KARACHI: The local cotton market remained stable on Friday. Market sources told that trading volume was thin because of the fluctuation in the rate of dollar.
ICE cotton futures fell to a one-week low on Thursday as a strengthening US dollar and losses in the grains market overshadowed a robust federal export sales report. Cotton contracts for May fell 0.76 cent, or 0.9%, to 85.75 cents per lb at 2:10 p.m. EDT (1810 GMT), having touched its lowest since March 11 at 85.35 cents. It traded within a range of 85.35 and 87.38 cents a lb.
“The sales were very good, especially considering that there is not much cotton available in the US,” said Bailey Thomen, cotton risk management associate with StoneX Group. However, “the cotton market is following some of the outside markets ... the dollar index is trading higher, it could be adding some pressure on the (cotton) market.”
The US Department of Agriculture’s weekly export sales report showed that net sales of 437,700 running bales (RB) for 2020/2021 were up noticeably from the previous week, while exports of 351,900 RB were unchanged.
Cotton Analyst Naseem Usman told that Commerce Ministry said on Thursday that summary on import of cotton from India is under process. This was disclosed at a meeting of National Assembly Standing Committee on Commerce, presided over by Syed Naveed Qamar.
Ministry of Commerce also came under fire for giving a subsidy “unfairly” to All Pakistan Textile Mills Association (APTMA) which is allegedly involved in billions of rupees fake invoices scam, “which will be unveiled in the next six months”. The Ministry said that it is reviewing the subsidy mechanism so that it should be linked to performance.
Kunwar Usman, Director General, Textile (Commerce Ministry) informed the committee that there has been a continuous decline of cotton production since FY 2015-16. As per Cotton Crop Assessment Committee (CCAC), estimated domestic cotton production would be 7.7 million bales in the current fiscal year, while Pakistan Cotton Ginners Association (PCGA) and United States Department of Agriculture (USDA) have been projecting 5.6 and 5.7 million bales, respectively.
In 2006-07, total cotton production was 13 million bales which has declined to 7.7 million bales in 2020-21. He further stated that due to less cotton production, domestic production of cotton yarn has remained low which resulted in yarn shortage and subsequently high yarn import orders, adding that value-added sector is not able to buy the yarn it needs domestically to materialize export orders.
He said electricity is available to export oriented industry at cents 9 per unit (all inclusive) and RLNG is at $ 6.5 per MMBTU, adding that the industry is benefitting from these “incentives”. The committee was informed that prices have increased due to shortage of cotton production.
Naseem also told that decline in exports during second consecutive month is a matter of serious concern for the policy makers as it will foment multiple problems relating to exports, foreign exchange earnings, unemployment and enhanced import of food bill in addition to aggravating law & order situation in the country, said Pakistan Hosiery Manufacturers & Exporters Association (PHMA) senior vice chairman Mian Farrukh Iqbal.
He said the value added textile exports recorded a phenomenal growth as the government provided substantial incentives during the first quarter of this financial year. He particularly mentioned $2 billion increase in Oct 2020 and 2 billion plus increase in the months of November and December, 2020.
He said the value added textile sector has well warned the government about the shortage of yarn coupled with price spiral as the government failed to allow import of yarn through Wahga border.
“Still this issue is irritating the value added textile sector and expected to reverse this positive trend if immediate remedial measures were not taken”, he said and added that we had also presented viable solutions clearly stating that government must allow import of cotton yarn from India through Wagah Border in addition to withdrawing 5 percent custom duty on impoMore over according to monthly report card of cotton imports is out, and the spinning sector seems to be faring remarkably well in controlling cost of imported raw material. But at a time when international cotton prices have climbed 21 percent over last year – and continue their rally above pre-pandemic levels – how long will prudent inventory management last?
All considered, average unit price of 8MFY21 cotton imports stood at $1.65 per kg, well above the international price range during the two peak lockdown quarters – March to August 2020 – when global prices hovered between $1.40- $1.54 per kg. Interestingly, unit price of import during those six months hovered above monthly Cotlook A Index rates, a deviation from long term trend (average unit price of imports by Pakistan historically average below the Cotlook A index).
This implies two developments: one, that cotton imports landing during peak lockdown months were against contracts entered before the global pandemic hit, which had led to a sudden crash in global commodity prices by April 2020. Earlier, global cotton prices had been surging upwards, rising 12 percent between Aug-19 and Jan-20.
Two, few if any cotton import contracts were entered during peak covid quarter (Mar to Jun 2020), when global futures rates had fallen below spot. That average monthly import unit prices are now once again lower than Cotlook A Index masks that fact. Was an opportunity to lock in long term contracts missed?.
Naseem told that 627 bales of Khanewal were sold at Rs 12400 per maund.
Naseem also told that rate of cotton in Sindh was in between Rs 10,300 to Rs 11500 per maund. The rate of Phutti in Sindh is in between Rs 4500 to Rs 5100 per 40 kg.
The rate of cotton in Punjab is at Rs 12500 per maund. The rate of Phutti in Punjab is in between RS 4800 to Rs 6300 per 40 kg.
The rate of Banola in Sindh was in between Rs 1600 to Rs 2000 while the price of Banola in Punjab was in between Rs 1800 to Rs 2250. The rate of cotton in Balochistan is Rs 12000 per maund. The rate of Phutti of Dalbadin Balochistan is available at Rs 6300 to Rs 6400 per 40 Kg.
The Spot remained unchanged at Rs 12300 per maund. The Polyester Fiber was available at Rs 220 per Kg.
Copyright Business Recorder, 2021
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