KARACHI: Drastic decrease in the production of cotton. The rate of cotton remained stable. There is a need to take steps on war footings to increase the production of cotton other wise reliance of textile sector on imported cotton will be increased. Due to the low production of cotton not only farmers but ginners have started looking towards other businesses. The future of cotton looks bleak. After the abolishment of regulatory duty on cotton yarn apparel sector looks happy while textile and spinning sector was not happy on abolishing the regulatory duty on cotton.
In the local cotton market during the last week the market remained stable because textile and ginning sector showed their interest in buying as well as ginners were interested in selling. Although the quality of Phutti is decreasing day by day but the trading volume remained stable due to interest of big textile groups in the buying of good quality cotton.
Due to the low production of cotton around 22 % ginning factories had not even started their operations while some ginning factories had suspended their operations after starting their operations partially. Due to the alarming decline in cotton production, like the cotton growers ginners were also discouraged and were showing their interest in other businesses. If the situation does not improve, the cotton trade in the country will continue to decline.
The rate of cotton in Sindh is in between Rs 8600 to Rs 9550 per maund. The rate of Phutti is in between Rs 3300 to Rs 4200 per 40 Kg. The rate of cotton in Punjab is in between Rs 8800 to Rs 9600 per maund. The rate of Phutti is in between RS 3400 to Rs 5000 per 40 Kg. The rate of cotton in Balochistan is in between Rs 8600 Rs 9200 per maund while rate of Phutti is in between RS 4000 to Rs 4800 per 40 Kg. The Spot Rate Committee of the Karachi Cotton Association has stabled the spot rate at Rs 9450 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all mixed trend was witnessed in the rate of cotton in international market. The Rate of Promise (Waday Ka Bhao) of New York Cotton remained stable. According to the weekly export report of USDA the exports witnessed a decline of 22 % but the Rate of Promise (Waday Ka Bhao) was not effected with the decline of export.
Economic tensions have resurfaced between the United States and China, but so far China is importing cotton from the United States in good quantity. The business volume in international markets is decreasing due to the threat of second wave of COVID 19. The rate of cotton in Brazil, Argentina and Central Asian states remained a little bit stable but the bearish trend was witnessed in the rate of cotton in India because of the news of increase in the production of cotton.
Cotton prices in India during the last week dropped by Rs 1000 per candy (356 kg). Although, the Cotton Cooperation of India has started buying of cotton since the start of the season in order to support the rate of cotton. According to the information up till now CCI bought more than 3 million bales from the ginners while CCI already had the stock of more than 4 million bales of cotton. Other than that Maharashtra Cotton Federation had the stock of around 400,000 bales.
The Indian textile sources told that up till now textile mills had ample stock due to which they were showing less interest in buying. The major reason of decreasing rates of cotton in India is that private sector had estimated that three crore sixty lac (36,000,000) bales will be produced while around 85 lac (8,500,000) bales were prepared in India up till now.
Seed cotton (Phutti) equivalent to over 4.6 million or exactly 4,648,092 bales have reached ginning factories across the country till Dec 1, 2020, registering a 37.59 per cent shortfall compared to corresponding period of last year when arrivals were recorded well over seven million bales.
According to a fortnightly report of Pakistan Cotton Ginners Association (PCGA) released to media on Thursday, over 4.2 million or 4,289,988 bales have undergone the ginning process i.e. converted into bales. Cotton arrivals in Punjab were recorded at 2.6 million or 2,634,487 bales while Sindh generated just over 2 million or 2,013,605 bales.
Just over 3.75 million or 3,754,750 bales have been sold out with major chunk of it, 3.7 million (3,709,450) bales, bought by textile mills and remaining 45,300 by exporters. Sanghar district of Sindh continued to remain on top with cotton arrival figure of 776,302 bales followed by two Punjab districts including Bahawalnagar (670,938 bales) and Rahimyar Khan (504,480 bales). Total 449 ginning factories were operational in the country including 147 in Sindh and 302 in Punjab.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that cotton production has dropped alarmingly this year, especially due to poor medicine and unfavourable weather conditions and decrease in cultivation area of cotton. To fulfil the demand of local cotton mills 70 lac bales of worth 6 billion dollars will have to be imported. Up till now mills have signed agreements for the import of 33 lac bales and more are in pipe line.
Experts believe that if no positive steps are taken for increasing the cotton production this year then next year, cotton production will be less than this year because the cotton growers have become discouraged and will started taking interest in growing other crops.
Moreover, in a bid to increase the exports of textile products Apparel sector has requested the government for the abolishment of Regulatory Duty on the import of cotton yarn. The government has accepted their longstanding demanding and abolished 5% import duty on cotton yarn in the meeting of ECC few days back. According to sources, the decision will affect the textile and spinning sectors while the exports of apparel sector will boost.
Adviser to Prime Minister for Commerce and Investment, Abdul Razak Dawood on Friday said that the government has released Rs. 1.78 billion for textile sector under Drawback of Local Taxes and Levy (DLTL) scheme. "I hope this will resolve the liquidity issues of our exporters and enable them to enhance exports" the adviser said this in a tweet. The DLTL for non-textile sector would also be released shortly, he added.
Meanwhile, the administration of United States President Donald Trump raised the economic pressure on China's western region of Xinjiang, banning cotton imports from a powerful Chinese quasi-military organisation that it says uses the forced labour of detained Uighur Muslims.
Copyright Business Recorder, 2020
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