KARACHI: The local cotton market on Tuesday remained sluggish. Market sources told that trading volume remained very low.
Cotton Analyst Naseem Usman told Business Recorder that ICE cotton futures rose to their highest since early March on Monday on persistent worries that unfavourable weather in key growing regions may hurt the natural fibre crop. Cotton contracts for July rose 0.7 cent, or 0.79 percent, to 89.50 cents per lb by 12:25 EDT (1625 GMT). The contract touched its highest since March 3 of 89.66 cents per lb earlier in the session.
“The main ingredient is the weather, particularly in the Southern plains. Demand is better than what the World Agricultural Supply and Demand Estimates are saying,” said Sid Love, commodity trading adviser at Kansas-based Sid Love Consulting, adding inflation is also playing a role in prices.
Prime Minister Imran Khan said on Monday that Pakistan is moving towards modern agriculture techniques by strengthening the farming sector and farmers, who are the backbone of the country.
“We are moving towards modern agriculture by assisting the farmers through Kisan cards,” PM said as he addressed a ceremony in Multan to distribute the cards among the farmers.
He observed that the step would transform Pakistan as farmers are the backbone of the country. “The more we strengthen them, the more we will strengthen Pakistan,” he said. Moreover, he added, moving towards technology will help eliminate corruption and bring ease to the lives of the people.
“In our tenure, the additional money that farmers received on account of wheat alone, amounted to Rs500 billion, while the support price only increased by Rs500 in the last two years.”
“The profit of farmers in terms of sugarcane, grain, corn, milk and other commodities’ prices amounted to an additional Rs1,100 billion,” PM maintained.
The prime minister said that these efforts are based on eliminating poverty in the country and will improve the situation in the rural areas.
He assured farmers that they will be provided with abundant water for their agricultural needs. “Trained professionals will reach out to the small farmers to impart knowledge of modern farming to them.”
“Pakistan will benefit from Chinese technology with regard to seed development, while the research institutes related to the subject will now be revamped.”
“We will also develop storage units and food processing plants to avoid losses of fruits and vegetables following a climatic change.”
Imran further said that the loans lent to the farmers will be doubled so that they can increase their productivity.
Cotton market analyst Naseem Usman told Business Recorder while quoting Director General Agriculture Punjab Dr Anjum Ali Butter said that due to dry weather this year, better cotton crop would be expected and agriculture department will ensure seed monitoring.
DG Agriculture expressed these views while talking to Chairman PCGA and other members during visit to Pakistan Cotton Ginners Association PCGA house here on Sunday.
He said that cotton crop was damaged due to the weather shift, but this year the weather will be favourable for the cotton. He further said that the Pakistani growers will also get support in terms of rates at international market.
He informed that the government has allocated Rs three billion for white fly control and Rs 3 billion for cotton seed subsidy which is being released.
Naseem Usman also told that due to the efforts of chairman of Pakistan Cotton Ginners’ Association Dr Jassu Mal, Punjab government has issued Kissan Card to the farmers.
Low cotton output has forced more than 60% of ginners to completely shut their factories in the past three years, leaving hundreds of thousands of farmers and textile workers out of work, according to Jassu Mal, chairman of Pakistan Cotton Ginners’ Association, a group representing about 1,300 mills.
“The cotton crop has shrunk to an alarming level but we don’t see the government taking any serious steps to revive production,” said Mal, who’s also Chief Executive Officer of Sindh Agro Industries and operates Pakistan’s biggest ginning mill in Hyderabad.
In the latest season, Mal had to close at least three of his seven factories and run others at 50% capacity due to the lack of cotton. The company’s number of ginning workers has plunged to 100 from 400 about five years ago.
Naseem Usman further told Business Recorder that as per media reports in its statement vice president Pakistan Central Cotton Committee Dr Muhammad Ali Talpur government has announced a Rs 10 billion package for the cotton farmers. As per package subsidy will be given to the farmers of four provinces on fertilizers, seeds and pesticides.
Meanwhile, Advisor to Prime Minister on Commerce on Commerce and Investment Abdul Razak Dawood in its tweet on Friday said that “Pleased to announce that MoC has released Rs. 1,154 Million for the non-textiles sector, & Rs 1,346 Million for the textiles sector, a total of Rs. 2,500 Million under DLTL schemes. Hope this will resolve the liquidity issues of our exporters and enable them to enhance exports, “.
Cotton market analyst Naseem Usman told Business Recorder that as per media reports The World Bank has projected around 34 percent decline in Pakistan’s cotton production and estimated at 8.9 million bales for 2020-21 compared to 13.2 million bales in 2019-20.
The bank in its latest report, “Commodity Markets Outlook”, stated that the global production of cotton is projected to fall eight percent this season, led by declines in the US, India, and Pakistan, mostly due to reduced plantings.
Cotton prices are expected to average 23 percent higher in 2021, compared to 2020, followed by a small increase in 2022.
Cotton prices surged 16 percent in the first quarter of 2021 following a strong gain in 2020Q4. Although prices retreated in April, they are still 40 percent higher than their trough in April 2020. The overall price strength reflects upward revisions to the outlook for global consumption, which is expected to average 24.5 mmt in the current season, almost eight percent higher than 2019-2020, it added.
The bank has project Pakistan’s cotton import at 11.03 million bales for 2020-21 compared to 5.55 million bales in 2019-20.
Pakistan, one of the world’s largest cotton producers, is finding it increasingly hard to meet its own needs, a problem that could push up import bills and further hurt its fragile economy, Bloomberg reported.
Years of bad weather, pest outbreaks and better margins on other crops have hurt the quality and quantity of harvest. And the scale of damage is accelerating: production in the current fiscal year is set to tumble to the lowest level in about three decades.
As a result, the country is spending billions of dollars to import record amounts of cotton to feed its textile industry, something it can ill afford to do. Its current account — which posted a rare surplus between July and December — has recently flipped back into a deficit amid higher imports. The move also threatens to boost cotton prices, which have already hit a seven-year high.
Cotton is one of the most important cash crops for Pakistan and commonly referred to as “white gold” by the 1.5 million farmers that depend on it for a living. It serves as the raw material for the textile industry, which provides employment to 40% of the workforce and generates more than half of foreign exchange earnings.
Pakistan’s cotton production is forecast to slump to less than 6 million bales in 2020-21, the lowest since at least 1992, according to Nasim Usman, chairman of the Karachi Cotton Brokers Forum. At its peak, output was more than 14 million bales in 2004-05.
The government has set a target for 10.5 million bales for fiscal 2022. That’s hardly a consolation as the previous year’s guidance was the same level and production is well short of estimates. Pakistan’s financial year is from July to June.
Moreover, textile industry is booming. Manufacturers are operating at full capacity and on track to ramp up exports, thanks to the resumption of economic activities as coronavirus cases eased in June.
This has caught the attention of Prime Minister Imran Khan, who said earlier this month that the textile industry is short of laborers. Cotton imports soared to make up for the production shortfall, almost doubling to 3.68 million bales in the nine months to March from a year ago, official data show.
During this time, textile exports expanded $940 million to about $11 billion. However the amount was close to being offset by the $870 million increase in textile imports, which consisted mostly of raw materials, over the same period.
The country is paying dearly for overseas cotton and would need to import 3 million to 4 million more bales by June, said Khaqan Najeeb, a former adviser to Pakistan’s finance ministry.
Higher purchases could further boost global cotton prices and widen Pakistan’s trade deficit, which rose more than 120% to $3.3 billion in March as Khan’s government struggles to tame inflation. A weaker rupee raises prices of essentials at home when the country’s balance of payment position worsens.
Pakistan’s long-running tensions with neighbouring India could add pressure to the cotton shortage. Last month, the government had initially approved the import of cotton yarn from India, lifting a nearly two-year ban, but Khan’s cabinet later rejected the proposal in a dramatic U-turn, saying trade could not resume until some political issues are resolved.
To revive production, the government plans to offer subsidies for cotton seed and pesticides and may unveil a minimum price for the first time to support farmers, Fakhar Imam, Pakistan’s food security minister, said in February. “The cotton production crisis is deepening in Pakistan. We will have to prevent the farmers who are shifting from cotton to other crops,” he said.
For now, the measures don’t seem to be easing farmers’ concerns. Noor Muhammad, 56, has decided not to sow cotton this year on the seven acres of land he manages in Matiari after experiencing disappointment in the past.
“I borrowed 100,000 rupees ($652) to buy inputs for the crop but a poor harvest never allowed me to pay it back,” Muhammad said, with perspiration dripping from his forehead as he carried a bundle of wheat, another major crop for Pakistan, off to the thresher.
The spot rate remained unchanged at Rs 11300 per maund. The Polyester Fiber was available at Rs 200 per kg.
Copyright Business Recorder, 2021
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