Cotton prices appear depressed on higher arrivals and increased deliveries

Cotton prices appear depressed on higher arrivals and increased deliveries

Lastly and finally, the tyrant monsoon season has expired and there has been no rains in the country in the last fortnight. The Government of Pakistan and non-governmental organizations are engaged in surveying the loss of agricultural crops, human life, property, livestock, housing and other irrigational and communicational infrastructure facilities which may run into billions of rupees excepting loss of human lives. Last year, the damage was intensive but this year it was extensive and somewhere intensive also. This year, the loss to human life and livestock appears larger than last year. Last year, loss was due to floods and this year more by unprecedented rains and less by floods. This time, the loss to cotton crop only in terms of amount of seed cotton has been estimated equivalent of over 3.0 million bales costing around Rs.120 billions. As per present position, rain-flood water is still standing in fields inundating cotton plants as such there is no question of fresh picking till the clearance of fields. Seed-cotton which had arrived in ginning factories before start of heavy rains is being ginned after drying to possible extent.  However, field situation is improving and stray cotton picking has started in fields cleared of rain water. 

The much awaited cotton arrival and disposal report of the Pakistan Cotton Ginners’ Association (PCGA) has been released on the 3^rd. October, 11. Accordingly, this report covers cotton activities upto 30^th September-11 and figures are mentioned as under:  

Period                       Arrivals in Sindh      Arrivals in Punjab          Total arrivals

Up to 30^th Sept-11         911,653 bales             1,887,120 bales              2,798,773 bales

Up to 30^th Sept,10       1,445,918  “                  1,171,400   “                   2,617,318    “

Variation  (%age)          -36.95                         +61.10                              +6.93

                                         

In my last cotton report (25^th Sept-11), total seed-cotton arrivals up to 30^th September-11, was estimated between 2.8 and 3.0 million bales.  The trend of arrivals in Punjab indicates a bumper cotton crop which may easily cross the psychological level of 10 million bales and may go up to 11 million bales. The trend of arrivals in Sindh shows that rain-floods have substantially damaged cotton crop and on the basis of field reports total Sindh crop may be between 2.0 and 2.5 million bales out of 4.7 – 5.0 million bales initially estimated. Thus, on national basis, we estimate cotton crop between 12.0 – 13.0 million bales. With the passage of time, the crop figures would become more specific and closer to reality.  The impact of latest cotton arrival data is considered to be tilting towards easiness.  This time, number of ginning factories in operation was high at 765 while last season it was 500 – the increase is 53%. This trend shows that ginners were expecting a real bumper cotton crop of 16.0 million bales this season and they opted to start ginning operations somewhat earlier than last season. Up to date seed cotton arrivals in four main districts of Sanghar, Mirpur Khas, Hyderabad and Nawab Shah of Lower Sindh,  severely affected by rains and floods, have been averagely decreased by 50.75 %.  These four districts produced 70 % of total crop and by applying the same percentage this season, these four districts lost some 2.0 million bales and about half a millions bales are estimated to have been lost other districts, making total loss at 2.5 million bales. Another equally disturbing aspect of the present situation is that sowing of wheat crop may be missed in these rain-flood affected districts of Lower Sindh  where standing water is a great threat. Spinning mills cotton purchasing from ginneries this season is about 76 % while it was 74 % last year. Domestic exporters are reported to have procured some 50% of their export sales which are estimated around 120,000 bales.  Of course, the exporters who had sold cotton at 80-85 cents a pound level and were expecting local market to match export parity, are looking for some ways to get out of this crisis. Most of the export sales are reported for China. 

New York cotton future market is moving in narrow margin and is now around 100 Cents a pound. The financial crisis in Euro zone countries is deepening whereas in USA debt crisis is adversely affecting its economy. Japan is facing drastic fall in its exports due to over-valuation of its currency against other major currencies. China is feeling the burnt of depression in European and US markets which are main importers of Chinese textile and other products. Prices of international commodities are under selling pressure, Gold is selling at US $ 1,662 per ounce and crude oil at US $ 76 per barrel, Main stock companies indices such as S&P 500, Dow Indu and Nasdaq are running low. International merchants are engaged in settlement of their last years high rate cotton bargains and the buyers have not as yet returned to normal business working. China has slackened its cotton activities because of slow off-take at European retail stores in view of continuing recession. Cotton activities have slowed down in Bangladesh again because of the same reason of slow sales in European stores. Due to instable financial and economic conditions in Europe and USA, most of the  commodity markets  including cotton are looking for specific direction in medium long term.

Cotton prices in Pakistan are quoted between Rs.5,00 and 6,400 per maund of 37.324 Kg ex-gin depending on the quality of lint cotton. Seed-cotton arrival is picking up specially in Punjab and prices may lose some ground on selling pressure. Yarn market is reported to be dull on the face slow off=take in local as well as exports.    

                                                            ************************