International cotton market target at two dollars a pound

KARACHI  (February 14, 2011) : Now, cotton production in 2010-11 season is estimated around 12.0 million local weight bales as by 31st January, 2011, seed-cotton arrivals had reached equivalent of 11.1 million local weight bales.
When this analyst visited cotton areas of Sanghar district, many fields were found having cotton on plants. Up-country reports also indicate that cotton can be found in fields in Punjab. In fact, due to heavy rains and floods in last July and August months, the development of crop was delayed. In some areas, flower-shedding and in some areas re-sowing extended the cotton season. On the 1st September, 10, seed-cotton arrivals were short by 19.91% in Punjab and by 22.65% in Sindh while on national basis the shortage was 22.95% which later was reduced to 19.52% on 15th November 10 and then to 11.26% on 1st February, 2011. If we harvest a cotton crop of 11.8 million bales, the shortfall may be further reduced to 7.1% from last season when we produced 12.7 million bales.
There are indications that in some cotton areas of Sindh and Punjab which were affected by floods, sowing of cotton was done after rain/flood water receded or dried up and this crop is maturing now maturing in late-February and March / April months.
The amount of such cotton production may be around 200,000 bales. Plants are reported to have developed bolls which may open as the temperature increases in coming days. Cotton farmers in early sowing areas of central Punjab and lower Sindh are reported to have started new crop cotton sowing which may be harvested in middle of coming May month. In view of record high cotton prices, cotton farmers are making haste in cotton sowing to take advantage of the high cotton prices in next cotton crop.
Understandably, cotton area may be increased by 10-12% to 3.4 million hectares. In view of the extension of the running cotton season and early start of next cotton season, seed-cotton arrivals may maintain continuity till next crop. There are strong indications that cotton area in almost all prominent cotton producing countries such as China, India, US, Pakistan and Uzbekistan would be increased considerably. This season, cotton harvested area in US was 10.973 million acres and next cotton season sowing intentions are estimated around 12.514 million acres - the increase is more than 14%. Thus US may harvest a crop of over 20.0 million 480-lb bales next year. If all things go normal, Pakistan may harvest a record bumper crop of 15.0-15.5 million local weight bales in 2011-2012 season, which may meet our season's cotton requirements.
To increase our cotton production at least matching our cotton requirements, Pakistan has to adopt G M technology, which would help us in boosting our cotton production and productivity as did India, our neighbouring country.
Cotton prices have continued their upward journey to new highs in local as well as international markets. In New York cotton future market, prices have touched the historical high of 1.94 US Cents per pound on last Friday (11th February 2011) in March 11, contract and the next target may be to touch the level of US $2.0 per pound. Before this, the historically high traded cotton price was US Cents 1.90 per pound some 150 years ago in American civil war in 1864. Only for the sake of information and interest of readers, the following data is presented.
In 1937-38 season, US produced a record high crop of about 19.0 million bales which was exceeded by China after 46 years in 1983-84 season by producing 21.3 million bales and US broke its own record after 55 years in 1994-95 by producing 19.662 million bales. US produced so far record high crop of 23.89 million bales in 2005-06 season. In this running cotton season, US is producing 18.32 million 480-ln bales while last season in 2009-10, it produced a lower crop of 12.19 million bales. In 2009-10, US exported 98.76% of its production. Generally, cotton export and cotton consumption are inversely related with each other. If cotton consumption goes up export goes down and inversely if cotton consumption goes down cotton exports go up.
In the local market, lint cotton prices have touched the ever high mark of Rs13,000 per maund of 37.324 Kgs ex-gin which works out equal to US Cents 185.0/lb ex-gin. As the lint price is going high shy-rocketing, the volume of cotton business is becoming lesser. Money market has become quite tight in view of liquidity crunch and business is squeezing. In view of present poor working conditions and high raw cotton prices, our total cotton requirements may be between 13.0 - 13.5 million bales. As such, we may be obliged to import.
There are reports that in view of better performance in exports, Pakistan's export target of US $20.0 billions may be increased to US $22.0 billions. If we look into this matter, we find that due to exceptionally high prices of textile and other products, our export earnings may be higher.
Pakistan's spinning mills are reported to have bought some half a million cotton bales of 480-lb each from US during this season but have also booked some 143,000 bales of next crop. This is a new phenomena in cotton import business.
This season, world cotton production is reported at 115.45 million 480-lb bales and consumption at 116.58 million bales. Thus the production is short from consumption by 1.13 million bales while last year cotton production was short from consumption by a large margin of (118.52-101.54) =16.98 million bales. However, beginning cotton stock last year was at 60.52 million bales but this season it is 43.85 million bales. Thus, the matter of statistics is not so poor that it can trigger cotton prices up to more than 100%. Actually, there has been abnormal increase in major commodity prices in the world and as such cotton is no exception to this abnormal increase in prices. Money market expanded widely but housing industry has sacrificed high cost.
India played its pivotal role in distortion of cotton market this season. Presently, cotton prices in Indian local market touched the ever highest level of Indian Rs60,000 / candy ex-gin (= US Cents 168.20 cts /lb) Now, just look at the difference in cotton prices between Pakistan and India. In Pakistan it is equal to US Cents 185.0/lb while in India it is at 168.20/lb. ex-gin. Indian spinners as well as the exporters are getting lint cotton cheaper than Pakistan by US Cents 20.42 / lb. Reportedly, Indian ginners are closing their operation as high seed-cotton prices are not matching with lint cotton prices.
India made frequent changes in cotton export policies. India is reported to have committed breach of contract and did not hour its cotton export commitments. Pakistan had bought some one million bales but has received only 10% shipments. Indian cotton exporters negotiated cotton prices many times with the importers when prices register increase. In China, cotton activities are resuming after vacations of Lunar New Year and the recent increase in international cotton prices is attributed to return of Chinese buyers in cotton market. The reports of drought in the North China Plain are causing some concern about the possible size of next cotton crop.
Until new cotton crop starts reaching markets / ginneries, lint cotton prices may maintain this high level of cotton prices. In May month, we may expect harvesting of new cotton crop which may decrease cotton prices.

(Source: http://www.brecorder.com/component/news/single/625:news.html?id=1155223)