Weekly Review: Russia-Ukraine conflict causes fluctuations in cotton market

KARACHI: Extraordinary fluctuation was seen in international commodities market due to war between Russia and Ukraine. Under the influence of the international market fluctuation was also seen in the local cotton market.

Karachi Cotton Brokers Forum and Brokers Advisory Committee gave their suggestions for the revival of cotton crop. Cotton Brazil Outlook 2023 which was held in Dubai on February 22-24 successfully concluded. All Pakistan Textile Mills Association and Pakistan Hosiery Manufacturers Association have welcomed five-year textile policy of the government.

As per details, in local cotton market during the last week a bearish trend was witnessed. Mills were hesitant to buy cotton on high rates due to disparity between cotton and cotton yarn. As a result, trading volume was seen decreasing. During the last week, trading volume was very low and if there was some trading it was on borrowing. It looks that there will be no businesses in coming days because of the war between Russia and Ukraine. The effects of this war are seen on the whole world but the global commodity markets are badly affected including cotton.

On Thursday Russia attacked Ukraine due to which the stock markets of the world crashed. In Pakistan also stock market shed 1300 points. Whole of the world was disturbed and there was a panic in businesses circles too regarding uncertain future. On the first day of war the rate of Future Trading of New York Cotton for the month of May increased by three cents but in the evening it was settled and the commodity was available at 119 cents. There was uncertainty in the world regarding future of this war but such type of wars could not last for a long. Unprecedented increase was witnessed in the rate of petrol due to the war and the rate of crude oil reached in between 103 to 104 per barrel due to which it is expected that rate of petrol will increase in the world especially in Pakistan which is one of the biggest importers of crude oil; as a result of which rate inflation can increase in our country.

There will be negative effects of increasing prices of petroleum products on businesses. There is fear among textile sector regarding its impact on exports. The exporters are already facing the issues of containers for shipments as a result of this war the issue of containers may worsen. The financial crunch is increasing in all the markets including cotton and yarn markets. There is uncertainty regarding future of New York Cotton. According to the information correction was seen in the rate of crude oil and commodities on the last day of trading week.

In Sindh the rate of cotton was in between Rs 18000 to Rs 20000 per maund which was available in very limited amount. Phutti was not available. In Punjab the rate of cotton was in between Rs 18000 to Rs 20000 per maund while Phutti was available in very limited amount and there was almost no arrival. The ginning factories in Balochistan were not operational for the last two months. There is very limited stock of cotton left in the country and an international organisation also doesn’t have much stock of cotton left.

The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 100 pet maund and closed it at Rs 20000 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that that rate of cotton in international market decreased after fluctuation due to Russia- Ukraine war. The rate of Future Trading of New York Cotton for May reached at 124 American cents after decreasing by 8 cent after the war reached at 116 American cents. According to the weekly USDA export and sales report during the week of 21-22 two lac forty seven thousand bales were sold which was 56 percent more as compared to last week. China was on number one with 92,000 bales, Pakistan was on number two with 25,000 bales and Turkey was on number three with 24,000 bales.

The rates of cotton in Brazil, Central Asia, Africa and Australia remained stable but there is a panic in the market due to the Russia- Ukraine war. Cotton market in India witnessed a bearish trend because according to the Cotton Association of India there will be a decline of 5 lac bales in the production of cotton.

However, a meeting of the members of Karachi Cotton Broker’s Forum (KCBF) and members of Broker Advisory Committee (BAC) was held on Friday, 18th Feb here at Cotton Exchange Building Brokers Room.

The meeting was chaired by Chairman Naseem Usman and it discussed the various points and decided to send their proposals to the government for their earliest implementation. The government was urged to include these proposals in the ensuing annual budget/ cotton policy:

Cotton is a backbone of Pakistan’s economy. Cotton and allied cotton products account for about 65 percent of the country’s export earning and add over 10 percent of the country’s GDP. Cotton farming is also the principal source of raw material for the textile sector. Hundreds of ginners, factories and textile mills in the country heavily depend upon cotton. This sector employs millions of people along the entire cotton value-added chain, i.e., from weaving to textile and garment export.

Naseem Usman demanded that government of Pakistan should take decisions not on personal liking and disliking. It should take decisions which are in the interest of the country.The stakeholders are ready to work with the government for increasing the production of cotton but it is regretted that government is not looking serious in increasing the production of cotton, as it has done nothing for increasing the production of cotton in the country. It is the long standing demands of the farmers that the government should provide good quality seeds and pesticides, which are necessary for increasing the production of cotton. It is very unfortunate that production of cotton is decreasing year by year because of non-availability of quality cotton seed.

The government has imposed 17 percent sales tax on cotton-related items. One wonders that in these circumstances how the cotton production will increase.

In order to achieve the desired results, the KCBE urged the government to take initiative the following measures on war footing basis:

A separate Cotton Ministry should be formed to look after the affairs of cotton trade exclusively and with a view to increase production of cotton in the country.

Monitoring of the cotton should be made at district level.

The government should mobilized it’s all resources at Federal and Provincial level to bring more area under cotton cultivation, particularly, in Balochistan and Khyber Pakhtunkhwa, and increase yield per acre.

The government should emphasise upon all the stakeholders including the growers and the ginners to switch over to modern farming and ginning practises to achieve the desired results.

The land of Balochistan is very appropriate for cultivation of crops but unfortunately no attention has been given nor initiatives taken for utilisation of incentives in Balochistan to boost export of Pakistan through cotton crops. If such steps are taken, Balochistan will also play its role like the provinces of Sindh and Punjab to strive for a prosperous economy.

For development and knowledge to farmers and landlords, seminars at different topics and levels should be organised at district level. At present we are generating cotton crops about 8 million bales whereas the local consumption level is I7 million, the shortfall of 8.5 million are meeting by import of cotton. There is a need to take bold steps for increasing cotton production in the country on war footing bases and avoid import of cotton in the larger national interest.

It is welcoming that Prime Minister Imran Khan has started taking interest in increasing the production of cotton and in this regard he has given approval for the establishment of a Pakistan Cotton Authority.

Farmers of cotton are getting good rates and the production of cotton is increasing. It seems that in this new season, farmers of cotton will take interest in increasing the production of this crop. It is expected that growing areas of Cotton in Sindh will be increased due to which it is expected that partial arrival of Phutti will be started by the end of May; however, supply of quality seeds and pesticides are important factors which play a crucial role in increasing the production of cotton.

Cotton Brazil Outlook 2023, a conference organised by Brazilian Cooperative Farmers in Dubai on February 22-24, was attended by Pakistani cotton agents, representatives of textile mills and owners of textile mills.

While addressing the conference President and Vice President of Brazil Cotton Growers said that our cotton and fibre are very good. They also said that we grow cotton and export it to the whole world. Pakistan is also the importer of Brazilian cotton. They also hoped that in future Pakistan will also buy cotton from them.

The meeting was attended by several textile mill owners from Pakistan including Usman Lotfi, Adil Bashir, Rehman Naseem, Qaiser, Kashif Rehman and Kashif Hanif. Cotton agents were represented by Adil Naseem, Amir Naseem, Altaf Katchi, Junaid, Fahim Siddiqui, Jaffer, Waqas, Rehan Nasir and Nasir Sohail.

Copyright Business Recorder, 2022