Soft trend on cotton market

KARACHI: The local cotton market on Monday was easy and volume was also satisfactory.

Cotton Analyst Naseem Usman told that the rate of cotton in Sindh is in between Rs 12800 to Rs 12900 per maund. The rate of cotton in Punjab is in between Rs 13500 to Rs 13600 per maund.

The rate of new crop of Phutti in Sindh was in between Rs 5800 to Rs 5900 per 40 kg. The rate of Phutti in Punjab is in between Rs 5800 to Rs 6300 per 40 kg. The rate of Banola in Sindh is in between Rs 1800 to Rs 1900 per maund. The rate of Banola in Punjab is in between Rs 2000 to Rs 2100 per maund.

Cotton Analyst Naseem Usman told Business Recorder that the government has called a meeting of the Economic Coordination Committee (ECC) on Monday (today) to consider allowing an intervention price of about Rs 5,000 per 40kg for cotton, which has arguably been necessitated by a sharp decline in production, besides clearing a dozen supplementary grants so close to the passage of federal budget by parliament.

To be presided over by Finance Minister Shaukat Tarin, the ECC meeting is expected to approve a notification about minimum indicative prices of tobacco and revision of cess rates on the commodity for the year 2021-22.

The ECC meeting will take up extension of general subsidy on five essential items through the Utility Stores Corporation for another six months (from June 30 to December 31, 2021) because of its poor utilisation during the current fiscal year and also consider a summary of the maritime affairs ministry for recovery of demurrages and other claims of receivables from the Pakistan State Oil.

Sources said the Ministry of National Food Security and Research (MNFSR) led by federal Minister Syed Fakhar Imam is pushing for an intervention price of about Rs5,000 per 40kg of cotton crop for 2021-22 whose production numbers have plunged to a 30-year low.

Ministry officials, however, describe the proposed intervention price as ‘too little, too late’

According to the Pakistan Economic Survey 2020-21, the total production of the cotton crop for 2020-21 declined 23 per cent to 7 million bales from 9.15 million bales a year earlier.

The area under cotton cultivation also fell by 17.4pc to 2.01 million hectares compared to previous year’s 2.5m hectares, mainly due to absence of incentives to farmers to sustain the crop amid challenges from competing crops like sugarcane. This was allowed even though Pakistan has been among the largest cotton producers.

While the growers have been demanding an intervention price of at least Rs5,500 per 40kg this year, senior officials in the MNFSR consider the proposed price of Rs5,000 as “too little, too late” as cotton’s sowing period is already over.

Moreover, the cotton sowing season in Punjab got terminated at 3.16 million acre against the target of four million acre this year, thus achieving only 77.50 per cent of what it had planned for a year during which it was trying to revive the cotton crop.

According to the agriculture department officials, though a target of four million acre was set, it never expected to fully achieve it. “What we were hoping for was 3.5 million acre,” says one such official. However, even that could not be achieved and sowing ended at 3.16 million acre, or 88.57 per cent of even those lowered expectations.

The Punjab Crop Reporting Service officials, on their part, had a target of 3.3 million acre, half a million acre less than last year’s 3.8 million acre, in mind where sowing started. “But the slide has been steeper than what all officials’ accounts could count. The situation looks ominous now as far as the cotton revival efforts are concerned,” conceded officials of both Agriculture Department and Crop Reporting Service.

Cotton chaos starts right from the seed. According to the official data, only 30 per cent cotton area is currently covered by certified seed and the rest 70 per cent with seeds of unknown parentage. Yet another layer of confusion is added by approved and unapproved varieties and the ratio is 53 to 47 per cent. “What miracle one can expect with this kind of seed chaos in the field,” wonders an official of the Federal Seed Certification Department.

In a statement issued here Pakistan Apparel Forum (PAF) Chairman Jawed Bilwani said that textile exporters have formed a committee for due diligence to shift industries in the wake of gas crises and unviable business environment.

During a meeting of prominent textile exporters of Pakistan, it was mentioned that since last 15 days (from June 11 2021) there was zero gas pressure, which has crippled industries and halted export production.

“During fiscal year 2020-21, some 99 days out of 320 working days, gas pressure was zero or low,” he added.

Furthermore, textile exporters having RLNG connections and paying the amounts with great difficulty, to meet export orders at a rate of Rs1,533 per mmbtu, are not provided gas.

The exporters questioned how industries would work without the basic raw material. They voiced concerns that there is no chance that the textile export industries will get the required gas smoothly with adequate pressure in future.

Textile industry is one of the leading export industries of Pakistan, said a textile sector research analyst. Exports clocked-in at $13.8 billion in the first 11 months of the outgoing fiscal year 2020-21 alone.

“This is more than twice the International Monetary Fund (IMF) facility of $6 billion,” the analyst said, adding that depriving the industry of gas will hurt exports of the country.

Meanwhile, Provincial Minister for Agriculture Ismail Rahu demanded the federal government withdraw sales tax levied on ginning factories and demanded immediate withdrawal of 17percent sales tax on cotton oil seeds and cotton.

The provincial minister further stated that two years ago, the ‘incompetent federal government’ had imposed 10percent tax on cotton which has now been increased to 17percent. He said the wrong policies of Imran Khan’s government had already caused a lot of damage to the agriculture sector.

ICE cotton futures climbed to a more than one-week peak on Friday and headed for a weekly gain, boosted by a weaker dollar and concerns over crop quality after heavy rains lashed major growing regions.

Cotton contracts for December rose 0.30 cent, or 0.4percent, at 87.03 cents per lb, by 12:13 a.m. EDT (1613 GMT), after hitting their highest since June 14 at 87.55 cents.

For the week, prices were up 2percent “As far as the crop is concerned, with all the rain and flooding in the delta, rain in the southeast, and particularly Georgia, there’s a lot of unanswered questions,” said Sid Love, commodity trading adviser at Kansas-based Sid Love Consulting.

A weaker dollar and the market pricing in lower cotton acreage in the US Department of Agriculture’s June 30th report is further providing support, Love added.

Analysts and traders in a Reuters poll estimate cotton plantings for 2021 at 11.856 million acres in next week’s report, down from March’s 12 million acres.

The dollar eased against rivals, making cotton affordable for other currency holders.

The Spot Rate remained unchanged at Rs 12600 per maund. The rate of Polyester Fibre was increased by Rs 3 per kg and was available at Rs 210 per kg.

Copyright Business Recorder, 2021