KARACHI (February 23 2004): The Pakistan Cotton Ginners' Association has declared total seed-cotton arrivals equivalent of 9.39 million local bales up to February, 15, 2004 against 9.57 million bales of same period of last season, a shortfall of 1.93 percent. Details are as under:

Now, most of the crop estimates appear to be converging around 9.7 million and 10.0 million bales.

By February 15, 2004, Punjab has produced 0.11 percent more than last year and this trend is likely to continue in the rest of the running cotton season.

Sindh has produced 8.85 percent less than last season but is likely to improve its arrivals in rest of the cotton season resulting in decrease in shortfall of 8.85 percent.

Although the arrivals in Sindh started some time back in August but are still continuing in the seventh month which indicates cotton production may reach quite close to last year's production figure.

The most important aspect of cotton figures is that during one-month period (15 January to 15 February) seed-cotton arrivals were 519,791 bales against 383,184 same time last year.

The increase works out to 36.84 percent while this season 483 factories are reported to be in operation against 258 of last season; the increase is 87.20 percent.

Stocks of unginned cotton are reported equivalent to 168,281 bales this season against 236,149 bales of last season--decrease of 28.74 percent.

It does not look logical and practical that despite larger arrivals of seed-cotton to the extent of 36.84 percent and higher number of factories in operation, to the extent of 87.20 percent, in the month ending February 15, 2004, the stocks of unginned cotton are lower by 28.74 percent.

Actually, in Punjab, unginned cotton stocks are equivalent to 99,913 bales against lower stocks of 60,805 bales of last year while in Sindh these are lower, at 68,368 bales this season, against 168,281 bales of last season.

More ginning factories are in operation, which shows that the ginners are expecting better arrivals in the coming months.

The larger arrivals in last of period and higher number of factories in operation indicate that, with expected arrivals in next couple of fortnights, total cotton crop may be around 10.0 million local bales.

The Standing Committee on Cotton Crop Assessment held its meeting in Multan last Saturday (February 21) under the chairmanship of State Minister for Food, Agriculture and Livestock, Sikander Hayat Bosan, and taking into account recent cotton arrival figures and other relevant factors, maintained its earlier crop estimate of 10.0 million local bales.

The ginner-leaders earlier had estimated a very low production, at 8.5 million bales, but now are estimating 9.6 million bales.

In sympathy with ginners' community, their leaders tried to show less crop to increase the rates of lint cotton but forget that major portion of crop was in the hands of growers who on reports of short crop increased the price of see-cotton and ginners had to oblige the growers.

Now, the ginners are caught, as lint cotton prices have come down by Rs 200 / Rs 300 per mound.

Recent press reports indicate that Trading Corporation of Pakistan (TCP) has prepared a plan to procure raw cotton from the market at substantially higher rates than prevailing international prices or local prices.

Also, the TCP plans to get the growers a premium of Rs 200 per maund for producing contamination-free cotton. As a matter of fact, when TCP was not in the market in 2003-04 season, the cotton growers got the highest rate of their produce.

Whenever, in the past, TCP entered the cotton market as third buyer (No 1 buyers are spinners and No 2 are exporters), the market was distorted and none of the main stakeholder benefited.

In the past, the ginners and the international merchants who traded cotton with TCP were not happy with their dealings and performance.

These paper scheme are apparently meant for extending its existence which otherwise appears to be in jeopardy for no effective role in cotton economy.

There cannot be a better system for improving quality of lint cotton and ensuring quality based price of cotton best serving the interests of all stakeholders, specially the growers, than the implementation of Cotton Standardisation / Cotton Grading Systems at ginning stage.

Although the Pakistan Cotton Standards Ordinance had been promulgated by the President of Pakistan in October, 2002, to take effect immediately but the vested interests have so far succeeded in deferring its implementation to deprive cotton growers of the payment of substantial premia of more than three billion rupees annually and simultaneously deprived the national economy of the benefit of more than $250 million.

Efforts are being made by cotton trade, specially Karachi Cotton Association for restoration of Cotton Hedge Market from next cotton season.

The support price scheme and the intervention of TCP in cotton market would become redundant when Cotton Hedge Market would re-start its operation under KCA.

In the absence of due buying interest, easiness in yarn market, booking of American/other cottons at relatively lower rates and weakness in local lint prices, trading activity has been quite low.

Spinners are lifting only quality lots while exporters are lifting poor grade cottons at lower rates on account of export viability.

On the close of the week, the Karachi Cotton Association had fixed Spot Rate at Rs 3,150 per mound ex-gin. Better grade cotton was changing hands at rates between Rs 3,150 and Rs 3,200; average Grade at Rs 3,000 to Rs 3,100 and low grade at Rs 2,700 - Rs 2,900 / mound.

On the basis of Rs 2,800 for Type 1210 /Adnas low mic, the export parity works out to 62.50 cents per lb FOB Karachi.

Upcountry reports indicate ginners anxiety over buyers' long silence in cotton buying. This situation has unnerved the ginners.

New York Cotton Futures have shown some recovery in values in the last week when retiring March contract gained 1.34 cents and May contract 2.08 cents to settle at 67.69 cents and 70.26 cents respectively.

In the week ending February 12, US committed 566,700 running bales in export sales. The latest US export sales are as under:
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(In million bales of 480-lb each)
Upland Pima Total
Export Sales 10.521 0.429 10.950
Shipments 5.153 0.368 5.521
Percentage 48.98 85.78 50.42
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Main buyers of US cotton (in million bales) were: China 4.060, Mexico 1.607, Turkey 0.983, Indonesia 0.703, Korea Rep 0.423, Canada 0.419, Pakistan 0.375, Thailand 0.298, Japan 0.285, Brazil 0.284, Taiwan 0.231, India 0.185 and Bangladesh 0.118.

Pakistan continues to maintain its position as Top buyer of US Pima cotton at 83,300 bales with a share of 19.41 percent.

Despite robust export sales of 566,700 bales in the week ending February 12. with China's share of 309,200 bales, international cotton prices have not shown appreciable increase which indicates enough resistance in New York Futures above the level of 70 cents.

The encouraging interests of cotton growers in sowing cotton on larger areas next season may become effective in impacting cotton prices downward in the next couple of months.

However, cotton market may not be subject to any abnormal fluctuations as most of the cards regarding production, consumption and availablepen.

Courtesy Business Recorder