KARACHI (January 12 2004): As the current cotton season is approaching its end, cotton production estimate of 9.5 million bales ex-gin is gaining consensus among trade circles.

When the last arrivals of seed-cotton from Lower Sindh have not so far come to an end and may continue till the middle of this month, such arrivals from late sowing areas of Upper Sindh and Southern Punjab may go up to end March.

About 15 percent fields have reportedly missed wheat crop sowing, relying on third pick of cotton, and next cotton sowing will be done on cotton fields and not wheat fields.

So, fears of transfer of boll worm and other diseases from this cotton crop to next cotton crop would be increased.

The Provincial Agriculture / Plant Protection Departments should take proper care to eliminate these fears.

The other point is that all necessary measures should be taken to counter the continuity of inclement weather and pest attack in next season.

There appear better prospects for early and bumper cotton production next season because the high cotton prices have lured the growers to grow more cotton.

In the local market, lint prices remained steady to firm. On January 10, KCA's spot rate for Grade 3 staple 1-1/32 inches was Rs 3,275 per mound.

Most of the sales in better grade cotton were concluded between Rs 3,200 and Rs 3,350 per maund ex-gin; average grade between Rs 3,000 and Rs 3,150; and lower grade between Rs 2,850 and Rs 3,000 per maund. Spinners tried to pick all offered better grade cotton.

On cotton import front, local spinners are understood to have booked some 700,000 bales of 480 lbs, of which about half is reported to have reached the mill sites.

In view of larger quantity of better quality imported cottons, Pakistan's spinners are expected to produce comparatively more fine count yarn and this season profitability on finer counts yarn has been better than traditional medium count yarns. Yarn prices have improved recently and its demand is picking up.

Cotton prices on the board of New York Future Futures showed reaction against bullish trend last week. Ruling March contract and May contract finished at 74.17 cents and 75.46 cents, losing 90 and 46 cent points, respectively.

USA sold in exports 103,500 Running Bales in the week ended on January 1, 2004. Total export sales and shipments position up to that week stand at: (See Table 1).
===========================================
TABLE 1
--------------------------------------------------------------
Sales  Shipments  Percentage (Figures in million bales)
--------------------------------------------------------------
Upland  8.607      3.353    38.96
Pima   0.409       0.332    81.17
Total    9.016      3.685    40.87
===========================================
Main buyers of US cotton (in million bales) were: China 3.291, Mexico 1.522, Turkey 0.640, Indonesia 0.558, Canada 0.421, Korea Rep. 0.342, Pakistan 0.275 (Including 82,000 bales of Pima cotton), Japan 0.268, Brazil 0.242, Thailand 0.228, India 0.174, Taiwan 0.173 million bales and Bangladesh 0.098.

Actually, Bangladesh is reported to have purchased major segment of its cotton requirements from India as this season India is expected to harvest a bumper crop of 17.0 million 170-kg bales against 1.35 million bales produced last season. Pakistan continues to be the top most importer of US Pima cotton this season.

US target for cotton exports in 2003-04 is 13.2 million bales while the highest export sales were of 13.3 million bales in 1926-27 season. In 1997-98 season, US domestic cotton consumption was 11.349 million bales and exports at 7.50 million bales.

Thus in seven years period, US cotton exports have increased by 76.00 percent while its domestic cotton use decreased by 45.37 percent while China's cotton consumption increased from 18.7 million bales in 1998-99 to 30.2 million bales in 2003-2004--an increase of 61.50 percent.

US exports may escalate to the level of 14.2 million bales and domestic consumption may go down to the level of 5.0 million bales in next couple of years, making available some more than 9.0 million bales for export sale.

China's economic performance in 2003 has been quite satisfactory despite many odds. In 2003, China achieved growth rate of Gross Domestic Product (GDP) at 8.5 percent while in 2004 it expects 8.0 percent.

In 2003, China is achieving growth rate of exports at 30 percent while only 20 percent in 2004 because of reduced demand from USA. In 2003, import increased by 35 percent and in 2004 may be around 30.2 (Figures in billion $). (See Table 2).
============================================
TABLE 2
---------------------------------------------------------------------------------
Year                         2000   2001    2002  2003   2004
----------------------------------------------------------------------------------
Exports                     249.2   266.2  325.6  423.0  508.0
Imports                      226.1   243.1 295.2  399.0  518.0
Foreign Direct Invest. 40.7     46.8    52.7    50.0   50.0
Forex Reserves         165.6   212.7  286.4  425.0  550.0
============================================
ON THE JANUARY 8, COTTON PRICES IN CHINA ON MILL DELIVERY BASIS WERE AS UNDER: 
========================================
Grade/ Staple Rmb/Ton US Cents /lb
========================================
129      18,266      100.26
229      17,953      98.55
329      17,478      95.94
429      16,870      92.60
527      16,153      88.66
========================================
Price of cotton yarn of 32s is RMB 23,000 per ton = 505.00 cents per 400-lb bale in local market. Our spinners can now match their cotton and yarn rates with those of China. Cotlook A-Index (Equal to Chinese Grade 329 ) is US Cents 76.08 which works out to around US Cents 88.00/lb in China including all import taxes/expenses whereas in China mills delivery price is 95.94 cents.

Chinese mills buy raw cotton at considerably high price and compete in exports of textile goods in the world market on the basis of their higher efficiency and cost effectiveness.

This season, China may require import of some 7.5 million bales, of which about 2/3rd. has already been covered mainly from USA and West Africa and the balance 1.3rd. around 2.5 million bales may be covered in the next seven week's period.

On the availability of cotton, India is quite comfortable by harvesting a second highest crop of 17.0 million 170-kg bales this season. In 1996-97.

India produced a record high crop of 18.0 million 170-kg bales. In 2002-03. India imported around 2.0 million bales to meet its cotton shortfall.

This season, India expects to make export sale of 1.0 million 170-kg bales of which about half has been committed in exports.

This season, China sowed Bt. Cotton on 200,000 Hectares and got better yield. It would drastically expand area under Bt. Cotton in coming years in view of promising results.

Courtesy Business Recorder