Weekly Cotton Review: Price increases following appreciation in dollar value

KARACHI: The rate of cotton witnessed an increase of Rs 1,000 per maund as a result of increase in the rate of dollar. Business volume also increased relatively. A joint committee of Agriculture Department and All Pakistan Textile Mills Association has been formed for increasing cotton cultivation. Rise in the cotton production is the only way to improve Pakistan’s declining economy.

It is said that the textile industry does not pay fair prices to local farmers. The area under cotton cultivation has decreased from 3.2 million hectares to 2 million hectares. Cotton production has fallen from 14 million bales to a low of 7 million bales.

In the domestic cotton market, the prices of cotton were generally stable during the last week. On Wednesday last, the State Bank Pakistan, with the help of money changers, removed the cap from the dollar, which immediately led to a sharp rise in the price of the dollar. Seeing this, the textile spinners also increased the purchase of cotton and the price of cotton went increased by Rs 1000 per maund. The yarn traders in Faisalabad also increased the prices as a result of which trading volume went increased.

The cotton season is coming to an end in the country. The stock of cotton is decreasing day by day. On the other hand due to the shortage of US dollars there is a delay in delivery of imported cotton; as a result the stock of cotton is getting less and less.

There is a hope amongst the textile millers that the demand for textile products and cotton yarn may increase in the coming days. However, according to APTMA, about 150 textile mills have been closed in the country and some other mills are also partially closed. Despite less protection, business is going on and in future its volume may increase.

Although, the recession in the international markets continues due to the conflict between Russia and Ukraine, but it is expected that some movement will be started in purchase of textile products in the European and American markets.

According to market sources, there is little chance of a fall in cotton prices at present and the market is expected to remain stable or increase.

In Sindh province, the price of cotton is Rs 17,000 to Rs 21,000 per maund and the price of Phutti is Rs 6,000 to Rs 8,500 per 40 kg. In Punjab province, the price of cotton was Rs 18,000 to Rs 21,000 and the price of Phutti was Rs 7,000 to Rs 10,200 per 40 kg.

There is stability in the prices of Banola, Khal and oil.

The spot rate committee of Karachi Cotton Association increased the spot rate by Rs.500 per maund and closed it at Rs.20,500 per maund.

Naseem Usman, Chairman of Karachi Cotton Brokers Forum, said that there was overall stability in the international cotton markets as the rate of Future Trading of New York cotton for the month of March was in between 84 and 88 US cents per pound. Business was closed due to lunar annual holidays in China.

According to the weekly USDA report more than two lac, thirteen thousand and seven hundred bales were sold for the year 2022-23 which is two percent more as compared to the sale of last week.

China was at the top by buying 59,200 bales. Turkey bought 55,200 bales and came second. Vietnam bought 42,400 bales (3,500 bales replaced by China and 200 bales from Japan) and ranked third. Pakistan purchased 22,000 bales (700 bales cancelled) and stood at the fourth position. Honduras purchased 6,100 bales for the year 2023-24.

A seed company organized the first Climate Change Cotton Conference in Vehari which was attended by cotton farmers, cotton agro-scientists, heads of agricultural institutions and experts. On this occasion, Rana Salim in his address encouraged the farmers to grow cotton crop. He said that cotton can put Pakistan’s declining economy on the path of improvement.

Chairman of Pakistan Cotton Brokers Association (PCBA) Major Muhammad Kashif Islam (retd) said in his address that in the current and in upcoming difficult situation decrease in the cultivation area of cotton is a tragedy.

The agronomists, themselves, have to reach out to the small farmers and convince them in simple language. He emphasized that the economy of our country is directly related to the production of cotton. The more cotton there is, the better the country’s economy will be.

In this regard, instead of becoming a seed mafia and exploiting the farmers, the seed companies should give them better seeds, as well as, better guidelines so that they buy seeds from the same company again. Otherwise, every year with new names and new traps, these seed companies come into the field and as a result, we will be ready to face more loss, he said.

It is high time that we all think about the country more than petty gains because we have absolutely no time. We should specially target small farmers in this regard. And if they succeed, the country will succeed, he said.

He further said that no effort in the field of cotton can be fully successful unless the government takes interest. At present the situation is that cotton is a forgotten lesson to which no one has any attention.

Moreover, the agricultural institutions either do not have qualified people or they are severely short of funds and they are not even able to give salaries to their employees. So what will happen to research and development in these circumstances? Our political elites are completely oblivious to the importance of cotton in the country’s development due to their internal conflicts. The serious loss is coming in the form of unemployment of millions of people, he said.

He further said that All Pakistan Textile Mills Association and Pakistan Cotton Ginners Association currently have competent leadership, well aware of difficult times which are coming due to shortage of cotton, especially in today’s situation when the country has severe shortage of dollars even to open LCs.

In these circumstances how important is the development of local cotton which is much better than imported cotton, both in terms of quality and production for the country’s textiles. Although some efforts are under way, there is no solution to this problem until all stakeholders, including government agencies, make a comprehensive policy.

However, Ahmad Aziz Tarar, Secretary Agriculture, Government of Punjab has constituted a joint committee with All Pakistan Textile Mills Association (APTMA) to finalize cotton strategy ahead of the cultivation of fresh crop in the province.

He was speaking to the APTMA members during his visit to APTMA North Zone. Shabir Ahmad Khan, Additional Secretary Task Force, Qadeer Ahmad Bajwa, Additional Secretary Planning, Dr. Muhammad Anjum, DG Extension & Adaptive Research, and Malik Muhammad Akram, DG Water Management also accompanied him on the occasion.

Patron-in-Chief APTMA Dr Gohar Ejaz, Senior Vice Chairman Kamran Arshad, Vice Chairman Asad Shafi, Secretary General Raza Baqir and other members of the Association welcomed the delegation at the APTMA Lahore office.

Secretary Agriculture said the committee would consist of five members each from the Punjab government and APTMA to finalize its recommendations in a meeting scheduled for the next week. He said all the best efforts would be made to make cotton production profitable business for the farmer community.

Speaking on the occasion, Dr Gohar Ijaz said there was a misconception about the price of cotton in Pakistan, saying that it was $1.05 in the country against 87 cents worldwide. He further pointed out that the textile industry was generating $1.3 billion from each one million bale of cotton, which means that it was doing 310% value addition at present.

According to him, the IMF had given loan of $6 billion since 2008 while the textile export sector of the country alone has generated $150 billion during the same period. Similarly, he added, the annual debt of the country has increased by $5 billion per annum since 2008 while the textile industry has the potential of generating additional $6 billion out of 15 million bales annually. He said the industry has the potential to add value worth $1.3 billion against each one million bale of cotton consumed by it. He said farmers would only be attracted if all the stakeholders are succeeded in increasing area, as well as, per acre yield of cotton ahead.

Senior Vice Chairman APTMA Kamran Arshad said multiple factors have been involved in reduction of cotton crop from 13 million bales in 2014 to 5 million bales today. He said the Punjab government, along with its cotton research wings, has agreed to join hands with APTMA to redesign the roadmap of how to increase cotton production in the country. In Punjab, he said, the cotton production has dropped to 3 million bales from 12 million bales in 2011-12. He recalled that the province of Punjab had registered 12 million bales back in 1993-94, as well.

Vice Chairman APTMA Asad Shafi made a detailed presentation on the existing industry challenges in terms of cotton shortage and apprised him about the short term roadmap of APTMA for revival of cotton crop in the province. He also gave him a detailed introduction of the APTMA Cotton Foundation to the government functionaries.

Identifying uncertain market, poor profit margin, an unregulated seed regime, insignificant research, and lack of mechanisation and extension services as the issues plaguing the all-important cotton crop, a farmers’ body suggests the government revive the sector and its allied textile industry for the sake of the country.

The Pakistan Kissan Ittehad, a body representing small farmers, has called for giving attention to a crop as per its contribution to the economy and the crops that are a burden on the economy or natural resources must be kept at bay and produced just to meet the domestic requirements as a policy.

The indigenous crop the country needed the most must be protected from massive import, ensured profitability and a value chain or good marketing practices, says a PKI report, urging the authorities to look at success stories in the regions for the purpose.

Pakistan may produce cotton, a basic raw material for the largest industrial sector of textile and the largest export earnings, up to 15-18 million bales from the existing resources (water and soil), it claims but regrets that the area under its cultivation has dropped to two million hectares from 3.2m with the total output shrinking from 14m bales to 7m bales, while the demand of the local textile industry has risen to 15-16m bales and the gap is being fulfilled by import.

It regrets that the textile industry does not pay a fair price to local growers, pleading higher prices will make its products un-competitive in the international market but it will pay even higher rates for imported cotton. It was demanded imposition of duties on imported lint to bring it at parity with the local cotton prices.

Neither public nor private funds are being allocated for research as the textile industry owes Rs3.2 billion as cess to the cotton research institute, whose staff has not been paid salaries and pensions for the last six months, and research projects have come to a halt, the PKI discloses.

The productivity gap between progressive and non-progressive growers is huge as the former gets 40 maunds per acre and the latter 12 maunds in the same village with the same nature of soil because of no access to technology and liquidity, substandard inputs and limited advisory services, it adds.

Copyright Business Recorder, 2023