WEEKLY COTTON REVIEW: Drastic cut in production hits businesses

The rate of cotton increased by Rs 300 per maund due to increase in buying by the textile sector. The drastic decrease in cotton production effects all the businesses related to cotton. There is severe financial crunch in markets due to the imposition of sales tax by Federal Board of Revenue. Uncertainty prevails among business community and the farmers.

In the local cotton market during the last week the rate of cotton as well as the trading volume increased after the increase in buying by the textile and spinning mills and due to the increase of supply of Phutti. The rate of good quality increased from Rs 100 to Rs 300 per maund. The rate of Phutti also increased.

The rate of cotton in Sindh as per quality is in between Rs 7800 to Rs 9150 per maund while the rate of Phutti is in between Rs 3000 to Rs 4400 per 40 kg. The rate of cotton in Punjab is in between Rs 8750 to Rs 9150 while the rate of Phutti is in between Rs 3800 to Rs 4400 per maund. The increasing trend was witnessed in the prices of Khal, Banola and oil in both Sindh and Punjab. In Balochistan the rate of cotton is in between Rs 8750 to Rs 9300 per maund while the rate of Phutti is in between Rs 4200 to Rs 4700 per 40 kg.

The Spot Rate Committee of Karachi Cotton Association has increased the spot rate by Rs 150 per maund and closed it at Rs 8950 per maund.

Chairman Karachi Cotton Brokers Forum told that this year due to untimely rains and extreme hot weather in the areas of cotton production crop was attacked by different kinds of germs and viruses and attack of White Fly and Pink Ball Worm had destroyed the standing crops due to which crop suffers irreparable loss. After suffering huge loss farmers were disappointed and they cut their crops before time. On the other hand cotton crop was affected due to the use of substandard seeds and pesticides. Ginners as well as farmers were affected due to the reduction in per acre. This year due to disappointment many ginners had not started their factories and few ginners after starting operations for some time close their factories. Farmers were of the view that they had suffered a huge loss and they will not sow cotton next year.

Moreover, fertilizer dealers were of the view that they had given fertilizer and seeds to farmers on loan due which their money was stuck. Farmers were in financial crunch and it looks that their recovery was difficult. Other than the cotton crop the production of wheat, corn, rice and Peeper were below the estimates due to which the uncertainty prevails among the farmers community.

Due to low cotton production big textile mills are fulfilling their demands by signing import agreements from foreign countries. This year textile mills are facing financial crunch due to increase in the cost of production because the banks has increased the interest rate and 10 percent sales tax on cotton and 7 percent on cotton yarn has imposed. The Federal Board of Revenue is not fulfilling its promise and delaying the payments of sales tax refund. The financial crunch will likely to be increase in coming days. Due to delay in the payment of sales tax refund by FBR textile spinners will not be able to stock the cotton for long time. In the same way ginners will hesitate to stock the cotton because of the fear of the increase in cost.

Naseem Usman told that over all in the international cotton market the rate of cotton remained stable, though the increasing trend was witnessed in New York cotton market. Fluctuation was seen in the Rate of Promise (Waday Ka Bhao) of New York Cotton due to both positive and negative news regarding China and America trade conflict.

According to the weekly report of USDA the export of American cotton increased by 9 percent as compared to last week while due to the news of decrease in tension of America and China trade conflict the rate of New York cotton increased and the Rate of Promise (Waday Ka Bhao) crossed 65 American cent per pound. This time also Pakistan remains the second largest importer of American cotton while the China had not imported cotton from America.

The rate of cotton remained stable in China while the fluctuating trend remained continued in the rate of cotton in India. The new cotton crop of 2019-20 in India has started arriving partially. It is expected that cotton crop in India will increase because of sufficient rains. The Cotton Corporation of India has officially started buying of cotton from Northern areas of India from the start of the season in order to give reasonable rates to the farmers of their products. The two day Cotton conference is going to be held in Indian city of Akola. The people related to cotton business are of the view that government officials, agriculture department as well as private importers and exporters are cooperating with the ginners. They hold cotton conference. Unfortunately, there is no positive impact of such kind of efforts in Pakistan.

According to the estimates released by Pakistan Cotton Ginners Association 44 lac 40 thousands (4,440,000) bales were produced in the country till October 15 which is 16 lac bales (about 26 .54 percent) less as compared to last year which is critical.

Experts are of the view that 90 lac bales of cotton will be produced in the country. The local textile mills will import 50 lac bales of worth 1.50 billion dollars in order to fulfill their needs. It will be a burden on the country when already the economic situation of the country is not good.

Government should take positive steps to increase the production of cotton in the next season especially by providing good quality seed and government should also take steps to stop the use of substandard pesticides. Government should also make arrangements for the import of good quality cotton seed from abroad. It is feared that if government had not taken steps for the increase of cotton crop then after years there will be no cotton in the country.