KARACHI (March 08 2004): The Pakistan Cotton Ginners' Association (PCGA) has decided not to release fortnightly cotton report up to March1, and now, understandably, it may be released by the middle of this month.

Now when almost 95 percent crop has been reported, there appears very little interest in getting the latest arrivals figures.

The figures of unsold stocks are considered to be the most important in determining the trend of lint cotton prices in the coming weeks.

Presumably, due to holidays of Ashoora last week, cotton sector activities remained quite dull resulting in lower lifting of cotton by mills in the fortnight.

Trade circles estimate the unsold stocks around 1.6 million bales which, if declared, would have further weakened the lint cotton prices.

Reports on cotton activities from upcountry indicate that the crop size would reach the level of 10.0 million bales, or even higher.

The ginners and the spinners had worked out their operational strategies on the crop size of 8.5 million bales on the strong claims of some leading ginners.

Resultantly, the ginners purchased seed-cotton at high rates--around Rs 1,500 to Rs 1,600 per 40 kg--and spinners procured local lint cotton at high prices--around 3,500 per 37.324 kg ex-gin--and foreign cotton at 75-80 cents/lb and both the ginners and the spinners appeared trapped.

Ginners are holding large stocks of lint cotton which may cost them higher than the best prevailing rates of Rs 3,000-3,100.

This level (10 million bales) of cotton production is quite insufficient to meet our increasing domestic demand of raw cotton which is estimated between 12.5 and 13.0 million bales.

Our spinners re-use about 1.0 million bales of locally produced cotton waste and the deficiency of 1.5 and 2.0 million bales is generally met through import of foreign cottons.

Presently, cotton economy has two very important core issues which are required to be attended very seriously and immediately.

First is low cotton production, and the second is poor cotton quality. In the past about 13 years, neither cotton production could break the barrier of about 10.0 million bales nor lint quality deterioration could be arrested.

The Ministry of Agriculture, Food and Livestock has miserably failed in making any positive headway in this regard.

The result is that our local spinning industry appears to have been permanently pledged to imported cottons.

Recently, one prominent national English daily published an editorial on Cotton Standardisation, suggesting application of Cotton Standards through implementation of Cotton Grading System for bringing overall improvement in the quality of lint cotton, to which the Minfal re-acted sharply and put up a clarification with the impression that most of the provisions of the Ordinance have been implemented and that the Karachi Cotton Association had also implemented the system of establishing the Spot Rates of cotton.

Some Minfal officers continued to issue press reports defending their position on implementation of Cotton Standardisation.

As a matter of fact, the ground realities indicate that Cotton Standardisation/Grading Systems are being torpedoed for some obvious reasons.

The whole system primarily aims at improving the quality of cotton to international level, ensuring proper return to cotton growers on the basis of quality parameters, making available properly graded clean cotton to local spinning industry / exporters and improving per unit export price of our yarn / textile products resulting increase in export earnings.

The facts are that in 1983, a project was initiated in Pakistan with the technical assistance of Food and Agriculture Organisation and financial assistance of the United Nation Development Program for evolving a system of Cotton Grading / Standardisation which, after passing through different successful tests and trials, was finally approved by the Government of Pakistan and all cotton stakeholders including growers, ginners and spinners and some prominent cotton associations of the world.

To carry on the work, implement it on all cotton areas, and keep on producing a cadre of cotton technicians / professionals to meet country's requirement, Pakistan Cotton Standards Institute (PCSI) was established in 1988, which is still there.

In November, 2002, the President of Pakistan promulgated an ordinance known as Pakistan Cotton Standards to provide legal cover to PCSI and its operation. About 15 percent of the trained cotton classers; many of them with foreign training, have left the services of PCSI in despair.

In 20 years' time (1983-2003), huge funds including millions of foreign exchange estimated around Rs 1 billion have been spent, apart from precious decades of years.

The whole scheme of Cotton Standards / Cotton Grading System worked on the internationally accepted idea of its mandatory implementation based on the theory of 'NO COMPROMISE ON QUALITY' but now all of a sudden the Minfal started advocating for 'Voluntary' implementation.

The report of the Executive Committee of the PCSI which comprised all important cotton stakeholders including growers, ginners and spinners and headed by a Government official of not less than of Grade 22 was overruled by the Chairman of the Board of Governors of PCSI as these recommendations did not favour the idea of 'voluntary' implementation of Cotton Standardisation System.

The Board of Governors of the PCSI has held only three meetings since November, 2002, with no results.

The implementation of Cotton Standardisation / Grading System at the ginning stage throughout the country would ensure overall improvement in quality of our cotton besides greatly benefiting the cotton growers through payments of due quality premium of about Rs 3 billion, improving the quality of our textile products and adding about $300 million annually to our economy.

The WTO regime is knocking on our doors and international system would rule, guide and monitor all foreign trade after December, 2004 and each country would be obliged to follow those rules and regulations.

WTO attaches high importance to quality of commodities in foreign trade, whether agricultural or industrial.

Hence, Pakistan has to adopt the international standards of quality for its products. The earlier we implement these Standards the better it would be for our economy. India in the last some years has been able to improve quality of its lint cotton to very high standards and we did nothing in this regard.

Heavy shipments of foreign cotton are in progress which have depressed local cotton prices. Why this situation has arisen?

One of the main reasons is that because of no grading system; our lint cotton has high amount of trash besides being quite irregular in grade, staple length and other prominent fibre properties which adversely affect the quality of yarn.

Lint cotton prices in the local market remained depressed during last week. Local yarn market is reported weak which is discouraging cotton prices.

Recently, the Federal Agriculture Minister visited Karachi Cotton Association (KCA) and discussed with the Board of Directors and its members cotton matters including prospects of resumption of hedge trading in cotton under KCA.

On Saturday, the KCA fixed the Spot Rate at Rs 3,050 per 37.324 kg ex-gin. Better grade cotton is selling around Rs 3,000 - 3,100, average Grade around 2,900-3,000 and lower grades down to around 2500.

Some export business in lower grade cotton has reportedly been concluded. Some countries have demand for lower grade cotton and Pakistan cotton may find way there. The exporters are also holding stocks of unsold cotton and now appear losing hope for better price.

Sowing in Lower Sindh is in progress. There exist better prospects for a bumper crop next year due to larger area under cotton.

New York Cotton Futures again turned bearish during the week. The retiring March contract finished at 68.40 cents, May contract at 69.48 cents and July contract at 70.70 cents, losing 3.70 cents, 4.29 cents and 3.90 cents, respectively.

Up to February 26, total US export sales were reported at 11.303 million bales (Upland 10.868 million and Pima 0.435 million) and total shipments at 6.117 million bales (Upland 5.743 and Pima 0.374).

Of 13.2 million bales US export target, 1.897 million bales are yet to be sold in balance of this cotton season which appears quite easy.

In 2003-2004, US would export 2/3rd of its production and would use locally balance 1/3rd share and US share on world exports would be around 40 percent, highest since 1957-58.

According to a report, in 2003, China produced 4.87 million tonnes raw cotton from 5.11 million hectares, average yield being 953 kg/hectare.

Some reports indicate that China wants to narrow down the local lint prices through cotton imports and also for increasing competition of Chinese textile mills.

China is reported to have granted safety certificate valid for 3 years to 5 years for five Genetically Modified agri crops including cotton.

There was a report of issuance of 1.0 million tonne raw cotton import quota to foreign trading firms and textile mills by the Chinese government but the international cotton prices have not reacted.

India is reported to have made export sales contracts of 700,000 bales and has so far shipped about 400,000 bales.

One report indicates that India got higher yield of 20-30 percent from Bt Cotton against normal cotton yield.

This season, India is expecting to harvest 21 percent higher crop, at 16.5 million bales, from 13.6 million bales harvested last season.

Courtesy Business Recorder