Pakistan’s cotton yields to soar as farmers pull out the stops
Cotton yields in Pakistan will soar this year, as the rising cotton price encourages farmers to increase inputs, US officials said.
The US Department of Agriculture’s bureau in Islamabad boosted its forecast for cotton production, despite trimming its estimate of harvested area to the lowest level in three decades.
The bureau saw Pakistan’s 2016-17 cotton production is forecast at 8.25m 480 lb bales, up 250000 bales from the previous estimate, and up 18 % year on year.
Insect management
“Despite reduced planted area, rising cotton prices are prompting farmers to more actively manage insects, resulting in higher expected yields compared to a year ago when low cotton prices prompted farmers to curb input costs,” the bureau said.
Prices remained low at the time of planting this season, between May and July, prompted farmers to cut sown acres to their lowest levels since 1985.
The bureau saw harvested area this year at just 2.40m hectares, down from an official USDA estimate of 2.50m hectares, and well below the 2.80 harvested last year.
Stronger yields
But cotton prices have been booming, with the bureau reported seed cotton prices now standing at 37 cents a pound, up some 48 % year on year.
So where last year farmers cut costs by reducing pesticide application, tanking yields, there is now a strong incentive to
“Consequently, while much will depend on how willing farmers are to spend on labour to conduct multiple pickings in the fall, yields are expected to improve,” the bureau said.
Import upgrade
Based on the updated figures, the bureau forecasts cotton yields at 3.4 bales per hectare, compared to 2.5 bales per hectare in 2015-16, a 36 % increase.
But despite the stronger production, with consumption remaining essentially flat at 10.33m bales, the bureau actually upgraded its forecast for imports by some 200,000 bales.
The reason is a downgrade to estimates of last season’s imports, prompting a trim to 2016-17 opening stocks numbers, which were seen at a 15-year low.
Hedge funds extend net short in grains – provoking ideas of price support
Hedge funds returned to a swing bearish in positioning on agricultural commodities – led by a selldown in grains which some analysts mulled may be ill-timed and lead to upward pressure on prices
Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to sugar, by 46,288 contracts in the week to September 25, 2016, analysis of data from the Commodity Futures Trading Commission regulator shows.
The reduction in the net long – the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – took it to some 328,000 contracts, the lowest in five months.
And it reflected a return to the “sell grains-buy soft commodities” pattern prevalent since April, driving the net short in grains (including the soy complex) above 150,000 contracts for the first time in six months.
By contrast, in New York-traded soft commodities, hedge funds raised their net long to a record 423,258 lots, helped by a nudge higher in the net long in raw sugar futures and options higher to an all-time high of 286,248 contracts.
“We may get used to it, but it is still immense,” broker Marex Spectron said of the extent of bullish positioning in sugar.
And in cotton, managed money raised its net long above 72,000 lots for only the third time in the past three years – ahead of an easing in prices.
Indeed, the week “saw another large addition of long hedge fund positions”, said Dr John Robinson cotton marketing expert at Texas A&M University, flagging support to cotton prices from futures which were “consistently higher” last week on the Zhengzhou exchange in China.
However, this time of year, in bringing the US harvest, often brings downward pressure to cotton prices, with Louis Rose at the Rose Report that “with the thrust of the US harvest season upon us… thus far, US grades have been generally strong, and the current weather forecast looks favourable for harvest over the near- to medium-term”.