Cotton market may operate in narrow range till next couple of months

Latest position of seed-cotton arrivals and estimated balance crop in the fields strongly support season's cotton production estimates around 14.5 million local weight bales, estimated to carry average weight around 155 Kgs per bale whereas standard average bale weight in Pakistan is Kgs. 170 per bale.
The quantum of 2011-12, cotton crop may be equal to 2.25 million metric tones or equal to 10.33 million 480-lbs bales. For better understanding to general public, cotton figures should be mentioned in tonnage and also in international standard weight of 480 lbs each bale. By 31st January 2012, Pakistan's total seed-cotton arrival was reported by the Pakistan Cotton Ginners' Association at 13.615 million local weight bales against 11.104 million bales arrived in same period last year. Thus, this season crop is 22.61% more than last year. Punjab crop is 49.24 5 percent more than last year while Sindh crop is 30.37 percent lower than last year.
This analyst had mentioned 2011-12 season's crop estimate around 15.0 million local weight bales in his cotton report dtd. 16th August 2011. By producing 14.5 million bales, high production record of 14.26 million bales of 2004-05 season will be broken. Before this, the record high cotton production was obtained at 12.8 million bales in 1991-92 season. If we had a favourable weather in 2011-12 season, we would have produced a record high crop of 17.0 million bales about 20 percent surplus to our domestic requirements.
In view of unfriendly business and industries conditions, our domestic cotton consumption may be estimated between 13.5 and 14.0 million bales despite obtaining duty-free/quota free access for 70 items of textile categories to EU-27 countries in near future. This season's raw cotton exports and imports may be around one million bales each.
Total unsold stock has now reduced to 1.381 million bales against 0.724 million bales same time last year. The story of Governmental intervention in local cotton market through their agency Trading Corporation of Pakistan appears to have come to en end. This season, growers of lower Sindh did get perhaps the lowest rate of seed-cotton between Rs 1200 and 1400 per 40 Kgs ex-gin in December month as Sindh especially lower Sindh received peak seed-cotton in November and December months.
Main reason for comparatively lower cotton rates in Lowe Sindh was that cotton was damaged by heavy rains and floods in August and September months so they are real sufferers. Next season, the growers may reduce cotton area to get better price. In this winter season, there has been heavy snowfall on mountains in Northern Areas of Pakistan and in next summer season there are chances of floods as the snow would melt down and there may be heavy rains in monsoon season which may again create some problems for our cotton crop.
Domestic Cotton prices in last week or so have been steady to firm up to Rs,6,000 per maund of 27.324 Kgs ex-gin, and New York cotton futures hovered within narrow range of US Cents 93-97. Keeping in mind the economic, political and financial developments in US, Europe, Middle-east, South Asia and East Asian countries, cotton price trend in international market may not find any breakthrough and cotton futures may play between 90 and 100 cents range till next March-12.
Exporters may be more active finding more surplus cotton in Pakistan. Performance of Bangladesh cotton and textile industry has been below expectation as their spinning mills and cotton merchants had suffered heavy losses when NY A-Index cotton prices touched historically high at US Cents 229.67 in March-11 and crashed to US Cents 114.10 in August and then to 95.45 in December-11. This abnormal behaviour of cotton market caused abnormally high losses to cotton merchants and spinning mills in most of the cotton consuming countries.
The heavy loss to textile industry is evident from the fact that the parity of their currency BD Taka against US Dollar suffered heavily when their currency depreciated its value from BD Taka 70.59 in 2010 to BD Taka 85 in January-2012. On the 7th February-2012, it was BD Taka 83.96 a US Dollar, This situation has put serious dent on BD economy and serious shortage of US Dollars for arranging imports of commodities especially raw cotton.
The depreciation of BD Taka against US Dollar has inflated the import cost of commodities. Now, the BD textile industry is coming out of the financial crisis and is slowly and steadily coming on business track. Indian spinning mills were also affected by the abnormally high prices of raw cotton in 2011 but their mills absorbed the shock to a greater extent as they had their own cotton crop which was provided to spinning mills by their Government at comparatively cheaper rates.
The international cotton price abnormality of 2011 affected more seriously to textile sector of those country which mostly or entirely depended on imported cottons. China has reduced its textile production on slackened demand from US and Europe. However, China has been seen actively building its cotton reserves which had depleted considerably. Cotton prices are likely to operate in narrow margins till some remarkable even occurs.