Cotton output expected to reach 12m bales

Crop shortfall pushes prices to new peak of Rs11,800.

KARACHI: Farmers have supplied 11.38 million bales of cotton to the market in the current season so far and total production is expected to reach 12 million bales, which is short of the target following damage to the crop in floods last summer, market data shows.

At the start of the season in the middle of last year, the country was expected to produce 14.6 million bales of cotton, but the crop is likely to show a shortfall of 2.5 million bales, causing prices to peak in the domestic market. Cotton spot rate rose to Rs11,800 per maund (37.324 kg) while in the open market prices surged to as high as Rs13,000.

The domestic market is mainly taking cue from the New York cotton exchange where prices have soared to a record $2.04 per pound backed by strong demand from China where floods have damaged the crop. Textile mills were also making heavy purchases following the global economic recovery and shortage of the commodity after floods in China and Pakistan.

The shortfall has also prompted the need for higher imports which may reach around four million bales this season, said cotton market analyst Shakil Ahmed. Dealers are making imports from Brazil, Argentina, USA, Central Asian States and African countries, he said.

India has restricted export of the commodity to Pakistan, seeking buyers who could pay higher prices. In the second half of last year, Pakistani traders had contracted to buy 900,000 bales of cotton from India, which produced a bumper crop of 32.5 million bales, but Indian dealers backed out after prices soared to record highs in the international market. They only supplied 65,000 to 70,000 bales to Pakistan, Ahmed said.

He said ginning factories were holding back supplies in the domestic market, anticipating further increase in prices.

“Spot price may rise to Rs12,500 per maund before the close of the season in March or April,” he added.

Published in The Express Tribune, February 19^th, 2011.