KARACHI, July 10: Pakistan's textile industry and cotton economy has come under severe stress following a ten cents fall in the US cotton prices down to 47 cents a pound within a week.
The downslide of the cotton prices is expected to continue in the future as according to the local cotton business circles China has walked out from the international cotton purchasing arena and now expects to reap a rich crop of 29 to 30 million bales. China's cotton output last season was about 22 million bales and its aggressive purchasing pushed up the international cotton prices to new heights in 2003.
An interesting feature of the current phenomenon is that the prices of US cotton are increasing in the wake of the reports that crop in the US would drop down to 17.60 million bales this season from 18.25 million bales last year. "This is because China has ceased to be a cotton buyer and American domestic textile industry is in process of being phased out," a cotton watcher said. He said that China is such a big player in the international cotton economy that if it enters the market to buy the prices go sky high and as it starts retreating the prices touch floor.
"The US cotton prices are down from 57 cents a pound to 47 cents a pound in a week's time," a senior official of the Textile Commissioner's office informed Dawn on Saturday. "A ten cent fall on a pound of cotton within a week has sent shivers among the farmers and the textile mill owners," he said.
"Textile importers abroad are now reluctant to lodge letters of credit with us," Waqar Monnoo, the chairman of All Pakistan Textile Mills Association told Dawn on Saturday. He said the importers who had opened letters of credit for import of yarn and other textile products "now want us to review the prices".
Waqar said that the last quarter of the cotton year (September-August is the cotton year and last quarter is June- August) has proved to be quite an upset for the textile business because "we bought cotton at Rs3,100 to Rs3,200 a maund and now the prices are down to Rs2,600 a maund."
Quite a big number of textile companies reported favourable business conditions in the first half of 2003-04 despite initial hick ups when there were reports of prices flare up and the domestic crop hit by the virus. Conditions were found by and large stable in the third quarter but started deteriorating in the last quarter.
There was panic cotton buying early last season which had pushed up cotton prices to Rs3,500 a maund. In sharp contrast, the cotton season begins this year with a price depression that apparently has come as a shock to the growers, ginners, spinners, weavers and all the players in chain of cotton economy. The ginners are stuck up with about 450,000 leftover and unsold cotton bales from the last season, which they want to be picked up by the Trading Corporation of Pakistan.
The Aptma Chief Waqar Monnoo was reluctant to offer any comment on the domestic cotton prices in the coming weeks when picking begins in the fields. "It is too early to predict anything on domestic cotton prices," he said. He recalled the cotton prices at the beginning of last season were high because of the wrong estimates of the crop.
Anwar Tata, a former Chairman of Aptma spoke of the textile mill owners' distress who bought cotton at 76 cents a pound a few weeks ago are now seeing the cotton prices going down to 47 cents a pound.
Cotton watchers predict a 10 per cent increase in the cotton output this season as over last season mainly because of expected increase in cotton crop in China. Initial estimates put global cotton output at about 103 million bales (480 pounds per bale) as against 92 million bales last season. India is also expected to show marginal fall in cotton output but Pakistan is expected to give a better yield.
"But it is all too early and premature," a source in Karachi Cotton Association said. The cotton picking in Sindh begins from August and in Punjab from September. It all depends on rains-early, delayed, too little or too much rains-all affect the cotton crop.
Cotton crop estimate in Pakistan depends on primitive system based on the calculations done by the patwaris. Cotton crop estimates in Pakistan have always been a source of controversy.