KARACHI: Cotton prices continued to decline previous week, as the spot rate decreased by Rs 800 per maund. However, a bearish trend was also observed in international cotton market.
Stakeholders say that the timely announcement of support price of Phutti is encouraging, adding to restore the confidence of cotton farmers, cotton should be purchased through Trading Corporation of Pakistan (TCP).
Chairman All Pakistan Apparel Forum Javed Bilwani said that textile sector is on the brink of collapse. There is huge decline in textile exports.
Karachi Cotton Association; however, has welcomed the decision of announcement of support price of Phutti. It has ensured its full cooperation. Pakistan Cotton Ginners Association has demanded that the problems of cotton ginning industry should be solved. Governor Punjab Muhammad Balighur Rehman has said cotton production can be improved by providing farmers with quality seed.
In the domestic cotton market, cotton prices showed an overall bearish trend during the past week. Textile spinners showed less interest in buying cotton while ginners continued to try to sell cotton, which led to a drop in cotton prices by Rs 500 to Rs 1000 per maund.
A discussion is going on in textile industry circles regarding closure of the industry after government had increased the sales tax to 18% and after State Bank of Pakistan hiked interest rate to 20%. In these circumstances textile mills are avoiding the purchase of cotton.
At present, the ginners have a stock of about 4 lac bales of cotton, out of which there are chances that one lac to one lac and fifty lac bales will be left before the arrival of new crop.
According to the experts there are chances that cotton business might be sluggish during the coming year because of the imposition of taxes by the government, and increase in interest rate. They say that due to increase in rate of doing business it will be difficult to keep stock of cotton due to the increasing costs.
The mills will also not stock much and the ginners will also avoid keeping stocks due to which the season will last longer.
However, the government has set a support price of Phutti at Rs 8500 per 40 kg for the upcoming cotton season due to which the farmers will be attracted to grow more cotton and the cotton area will also increase.
Experts believe that in order to protect the support price, if the price in the market falls below the support price, there should be an arrangement of purchasing it as support. They said because the government cannot purchase Phutti, so it should announce purchasing of 5 lac bales through TCP at the beginning of the season in order to stock ginned cotton and to boost farmers’ confidence.
On the other hand, due to the severe financial crisis, the economy of the country is on the verge of collapse; especially the textile sector, the largest exporter and the largest employer, is in dire constraints.
On the one hand, L/C problems is there and refunds of billions of rupees are stuck with the government, which is adding to the already existing financial crisis, and on the other hand the complaints of the textile sector are not being heard by the government and the problems of the industry are increasing day by day.
First, there was a crisis in the world markets due to Russia and Ukraine war, now there are reports of the bankruptcy of many American banks and the interest rate is increasing by European banks, due to which the recession is increasing at the global level.
The rate of cotton in Sindh after decreasing by Rs 500 to Rs 1,000 per maund is in between 17,500 to Rs 19,000 per maund while the rate of Phutti, which is available in limited quantity, is in between 6,000 to Rs 8,000 per 40 kg.
In Punjab the rate of cotton is not much different from Sindh. The rate of cotton is in between Rs 17,500 to Rs 19,000 per maund while the rate of Phutti is in between Rs 6,500 to Rs 8,800 per 40 kg.
There is a decrease in the rate and demand of Banola, Khal and oil.
The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 800 per maund and closed it at Rs 19,000 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that overall a bearish trend remained prevalent in international cotton markets. The rate of New York Cotton is in between 78 to 81 American cents. The Cotton Association of India decreased the cotton production by 8.5 lac bales and reduced the new production target to three crore and thirteen lac bales.
According to the USDA’s weekly export and sales report, sales for the year 2022-23 stood at two lac and twenty five thousand bales. Vietnam took the top spot by buying 78,000 bales. China bought 35 thousand 800 bales and came second. Turkey bought 16 thousand 900 bales and was in the third place. Pakistan bought 10,400 bales and stood at the fourth position.
Twelve thousand 800 bales were sold for the year 2023-24. Turkey was at the top by buying 4 thousand 400 bales. Pakistan bought 4 thousand 400 bales and stood second. South Korea bought 4,000 bales and came third.
Muhammad Atif Dada, Chairman, the Karachi Cotton Association (KCA) has welcomed the directives issued to the authorities concerned by the Prime Minister of Pakistan, while chairing a review meeting on ongoing reforms and upcoming cotton crop by the Agricultural Task Force, for devising a comprehensive strategy/ mechanism to acquire self-sufficiency in agricultural produce by activating the role of Agricultural Research Institutions both at federal and provincial levels and provide quality seeds to farmers by ensuring transparency and effectiveness in the seed certification process, to get bumper crops.
The KCA Chairman has also appreciated the directive issued to the authorities concerned by Prime Minister of Pakistan to take immediate and long term measures from now to get bumper cotton crop for the country. He stated that in the backdrop of drastic decline in cotton production from 15.0 million to 4.50 – 5.00 million bales in the current cotton season 2022-23, the directives of the Prime Minister of Pakistan to introduce reforms in agriculture sector with a view to increase production of crops including cotton crop is right step in right direction and thus most welcomed. The KCA assures its full cooperation to the Government in this regard to achieve the desired result.
The KCA understands that drastic decline in cotton production is mainly due to (i) reduction in yield per acre, (ii) cultivation of sugarcane in the areas earmarked for cotton cultivation, and (iii) supply of uncertified Cotton seed & pesticides that have created a considerable gap in cotton production and local mills consumption.
The KCA; therefore, urges the government (i) to mobilize all resources at federal and provincial level to bring more area under cotton cultivation, (ii) increase yield per acre, (iii) ensure to produce and supply of certified cotton seed to the growers for cultivation, (iv) provide education to growers to switchover to modern integrated pest management system, (v) place ban on cultivation of paddy/ sugarcane and setting-up of sugar mills in the areas already earmarked for cultivation of cotton, (vi) revamp/ gear-up Pakistan Central Cotton Committee (PCCC)/ all the Cotton Research Institutes to evolve high yield/ virus-resistant cotton seed varieties for cultivation, (vii) take measures to import pure and certified pesticides in small packing instead of bulk in order to avoid adulteration, (viii) advice the cotton growers and the ginners to switch over to modern farming and ginning practices year after year to increase cotton production and improve quality of cotton, and (ix) implement Cotton Control Act in letter and sprit to achieve the desired results.
The KCA Chairman is of the view that if the agriculture reforms, as desired by the Prime Minister of Pakistan, are introduced in right direction and implemented in letter and sprit they may bring revolution in agriculture sector, especially in cotton trade and place a positive impact on economy of the country.
A restriction on letters of credit (LCs), natural gas and electricity shortages, unavailability of raw materials and long delays in refunds have brought the textile sector to the verge of collapse, exporters on Tuesday regretted.
Exports of the entire textile sector nosedived by 29 percent or $487 million on a yearly basis in Feb 2023, comparing to those made in Feb 2022, Muhammad Javed Bilwani, Chairman, Pakistan Apparel Forum said.
From July 2022 to Feb 2023, total textile exports plunged by 11 percent to $1.35 billion as against those made in the same period last fiscal year, which he attributed to the “anti-business” policies of the PDM rule.
He said that the textile sector, which contributes 60 percent alone to the entire pool of national exports, still stands abandoned by the government.
The Prime Minister has no time to meet the exporters as all scheduled meetings during last four months have been postponed,” he said and appealed to the premier to help the textile sector overcome its financial problems.
Exporters of the apparel textile are left highly disappointed with the highest ever soaring cost of manufacturing amid fragile economic outlook over the last eleven months, he said, adding that the unfavourable situation has also made operating the industrial units hard.
Regionally Competitive Energy Tariff regime, he said, the government had cancelled for the five zero rated export sectors. Gas prices have surged about 34.5 percent retrospectively from Rs819 to Rs1100 mmbtu with effect from Jan 2023, although the utility is unavailable for the Karachi’s industries, he added.
Moreover, Chairman Pakistan Cotton Ginners Association Chaudhry Waheed Arshad presided over the 311th Central Executive Committee meeting of Pakistan Cotton Yarns Association.
Various issues of the cotton ginning industry were discussed including fixed charges imposed by Nepra, sales tax, property tax and excise fees and notices issued by NHA to cotton factories.
The committee also agreed to organize a seminar on cotton crop recovery and to launch cotton awareness campaign before the next season.
Punjab Governor Muhammad Balighur Rehman said on Friday that after obtaining 14.4 million bales of cotton production in the last decade, the gradual decline in cotton production by almost three times is a huge loss for the national economy, which can be improved by high quality seed supply.
While addressing a meeting of cotton seed committee, at Governor House on Friday, the governor said that announcement by the prime minister to fix the support price of cotton at Rs 8500 per maund before sowing is commendable and it will encourage cotton farmers to cultivate cotton on maximum area.
He added that cotton crop plays a central role in the stability of the country’s economy by providing raw material to the textile industry and earning the highest foreign exchange.
He said that decline in cotton production is a major concern, which needs to be improved by joint efforts of all the stakeholders. He said that all-out efforts will be made to solve the problems of seed industry to ensure quality production of cotton in the country.
The governor emphasised on integrating research on seeds of modern technology with the collaboration of the public and private sectors.
He said that concerted efforts on the part of the government, agriculture research institutions, Department of Agriculture, agricultural universities and private institutions aimed at solving seed problems will yield positive results.
He said a letter has been sent to the chief minister Punjab to convene the meeting of the Seed Council within a week to take important decisions for facilitating the cotton farmers.
He expressed concern over non-payment of cotton cess by APTMA and said that it is affecting cotton research institutes.
Copyright Business Recorder, 2023
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