The International Cotton Advisory Committee has painted a grim picture of Pakistan’s cotton, saying the output may plunge 9pc in the new season owing to persisting ‘lack of enthusiasm’ among the farmers.
The farmers are not getting right prices for their produce for some time and this has compelled many of them to plant wheat instead of cotton this year. Abandoning cotton crop is a worrisome development. One may note that the government used to fix minimum support price for phutti in the past but stopped doing so for to move towards the free market for commodity trading. It did resum the support price in October last but for a selective few, not across the board.
The area under cultivation, according to the ICAC, is expected to fall 5pc to 2.7m hectares and production 9pc to 2.2m tonnes in the new season. Farmers start sowing cotton by the end of March and harvesting begins from end-June.
Despite many experiments based on international and national research, cotton production remains static at 13-15m bales
However, the low cotton prices and the slow start to procurement by the Trading Corporation of Pakistan in the current season induced many farmers to end harvesting early and plant wheat instead, the ICAC said in its monthly review. In November last, cotton prices had plunged to a three-year low of Rs5,000 per 37.324kgs(maund) on weak demand. Prices fell despite the government’s purchase of at least 1m bales at higher prices of Rs 6,864 from farmers in an effort to support farmers.
The prices, however, rose for a while above the psychological barrier of Rs5,000 per maund in the first week of February causing rush among buyers to replenish their stocks at a higher level. But the buying surge was attributed to a rise in the dollar’s value against the rupee which has improved export parity of textile goods. One reason for thin trading at Karachi’s cotton market is stated to be the offshoot of a tug of war over prices between the ginners and mills.
Meanwhile, the rising imports from India of cheaper fine count yarn, which is used to make lawn, has triggered confrontation between value-added and spinning sectors. While the latter, backed by All Pakistan Textile Mills Association, is demanding 15pc regulatory duty on Indian yarn to protect 30 spinning factories, mostly located in Punjab, from going out of business, the value-added sector of textile industry opposes any new curb (5pc duty is already in force) and wants the cheaper yarn imports to continue. The spinning industry is finding it hard to survive for Indian yarn is not the only threat, the Chinese have drastically cut yarn imports from Pakistan.
The cotton ginners’ body has meanwhile claimed that the country may have a bumper cotton crop this season, basing its prediction on a rise in phutti (seed cotton) arrivals by 10.16pc to 13.958m bales up to January 1, 2015 compared to 12.670m bales in the corresponding period last season (2013-14).Both Punjab and Sindh have recorded higher cotton production this season, as suggested by the latest figures released by the Pakistan Cotton Ginners’ Association (PCGA). The hard fact is that despite many experiments based on international and national research, the cotton production in the country remains static at 13-15m bales.
The ICAC forecast says that global prices of cotton will remain depressed in the 2014-15 crop year. As a result, world cotton area in 2015-16 is projected down 6pc to 31.6m hectares and production to fall 6pc to 24.6m tonnes, which is the lowest volume since 2009-10. But world cotton consumption is expected to increase 2pc to 24.7m tonnes, making 2015-16 the first in five seasons where consumption overtakes production.
Meanwhile, the Cotton Association of India claims that its country may topple China as the world’s largest cotton grower next year as farmers in India plan to plant cotton on the biggest area ever, boosting production to near-record levels. The harvest is likely to be 39.63m bales of 170kgs each (375 pounds), or 6.74m metric tonnes, in the season starting October 1.That’s more than the 6.04m tonnes estimated for India by the International Cotton Advisory Committee.
The ICAC has endorsed India’s claim, saying that assuming yield is similar to the last few seasons, production could reach 6.5m tonnes, making India the largest producer of cotton. With China cutting down its imports of cotton, India hopes to step up exports to other countries including Pakistan, Bangladesh, Thailand, Indonesia and Vietnam. The sudden withdrawal of China from the market has caused a slump in cotton prices the world over and Pakistan is no exception. Moreover, higher crops in most of the cotton producing countries has further aggravated the situation, with raw cotton prices taking a nose-dive. China had been stock-piling cotton from the world market since 2009.
Published in Dawn, Economic & Business, February 16th, 2015