KARACHI – Cotton output, up till March 15, has declined by an annual 8.7 percent, standing at 11.57 million bales compared to 12.68 million bales in the corresponding period last year, figures released by the Pakistan Cotton Ginners Association (PCGA) revealed. Cotton output increased by an annual 165 percent and reached 72,000 bales. Punjab has contributed 67 percent (7.78 million bales) in total cotton arrived so far, while Sindh has contributed 33 percent (3.79 million bales) during the said period. Rahim Yar Khan, Bhawalpur and Bhawalnagar accounted for 37.5 percent of the total production in Punjab, with cumulative cotton outputs down by an annual 10 percent to 2.92 million bales.
Cotton output reduced by an annual 13 percent to 2.37 million bales in Sindh, Sanghar, Tharparker and Hyderabad. According to figures, Sindh was the most affected province in terms of cotton production (-10 percent annual), whereas Punjab was less affected (-8.0 percent annual). However, contribution of both in total outputs remained the same as last year in relative terms. Despite cotton shortfall in the country, exports were 525,000 bales during the season, which however, declined by an annual 34 percent. Currently, Pakistan needs 14.2 million bales to fulfill its demand, out of which locally produced cotton so far fill a meager 11.6 million bales, leading the country towards additional import requirement of 2.6 million bales.
So far, the country has imported 1.5 million bales, while further import of one million bales is expected. Lower production of cotton was seen in the country due to flood losses. Consequently, local cotton prices during August-March 11 exhibited a massive annual surge of 113 percent. Furthermore, international cotton prices also hiked with more or less the same pace, mainly due to increased demand from China and Pakistan. India is also reluctant to export its excess cotton in the international market which is adding further pressure on prices.
Due to high cotton prices, both textile companies under our coverage, i.e. Nishat Mills Limited (NML) and Nishat Chunian Limited (NCL) took the hit in its margins during the 1QFY11, said Abdul Azeem at Investcapital. He further said that companies were initially unable to pass on the high cotton prices impact. However, margins are expected to improve in the coming quarter as prices have been gradually passed since then, he maintained.
