THE COTTON CRISIS
Huge increase in cotton and yarn prices posing threat to textile exports
By AMANULLAH BASHAR
Oct 27 - Nov 02, 2003
While the textile industry was viewing the abnormal high in cotton prices as what they called cotton crisis which they fear may hit the export target, the optimists were looking as a positive move as the happy growers would be producing a much better crop next year.
The ginned cotton prices had touched a level around Rs3,500 per maund at local market while the international cotton prices were shot up to 82cent last week.
Although the price hike was attributed the shortfall in the current cotton crop, yet the fact of the matter is that the world cotton market is also facing a shortfall due to decline in crop size in the cotton producing countries like China, India and the United States which helped pushing up the prices.
Country like China, which is termed as one of the large cotton exporting country, has to meet its requirement through import of at least 4 million bales. This situation has extremely attractive for the cotton exporters due to handsome prices being offered. However the spinners are not happy over the situation due to fears that more cotton may be exported out of the country and they would be forced to import cotton at a higher prices.
The textile sector is pressurizing the government to resolve the situation either by offering subsidies on cotton price or allow them to import cotton from Central Asian States or from India where the price is still low as compared to the prices in Pakistan.
Farooq Umer, Chairman, Cotton Association while talking to PAGE did not agree to the reports that there is a shortfall in cotton crop. He was of the view that a better return to the growers may encourage them to harvest even a better crop next season.
Some of the leading textile units have expressed their serious concern over the situation giving a threat to close down their units if the timely steps for correction of the situation were not taken by the authorities.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has formed a seven-member committee to sort out cotton crisis currently a talking point of the cotton and textile trade in Pakistan.
The committee has been assigned to prepare a report on the issue faced by the cotton and textile industry, and get the issue resolved amicably by having meetings with the commerce and finance ministers.
The committee comprises Dr. Ikhtiar Baig, Abdul Shakoor Khatri, G.R. Arshad, Iqbal Dossa, Dr. Shahzad and Iqbal Umar.
Currently, cotton textile sector is passing through a serious crisis as the sudden increase in cotton and yarn prices in the country has jeopardized production schedule of value added textile sector and fulfilling export commitments.
The textile sector generally made export commitments 6-12 months in advance and obviously the export rates are determined on the assumption of cotton and yarn prices to be prevailed in the country. However, the abnormal increase in cotton prices may hit the exporters of the textile products such as ready-made garments, towel and knitwear.
The price hit textile sector on one hand has suggested the government not to allow export of the local cotton while is looking into possibilities to import from Central Asian States as well as from India where the cotton prices are still lower as compared to local market prices.
Central Cotton Committee in its report has projected a shortfall of 1.4 million bales.This estimate is based on production of 8.2 million bales, against the consumption, which is estimated at 9.6 million bales. However, the financial report about the size of crop has yet to come. Contrary to the assessment of shortfall in the crop, the Karachi Cotton Association was of the view that a better per acre yield of cotton is suffice to substantiate that the crop target of 10.05 million bales was well within the reach of the growers and it may be hopefully achieved when the size of the crop was finally assessed.
In the cotton policy, a tug of war between the growers-ginners and the textile mills is a common sight in the cotton trade of Pakistan. The textile industry always claim for a shortfall to pressurize the government for imposition of a ban on cotton exports, the growers on the other hand obviously have a stand for a free hand on export of the produce to get maximum benefit of their produce.
The world cotton faced a gap of 4.6 million bales between production and demand. This situation is much attractive for the growers as well as the middle in Pakistan to get benefit of the situation. It is learnt that hiding the actual size of the crop by the elements involved in the trade is also one of the reasons behind pushing the cotton prices in Pakistan. Besides the domestic cotton politics, the hike in international prices to a record high of 82 cents is also one of the major reasons for price shoot up in Pakistan.
The shortfall in world cotton production is projected in spite of 5 percent increase in output. As against 84.45 million bales produced in 2002-03, the production in 2003-04 is expected to rise to 92.8 million bales. The world textile sector is likely to go up its consumption from 95.69 million bales of last year to 97.4 million bales in the current year.