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Cotton market maintains bullish tempo

S A AZIZ SHAH

KARACHI: Most of the cotton players are now converging their crop estimates around the level of 10 million bales (170 kg each) ex-gin. The Cotton Crop Estimation Committee has revised its estimates down to 10.5 m bales ex-farm and its next meeting is scheduled to be held on the February 7, 2000 in the office of Pakistan Central Cotton Committee, here. The general impression of a bumper cotton crop of over 12 million bales reportedly given by some members of the Crop Estimation Committee, also depressed the cotton market. The committee earlier estimated the crop size at 11.5 million bales. The loud noise of a bumper crop misled the growers who decided to sell their produce at cheaper rates. Although this phenomena works almost every season but it had increased severity this season. When about 85 percent of cotton crop has moved out of the hands of the growers, crop estimates were lowered which led the price go up appreciably causing loss to the growers and benefit to the spinners and ginners. By 15 January, 2000, total seed-cotton equivalent of 8.7 million bales was reported to have arrived in the ginneries and by the end of January, 2000, it is now estimated around 9.2 million bales. The Growers have very little say in the estimation of cotton crop by the committee. As a matter of fact, the governmental element prevails upon the committee members. The statistical data compiled by Pakistan Cotton Ginners' Association, of which authenticity is reported to be doubtful, is considered to be an indicator for ascertaining the size of the crop. Sometime back, this analyst had given a proposal for collection of crop movement data through banks which was widely acclaimed in cotton circles, but, the government ignored it. The government should adopt some viable and accuracy-oriented system of the data which may help the economists and scientists to plan national development programmes in a better way. The attitude of the government has been quite indifferent towards its cotton departments/institutions/committees/organisations which have failed in producing the desired results. Pakistan Cotton Standard Institute which has cost Pakistan around Rs 500 millions and a long time of more than 18 years, has not yet taken off. The system evolved has passed all tests and experiments and its implementation would yield an extra income of about $250 million per year in foreign exchange by improving the quality of Pakistan cotton to international standards. The proposed Pakistan Cotton Standards Act has been approved more than once by the select committees of the defunct parliaments and enforced many times through promulgation of ordinances but to no avail. Every now then attempts are made to deform or cripple PCSI so as to serve the vested interests. Cotton growers and the country would be the most strong beneficiaries of this system.

Domestic cotton market staged large improvement partly due to strong statistical position and partly in sympathy with the rise in international prices. Although the rise in prices was evident but not so steeply. Local prices jumped from the lowest level of Rs 875 to Rs 1,300 per maund ex-gin for lower grades while higher grade cotton is fetching better price around Rs 1,800. As visualised earlier, higher grade cottons would be in demand and would command better price. The difference of lowest and highest grade cottons now stands around Rs 450 per maund of 37.324 kg ex-gin i.e. more than US cents 10 per lb. The domestic consumption of cotton during this season is likely to reach the level of 9.4 million bales posting increase of about 10 percent due to favourable yarn manufacturing conditions. The Trading Corporation of Pakistan have already procured 625,000 bales which are intended to be sold in export. The private exporters reported to have declared foreign sales of 469,000 bales against which 83,642 bales are reported to have been shipped. So far about 190,000 bales (480 lb each) are reported to have been imported from different sources by the local spinners. The amount of balance sales to India should be treated as settled at par and should accourdingly be adjusted in the total sales so as to correct picture of the cotton affairs. The Karachi Cotton Association which monitors all cotton marketing activities should do it. The government is understood to be working on some plans which may safeguard the interests of the growers in time of crisis. A cotton upgradation/stabilisation fund should be established for this purpose which may be used for the benefit of the growers. The profits which TCP makes in disposal of its cotton stocks should also be diverted to this fund.

New York furtures remained bullish. May, 2000 contract has gone very close to the level of 59. The A and B indices are inching up slowly and gradually which shows the strength of ready market. China's selling factor appears to have lost its power and has become redundant. International cotton market is likely to remain bullish in future with some adjustments and reactions of bears. Better grade cotton equal to Midding Ñ SM with staple length around 1.1.8 is likely to remain in high demand. ELS cotton is also expected to be in the limelight. The TCP which is holding a stock of 625,000 bales should make wise and calculated moves to amass the benefits of bullish market. Some of the steps already taken by the TCP towards making export sales are reported to have become disputed. The defunct Cotton Export Corporation already stands blacklisted by the Liverpool Cotton Association, UK due to default in meeting the contractual obligations. So the TCP is required to play more cautiously, professionally and efficiently in export performance. The Indian merchants who had received shipments of Pakistan cotton are now reported to be offering Pakistan cotton to Bangladesh, Indonesia and other countries at comparatively cheaper rates. It is, however, unfortunate that sufficient surplus cotton is not available with Pakistan to avail of this opportunity of higher prices.