up to December or 15th January-12, is assessed to be easy to weak on the following grounds: Larger arrivals would depress cotton prices. In next fortnight or so, domestic cotton activities would be slackened due to Eid-ul-Azha festival holidays and mood. In December month, money market would squeeze and banks would restrict lending.
The country's political atmosphere is expected to remain charged with demonstrations, political processions/ gatherings, accusation and counter accusation of political parties. Severe shortage of power and gas which mat restrict industrial operations of all sectors including spinning, weaving, printing, processing, sizing, towel manufacturing and garment manufacturing industries in the country more specifically in Punjab provinces.
The law and order situation may deteriorate in next coming months. As reported by the World Bank, business conditions in Pakistan have already remained unfavourable. On the international front, the business conditions do not appear conducive as US and EU-27 countries are facing great crisis of credibility, budgetary deficiency, economic instability, economic depression in Japan and China due to problems of strong currency.
Demonstrations on economic disparity are being held in different countries against capitalistic system and if the range of these demonstrations further increase higher level the economic activities of the world would be adversely affected . Cotton crops would gear up its movement / deliveries from selling countries to buying countries from next month. Textile production process may be constrained due to slow economic activities.
Estimated global cotton production figures are increasing and consumption figures are reducing month to month and gap between production and consumption figures in 2011-12 season is around 10.0 million bales in favour of production. On the strength of these factors, local cotton prices may be under selling pressure up to December month and price of average quality cotton may break the psychological barrier of Rs 5000 and Middling grade 1-1/8 may be available around 90 cents.
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Cotton Arrival Report up to 15th October-11 (Fig: million bales)
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Arrivals Sold Unsold
Season Sindh Punjab Total Sindh Punjab Total Sindh Punjab Total
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2011-12 1.365 3.350 4.715 0.869 2.542 3.411 0.496 0.808 1.304
2010-11 2.044 2.129 4.173 1.645 1.690 3.335 0.399 0.439 0.838
Diff: (-) 0.679 +1.221 +0.542 (-)0.776 + 0.852 + 0.076 +0.097 +0.369 + 0.466
percentage (-) 32.22 +57.35 +12.99 (-)47.17 +50.41 + 2.28 +24.31 +84.05 + 55.61
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