ANALYSIS: weather conditions directly influencing cotton prices

KARACHI (September 16 2004): All eyes are set on weather conditions. Any change in weather conditions would directly influence cotton crop, either quantitatively or qualitatively, in almost all cotton producing countries of Northern Hemisphere.
In Pakistan, cotton crop is progressing well under almost conducive conditions. Almost half of the critical period has passed and about a fortnight is left.
Harvesting in early sown areas is in progress, while in other areas cotton crop is passing through a critical period.
On my early this week visit to some cotton areas of Hyderabad and Sanghar districts of Lower Sindh I found crop conditions from good to very good in about 80 percent, very good to excellent in 15 percent and poor in 5 percent areas. Cotton plants up to top had flowers in good numbers.
It is hoped that there would be very low shedding of flowers due to calm weather forecast. Overall position of the crop is ‘good’ to ‘very good’ and hopefully a bumper crop of 12.0 million 375-lb bales may be harvested this season.
However, I got worried when I spotted some plants in some fields suffering from some disease which turned the plant leaves redish and also the bolls, resulting in withering of the plants. I remember that one or two years ago the same disease had largely affected cotton plants in these two districts and it had damaged the cotton crop.
The growers of this area and Sindh Agriculture Extension Department people should take notice of this development and immediately take necessary steps to check its spread to other plants and areas.
The growers, Agri-Departments and all concerned agencies should be on high alert to effectively meet any eventuality. Any delay or negligence in this matter may be disastrous for cotton economy.
On examination, quality of phutti arrivals in Sanghar district was found quite satisfactory except that it contained excessive moisture which not only reduces brightness of cotton colour but also makes ginning rough.
On Monday, September 13, ginners were quoting Rs 965 to Rs 975 per 40 kg ex-gin for phutti. Cottonseed was selling at Rs 360-370 per maund, while lint cotton was at Rs 2,200 to Rs 2,250 per maund of 37.324 kg ex-gin.
The ginners said that arrivals were heavy and compounds / courtyards of many factories were found jam-packed with seed-cotton.
Saleable cotton was not found in any factory; rather the ginners were oversold in lint cotton.
Lint cotton prices in local market are following New York cotton futures which are fluctuating, mostly on weather reports. However, the tone was easy due to larger arrivals.
On last Monday, lint cotton sales of Shahdadpur (District Sanghar) station were reported at Rs 2,200 to Rs 2,250 per maund ex-gin, but on Tuesday prices firmed up by Rs 50 on high New York advice and again on Wednesday on lower New York advice, local lint prices showed some weakness and were quoted around Rs 2,250 per maund ex-gin.
Quality-wise. lint cotton of Mirpur Khas area was generally discounted by Rs 50 -Rs75 per maund against lint cotton of Sanghar district.
Arrivals of seed-cotton in Punjab were also on the increase and a good number of ginneries in northern Punjab have also resumed operation in new crop.
The spinners, after sweeping lint cotton of first pick in Lower Sindh, either move to late areas of Upper Sindh or to fresh stations of northern Punjab. Then accumulation of unsold stocks starts in Lower Sindh which would develop selling pressure on ginners forcing them to reduce prices.
New York cotton futures appeared operating mainly on weather reports. On the reports of storms / cyclones / tornado etc, or heavy rains, cotton futures fluctuated widely.
On Monday, New York cotton prices jumped by 180 C/pts on report of possible damage to cotton by storm ‘Ivan’ hitting Mexico, but next day New York futures prices decreased by 160 C/pts when the storm caused no damage to cotton crop.
On Tuesday, retiring October contract finished at 51.45 cents and December at 50.45 cents.
The latest USDA report issued on September 10, showed increase in US cotton production from 20.14 million to 20.90 million bales, while production estimates in China were reduced from 30.0 million to 29.50 million bales.
Overall world production estimates have been increased to 107.25 million bales.
The speculators have time to play till critical period for cotton crop comes to an end by end-September. Hopefully, the crucial period would pass without any noticeable damage to cotton crop.
Thereafter, cotton prices would stabilize. At what level the prices would stabilize is anybody’s guess but a broad contention indicates 2-3 cents up and 2-3 cents down from 40 cents.
Last year, world had produced some 94.0 million bales, but in this season production estimate has increased by 13.25 million bales to 107.25 million bales.
The increase is 14 percent while production has increased only be 2 percent. Clearly, the impression is that lint cotton prices would remain depressed due to larger production.
USDA Cotton Production and Consumption Estimates (2004-2005). (Figures in million 480-lb bales).
Country                      Production    Consumption      Position
China                        29.50            33.50                 (-) 4.00
USA                         20.90             6.10                  (+) 14.80
India                         13.00            13.75                 (-) 0.75
Pakistan                   8.75              9.90                   (-) 1.15
Central Asia              7.64             1.95                    (+) 5.69
Brazil                       6.00              3.90                    (+) 2.10
West Africa              4.47              0.20                    (+) 4.27
Turkey                     4.25              6.10                    (-) 1.85
Australia                  2.20              0.07                    (+) 2.13
World                      107.25          100.85                 (+) 5.40

Curtesy: Business Recorder

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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