LAHORE - The local cotton prices have shot up by 17 per cent during the period of Jul-Feb FY09 and remained in the range of Rs3,250 to Rs3,500/maund on average due to lower than expected cumulative cotton arrivals, market sources said. According to industry sources, due to high cotton prices in the local market textile mills prefer to buy imported cotton rather than local cotton as they look to check their shrinking gross margins which are already under pressure due to decline in sales orders. Atif Zafar, a cotton market expert, said that world cotton demand is expected to exceed production next year for the first time since at least 2004 as farmers switch to more profitable crops and a rebounding global economy revives textile demand. However in the current crop year, there will be excess production (fifth straight annual surplus). Thus, international cotton prices have showed a downward trend since the turn of the year depicting a fall of about 12%. According to the latest numbers released by Pakistan Cotton Ginners Association (PCGA), cumulative cotton arrivals stood at 11.221mn bales in FY09 as of Feb 28, 2009. After five consecutive fortnights of decline in arrivals prior to the month of Feb, cotton arrivals Feb 2009 have performed relatively better to stand at 0.59mn bales depicting an increase of 5.3%. This has been due to release of cotton bales by farmers as they were hoarding earlier in the season due to unattractive prices. However recent rally in cotton prices have resulted in increased arrivals. We expect cotton arrivals for FY09 to be about 11.5mn bales versus 11.4mn bales last year and 5% lower than government's revised target of 12.1mn bales. According to data released recently by Federal Bureau of Statistics (FBS), in the first 7 months (Jul-Jan FY09) Pakistan's textile exports have depicted a decline of 4% in US$ terms however posting an increase of 22% amid Rupee devaluation. Textile's share in Pakistan's total exports has declined by 633bps to 54%. Moreover, Pakistan textile exports to USA, largest importer of Pakistan textile products, stood at $3.1bn in 2008 depicting a decline of 2.83%. Pakistan managed to maintain its share in US textile exports at 3.02%. Textile analysts stated that Pakistan's textile sector is going through challenging times with international recession, slowdown in local economy and political and security issues affecting industry dynamics. Moreover, due to shortfall in cumulative cotton arrivals in the current crop season, recent jump in cotton prices coupled with declining export orders have aggravated the current situation.