However, final out-put figures is estimated between 14.3 - 14.5 million running bales. Reported total unsold balance of 10.5 million bales as on 16th February, 5 may come down to around 750,000 - 800,000 bales. The cotton world is very much surprised over very high percentage of growth in cotton production this season over last season.
This season production may be taken as 14.5 million bales while last season it was 10.0 million bales - gross increase is 45 percent, the highest percentage in the world.
Actually, this season cotton acreage was 3.20 million hectares - 10 percent increase over last season. Deduct 10 percent production ie 1.45 million bales from 14.50 million bales to make it 13.05 million bales. The levy of 15 percent Sales Tax on raw cotton which was applicable in previous years has been withdrawn this season.
It was generally estimated that to evade payment of Sales Tax, about 1.0 million bales were traded off the record and this season these 1.0 million bales have been put on record which further reduces the real growth from 13.05 million bales to 12.05 million bales.
Thus real growth in production comes to only 20 percent which is quite normal and in line with other countries like China, USA and India. The Trading Corporation of Pakistan (TCP) is already holding unsold lint cotton stocks of 1,570,000 bales and the Government of Pakistan has yet to decide whether to sell these stocks in local market or in export or in both.
This decision will greatly influence the local cotton prices in coming weeks. The ginners are in comfortable position as they are carrying thin unsold stock of 800.000 bales and new crop would not be available before next September.
If TCP decides to sell its cotton stocks to local spinners, local prices are likely to comes down to the level of Rs 2,200 per maund and of if TCP sells in exports market, local lint prices may further improve. TCP has got the chance to cover up its poor performance and malpractice in cotton procurement operation by earning market profit.
This cotton is costing TCP around US Cents 46-47.0/lb ex-Karachi warehouse and present level of local and export prices is the same around US Cents 47-48/lb ex-TCP warehouse.
Market reports indicate that TCP may sell bulk of its cotton stocks to China when Chinese Prime Minister would come to Pakistan to inaugurate Gwader Port in the month of March. Recent visit of a Chinese delegation to TCP office and to cotton areas is considered as a preparatory one.
Ginners want the TCP to sell its cotton stocks in exports while the local spinner want TCP to sell this cotton to them. Both have divergent interests. To balance the situation and keep the local prices at a reasonable level, TCP should equally divide this cotton between local and export buyers. Our domestic cotton consumption is on increase but unfortunately reliable figures are either not available or made not available which cause speculation and fluctuation in cotton prices.
Trade estimate mill-use this season around 14.0 - 14.5 million local bales and it may go up to 15.0 - 16.0 million bales next season in view of ongoing huge expansion in spinning capacity. This season, our imports may be equivalent to 1.28 million local bales and export shipments around 800,000 bales. Thus the excess of imports over exports around 480,000 bales would thus be added to cotton inventory.
Now, estimate what would be the size of our next cotton crop? Taking into account the different cotton production factors such as replacement crops of sugarcane and rice, availability of inputs, weather forecasts, growers' intentions, government policies, cotton demand and prices, crop size is safely and realistically put between 13.0 and 13.5 million local bales.
Local cotton market remained form during the last week. Lint prices improved by Rs 100- 125 per maund from Rs 2,225 to 2,350 per maund for better quality cotton. Export parity now stands around US Cents 50.0/lb FOB Karachi for T-1467 staple 1-1/16 - 1-3/32 inches.
Other growths particularly US, Indian and Nigerian are found comparatively cheaper. International merchants are offering different growth to Pakistani buyers.
Globally, some experts consider a drastic drop of 2.2 million acres in world cotton acreage in view of lower cotton future prices. In 2002, cotton future prices were at lows and acreage dropped. World cotton production next season is estimated around 104.7 million bales even lower than estimated world consumption.
World Beginning stocks this season was 35.6 million bales while next season it would swell to 47.1 million bales - up 32.3 percent. China factor is very important in setting the directions of market prices.
Reportedly, China's imports this season are estimated between 8.5 - 9.0 million bales and so far some 3.0 - 3.5 million bales are understood to have been booked. Thus China is likely to buy some 5.0 million bales from the world market. US export sales are close to 11.0 million bales against the season's target of 13.0 million bales.
CIS is holding sufficient unsold stocks, also India has some 2.0 million bales for exports sales and African countries also have unsold stocks. Bulk buyer is the China.
Cotton stocks with Chinese mills are reported very low and China requires cotton imports on average 1.0 million bales a month till next cotton season. China is emerging as the most potential cotton consuming country. In 2000, China consumed 23 million bales while next season it is estimated around 41 million bales - an increase of 78.2 percent.
Some reports indicate that due to limitation in increasing acreage under cotton, China's total deficit next season may go up to 17 - 18 million bales and its import requirements may be around 14.0 - 15.0 million bales after using cotton from its reserve stocks.
If these stories come true, the present infrastructures do not appear compatible with the Chinese explosive cotton demand. China will have to take necessary measures to control the situation.
The whole existing global marketing system may appear to be in jeopardy. Next couple of months are very crucial from marketing point of view as lion China has to come out of its den to collect cotton from different sources to feed its starving textile industry.