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NALYSIS: larger cotton arrivals, weak
New York advice depress prices
KARACHI (September 06 2004): Countdown of crucial period for
cotton has already started. The other day Punjab Agriculture
Department was cautioning cotton growers through e-media to
remain vigilant on the possibility of boll-worm attack in
cotton belts of Punjab in view of the presence of some eggs of
boll-worms on cotton plants in some areas including
Rahimyarkhan and Okara districts.
The telecast was mentioning different measures to be taken by
cotton growers in correct diagnosis of disease/pest attack,
selection of right medicines, spray system and safety
measures.
The September month described in cotton trade circles as
Situmger (Devastating) month for cotton crop is crucial with
regard to possibility of damage to cotton crop by pest attack
specially boll-worm.
All cotton growers, field workers of all Provincial
Agriculture Extension Departments, pesticide sellers,
agri-scientists and other support workers should remain at
high alert to fight any possible attack of pest specially
boll-worm on war footings.
In the crucial period the slogan should be 'save cotton crop
to boost economy and strengthen Pakistan.' The good news for
cotton crop is that there may be either little or no more
rainfalls in this season.
Hopefully, we may be able to harvest a bumper cotton crop of
11.5 - 12.0 million local bales. Shaikh Shahabuddin, a
Sadikabad based grower operating his ginning factory in
Rajanpur (Punjab) said that he was seeing a record high crop
of 13.0 million bales this season. God save our King Crop.
He said that the hope for a record high crop has
synchronisation with the coming up of an able and
well-renowned economist Shaukat Aziz as Prime Minister of
Pakistan. Perhaps appointment of Shaukat Aziz as Prime
Minister of Pakistan may herald a record high crop this
season.
Harvesting of cotton is extending to other areas in Lower
Sindh and Punjab resulting increase in arrivals of seed-cotton
in markets and ginneries. Pakistan Cotton Ginners' Association
(PCGA) released its first of the season's cotton statistics
report on the September 4, 2004.
According to this report arrivals of seed-cotton up to
September 1, 2004 was equivalent to 406,637 local bales
(197,108 bales in Sindh and 209,629 bales in Punjab) against
189,530 bales (121,812 bales in Sindh and 67,718 bales in
Punjab) same time last year.
The increase works out to 114.55 percent over last year. This
does not mean that this season crop would be double of the
last season's crop. Some early sowing seeds have been planted
in Punjab which has doubled the arrivals.
Interestingly, local spinning mills lifted 301,451 bales out
of total 318,920 pressed bales - about 94.5 percent. Exporters
also opened their account by purchasing 2,800 bales.
Some of the local mills appear short-stocked and need to buy
cotton while others are adding to their inventory. The number
of factories in operation this season was 194 (66 in Sindh and
128 in Punjab) against 154 factories (107 in Sindh and 47 in
Punjab) same time last year.
This means Punjab is endeavouring to bring its cotton
production in the market quite earlier even earlier than Lower
Sindh crop to get benefit of higher prices in coming years.
Also textile mills are quite active in lifting cotton bales.
Quality of cotton is reported to be far better than last
season and the prices are viable.
Lint cotton prices in the local market were directly
influenced by New York Future market values and prices moved
to Rs 2,450 - 2,500 per maund of 37.324 Kg ex-gin.
However, prices receded to around Rs 2, 300 - 2,350 on the
last day of the week. As the prices move up, buyers lose
interest and prefer to stay on sidelines. Reportedly, some
maiden export sales of raw cotton have been made at the level
of Rs 2, 350/2,400 per maund ex-gin.
The Government of Pakistan had withdrawn levy of 15 percent
sales tax on purchase of raw cotton from ginneries in the
budget and last week it also withdrew 15 percent sales tax on
imported cotton. Now, there is no either sales tax or any
other Tax/duty on purchase of raw cotton either local or
imported cotton.
This would benefit the spinning industry. Ali Mohammed, cotton
waste cotton merchant based at Karachi said that it was a high
degree of anomaly that import of waste cotton was subjected to
25 percent import duty and 15 percent sales tax. He strongly
demanded that like raw cotton, import of cotton waste should
be made free.
He further said that consumption of waste cotton was
increasing in Pakistan so duty-free import of waste cotton
should be allowed.
About 400 Open End mills had been closed down in USA being
incompetitive and waste cotton was surplus there. It is also
quite cheaper in USA, Brazil and CIS countries and can be
easily imported, Ali Mohammed said.
As Pakistan is exporting towels, dusters and other rough items
so free-import of waste-cotton is in the best interest of our
economy. In another meeting last week, commenting on quality
of Pakistan raw cotton, Ahmed Musa of Quality Textile Mills
said that Pakistan cotton was the best one among different
corresponding growths if produced after proper grading and
free from any contamination.
Replying to a question on low export price of Pakistan yarn,
he said that poor cotton grade and poor knowledge of export
marketing techniques are the reasons. He strongly stressed on
better quality of raw cotton and yarn for staying competitive
in world market.
He favoured opening of exchange for future trading of yarn in
Pakistan as this would help local spinners to compete in world
market. Ahmed Musa has good knowledge of global marketing of
textiles. He was very hopeful of better future for Pakistan
textiles in world markets in WTO regime.
New York Cotton Future Market experienced a turbulent trading
sessions last week when values touched limits (Two up and one
down) in five working days of the week.
Lastly, retiring contract October 4 closed at 51.00 and
December 4 at 51.58 after losing Cents 3.10 and 3.14
respectively. Practically, Fund speculators are playing and
trade is watching.
The fear of possible damage to cotton crop due to hurricane in
US was instrumental is wide fluctuations in prices. US crop
still reported intact around 20 million 480-lb bales with
lower consumption around 5.5 million bales this season.
As the WTO regime is approaching fast, unrest among textile
manufacturing companies of US and European Union countries is
increasing on fear of heavy and cheap exports of textile and
garments from China to these countries. As such, these
countries are taking necessary steps for safeguarding their
local textile industries.
Reportedly 90 textile organisations from 49 countries around
the world have recently called upon their political leaders
and WTO officials to either extend the current Quota Regime or
devise new protection systems which can crack down on cheap
Chinese textiles or face economic, political and social unrest
around the world.
On implementation of WTO regime from the year 2005, these
countries fear loss of some 30 million jobs. Sri Lanka and
Bangladesh countries would be most affected by the cheap
Chinese textile exports.
In 2003, European Union imported textiles and garments worth
66 billions dollar which would grow substantially after
abolition of Quota Regime after the year 2004.
US textile companies are making out cases against China
mentioning Chinese irregularities in foreign trade with USA
which would be submitted to US International Trade
Commissioner demanding some sort of restrictions on Chinese
exports of textiles and garments to USA.
These measures are being initiated to safeguard the interests
of the US textile industry post Quota Regime in fear of
complete closure.
India's cotton production this season is now placed in the
range of 17.5 and 18.0 million 375-lb bales and its domestic
cotton consumption is estimated around 30.0 million local
bales by the year 2010 while in 2004-2005 it is estimated
around 18.0 - 18.5 million bales.
Reports from China indicate a bumper crop around 30.0 million
of 480-lb bales despite minor setbacks. However, local
economic and textile conditions indicate some difficulties in
achieving domestic cotton consumption target of 34.0 million
bales.
The Chinese Government has decided to purchase lint cotton
from growers to keep up lint prices and to build up a
reasonable reserve of cotton stocks to meet any eventuality in
coming seasons.
Australia is producing 2.41 million 500-lb bales in 2005. Some
years ago Australia had produced 3.5 million bales, which were
reduced to 1.2 million bales due to drought conditions and
again it is recovering its production. Global production this
year is expected 106.75 million 480-lb bales against world
cotton consumption around 99.0 million bales.
As the crucial period comes to end by the close of September,
possibilities of damage to crop would be minimised and a more
reliable production estimates would emerge.
Then cotton prices would be under pressure and lose ground to
below the level of US Cents 40.00/ln or even 35., the trade
circles estimate.
Courtesy: Business Recorder
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