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Bumper crop

could bring

down prices

of cotton

KARACHI: An expected bumper cotton crop in Pakistan, combined with shrinking demand after the closure of 142 textile mills, could drive cotton prices down 20 percent by November, an analyst said on Monday.

"I think cotton prices will fall to Rs. 1,600 per maund (37.32 kg) by November from the present Rs. 2,000 Sattar Balagamwala, chairman of the private Karachi Cotton Association, told Reuters in an interview.

He said prices would slide in October, when ginning plants in the central province of Punjab start processing the new crop.

In the southern province of Sindh, where cotton ripens earlier, ginning started at the end of June when new-crop cotton commanded domestic prices of at least Rs. 2,175 per maund.

Balagamwala said Punjab could produce 8.5 million 375-lb (170 kg) bales and Sindh 1.6 million bales in 1995/96 (July-June) for a substantial total of about 10.1 million bales.

Farmers said monsoon rains and floods had slightly damaged the crop in Sindh and Punjab, but the overall outlook was good.

Officials at the state-run Pakistan Central Cotton Committee agreed that as long as the crop stayed healthy and the weather remained favourable, the harvest was likely to surpass the government target of 9.5 million bales.

Official figures put 1994/95 production at 8.6 million bales, but ginners say the crop totalled only 7.7 million bales, slightly up on the 7.6 million produced in 1993/94.

Balagamwala said cotton consumption was likely to tumble to seven million bales in 1995/96, against earlier estimates of 8.5 million, because 142 of Pakistan's 456 textile mills had shut.

He said another 20 mills could close down, unable to compete with some South Asian rivals who pay 35 percent less for electricity and handicapped by Pakistan's interest rates of about 22 percent, compared to 14 percent in India and nine percent in some other competitor countries.

Bank lending rates rose to 22 percent in early 1995 from about 18 percent after the central State Bank of Pakistan removed an interest rate ceiling, he said.

Balagamwala said that textile mills, also hit by power shortages and strikes, were operating under heavy losses.

"I don't think there is any chance of cotton imports as the 314 remaining mills will consume about seven million bales," he said. "There will be no need for cotton imports."

Pakistan imported more than 700,000 480-lb (218 kg) bales of cotton, mostly from Central Asia, in 1994/95 and exported more than 200,000 375-lb bales, association figures show.

Balagamwala expressed concern that cotton prices might fluctuate wildly unless the government gave the go-ahead for hedge trading as demanded by the association.-Reuter