|
ANALYSIS: Renewed buying and larger
output balance cotton prices
S A AZIZ SHAH
KARACHI : The private estimates of Pakistan cotton crop
(2004-2005) have now converged to the narrow range of 14.5
to 15.0 million local bales while initially official
estimates were at 10.7 million 170-Kg bales which have now
been revised upward to 13.2 million 170-Kg bales and are
likely to be further revised upward to 14.0 million 170-Kg
bales by the next month.
Although, there was lot of hue and cry about shortages of
irrigation water and availability of fertiliser both in
Sindh and Punjab provinces but the God has given us a record
high crop of about 15.0 million bales - about 50 % higher
than that of last year. Not only alone Pakistan has produced
record high cotton crop this season but other cotton
prominent countries viz: China, USA, India, Uzbekistan and
Brazil have also done it. It is squarely due to cotton
friendly weather on global basis.
The Government of Pakistan should take all necessary measure
to maintain this level of production by improving agronomic
conditions and adoption of bio-technology in evolving Bt.
Cottonseeds / hybrid cottonseeds.
Unfortunately, whenever, a record high crop is harvested in
Pakistan, a marketing crisis develops due to mismanagement
and mishandling of the crop. The Government may now realise
its mistake of closing down its 25-year old well-established
and well-groomed institution namely Cotton Export
Corporation of Pakistan in 1996 of which performance was
certainly better barring a few laps and mistakes. It now
appears that cycle of cotton friendly weather may continue
further to the next three or four seasons resulting in
substantial increase in yield per unit of land.
To meet the global competition in textile exports in WTO-regime,
Pakistan must have sufficient cotton production, presently
15.0 million local bales, for meeting its increasing
domestic cotton requirements with a minimum of one million
bale surplus for export because it would be very difficult
for our spinning industry to stay competitive in textile
exports on imported cotton.
Therefore, it is quite expedient in national interests to
have a permanent body / institution manned by cotton
professionals for managing local and export cotton marketing
to ensure better return to cotton growers and a regular and
proper supply of cotton to local spinning industry according
to their requirements.
Simultaneously, our old and worn-out cotton marketing system
must be overhauled to meet new challenges of local as well
as international marketing. In this regard, resumption of
Cotton Hedge Marketing System under the aegis of the Karachi
Cotton Associations is the need of the hour for streamlining
the marketing system.
The most important matter grossly neglected is the quality
of cotton. To improve quality and marketing of our cotton /
lint cotton to international standards, we have to
immediately implement Cotton Standardisation / Cotton
Grading system and establish a Cotton Ginning Institute for
bringing overall improvement in quality of ginned cotton.
Unfortunately, the Government has ignored all these steps
although these steps have also been incorporated in the
document of Textile Vision 2005. Now any delay in the
implementation of these recommendations would cause colossal
loss not only to cotton or textile sectors but to our
national economy as survival of our economy squarely rests
on cotton and textile sectors and the enforcement of
quota-free regime would become effective from January 1, 05.
Trading Corporation of Pakistan (TCP) has taken deliveries
of some 1.1 million bales against their purchase contracts
of some 2.2 million bales. The performance of TCP has
reportedly been found far below satisfactory level as they
operating on ad hoc basis by engaging unqualified and
in-experienced workers temporarily and hiring the services
of some cotton classers from Pakistan Cotton Standard
Institute (PCSI).
Even then TCP is under-staffed and have a weak base of
infra-structure facilities. Their own storage capacity has
been exhausted and are now reported to have hired some
warehouses from private sector in upcountry stations. TCP's
final purchases may touch the level of about 1.7 million
bales.
Their purchase price is Rs 2,159 per maund ex-factory for
average Grade 3 with staple length of 1-1/32 inches against
its market prices of Rs 1800 - 1850 per maund.
The growers are getting much below the Government's assured
price of Rs 925 per 40 Kg of seed-cotton but the ginners are
getting the Government price of Rs 21,59 per maund. It means
TCP is paying some Rs 300 - 350 per maund over and above
market price.
The TCP should have at least raised its standard of quality
to Grade 2 or even Grade 1 with staple length 1-1/16 inches
to reduce the Ginners' profit from Rs 350 to Rs 200 per
maund which the ginners can happily accept.
This would have encouraged the ginners to produce better
quality cotton. Some reports indicate that TCP received lots
of cotton with quality lower than Grade 3 at this high price
of Rs 2,159 per maund.
The ginners appear quite dissatisfied with TCP's performance
as they have to face great problems at every stage specially
in getting ad hoc payment. There is no automatic system
which can guarantee prompt payment of 90 % price of cotton
within the stipulated period of time. The ginners have to
apply some sort of jack to get the payment.
In its second Tender, TCP received the best bid of US Cents
39.53 per lb FOB for 10,000 bales from Cargill but after
opening the tender bids, one party on 4th top position
reportedly sent a counter offer of US Cents 40.15 lb to TCP
and TCP also obliged this party and other top three were
countered the same price.
For the satisfaction of the international merchants, TCP
should adopt a clear cut and transparent system which should
meet the requirements of equity and justice.
Lint prices in the local market remained depressed the
reports of larger arrivals of seed-cotton. However, the
spinners and exporters picked up better quality lots at
comparatively better price around Rs 1,900 per maund ex-gin.
Average cotton was selling between Rs 1800- 1850 while
low-grade cotton was selling down up to Rs 1,600 per maund.
In the coming couple of months, cotton prices specially of
low grades may go down in view of larger low grade cotton
stocks at the close of arrivals by end February,05.
This low-grade cotton may find way in China , Thailand,
Korea Republic and other countries of this region on price
viability.
India is reported to have allowed a subsidy of US cents
3.0/lb on export of 2.0 million local bales from current
crop.
The Cotton Corporation of India and Maharashtra Co-operative
Societies would handle export of 2.0 million bales. As
reported earlier, India is very much interested in exporting
its cotton to Pakistan via Wagah border.
Cotton prices in the international market picked up easy
tone. March 05, contract closed at 42.90 down cent 1.23 and
May 05 contract finished at 43.49 down only cents 0.59.
The international cotton market has as yet not found its way
but with the close of quota regime and start of quota-free
regime under WTO from . January,1, 05, cotton prices may go
up at least on psychological ground.
With a view to reduce the apprehension of the textile
importing and textile competing countries of the world in
respect of complete domination of Chinese textile goods over
US and EU cloth and textile markets, China is reported to be
taking some measures to restrict its exports of a few
sensitive textile items.
On the other some countries are demanding postponement of
quota-free regime for three years till 2008 but acceptance
of this demand appears quite difficult.
Courtesy: Business Recorder
|
Pakissan.com;
|
