Spot rate unchanged amid subdued business

KARACHI: The local cotton market on Tuesday remained stable and volume remained low.

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 13800 per maund.

The rate of new crop of Phutti in Sindh was in between Rs 5700 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 amid conflicting views of the proponents of rural agriculturists and urban industrialists, the Economic Coordination Committee (ECC) of the cabinet pended a decision on intervention price for Cotton 2021-22 Crop for at least a fortnight when the sowing would be completely over.

The Economic Coordination Committee (ECC) of the Cabinet presided over by Minister Shaukat Tarin has approved the tender for the import of 100,000 metric tons of sugar but constituted a committee on intervention price of cotton to increase its descending production in the next fiscal year to boost exports.

The committee debated at length the merits and timing of a repeatedly delayed summary of the ministry of national food security & research seeking Rs5,000 per 40-kg intervention price for a limited cotton produce. Based on data and charts, the ministry reported that while "comparing intervention period with that of non-intervention period, it reveals that cotton area and yield has increased during TCP intervention period - 1998-2010 - and decreased during the period without intervention - 2011-2020".

The house was clearly divided between two groups - Minister for National Food Security Syed Fakhar Imam and Minister for Industries and Production Khusro Bakhtiar on the one side pushing for incentivising cotton farmers and the other group led by prime minister's adviser on commerce Abdul Razak Dawood, Interior Minister Sheikh Rashid Ahmad, Energy Minister Hammad Azhar and Mr Tarin who jointly knocked down the summary on technical grounds. Privatisation Minister Mohammadmian Soomro was neutral.

The meeting deliberated if offering an intervention price could be a prudent step while sowing was almost over. The opponents were of the view that announcement of an intervention price before sowing could have incentivised farmers to enhance cultivation but no more. Dawood said his workings suggest the Rs 5,000 per 40-kg intervention price would make Pakistani cotton expensive when compared with the international market.

Imam said the historic trend suggested that intervention price even after the sowing encouraged farmers to use fertilisers and chemicals and received better results and vice versa. It was reported that cotton output peaked 14.1 million bales in 2004-05 and the hovered around 12m bales since then except for last four years when it declined to 9.2m bales in 2019-20 and just 6.98m bales in 2020-21.

This was mainly because of decline in area in Punjab and thin profit margins in cotton than competition crops like sugarcane, maize and rice. The ministry of national food security & research said the country's cotton production would reach 20m bales in 3-5 years if farmers were supported with appropriate technology and ensured a fair price.

"Lower cotton production is (also) hampering the industry's growth, textile exports and elevating import bill of edible oil, raw cotton, livestock meal and causing economic insecurity in rural areas," the summary pleaded. The summary sought procurement of 1-2m lint cotton at pre-determined rate based on Rs5,000 per 40-kg of seed cotton by the Trading Corporation of Pakistan through the Pakistan Cotton Standard Institute.

Fakhar Imam put on record that the delay in bringing up the summary was not a fault of his ministry which has been trying for almost two months to place it on the ECC agenda and had also taken up the issue both at the level of federal cabinet and twice at ECC. Even two weeks ago, the summary was not taken up by the ECC on the objection of Dawood for being 'an additional agenda item'. It was agreed then that a special ECC meeting would be called next week to deliberate in detail the cotton crop. Strangely though, even this meeting had about 14 agenda items and four non-agenda items.

Finance Minister Tarin finally ordered that a committee should submit a report within 15 days on the issue to take a decision on future policy direction for the cotton crop and the strategy for its revival or otherwise.

Naseem Usman also told that with the country missing out on the cotton sowing target for the 2021-22 season, stakeholders maintain the crop can only be revived if work is done to make it financially lucrative to the farmers.

Cotton was sown on 1.96 million hectares of land against a target of 2.32m hectares fixed for the 2021-22 season. Both Punjab and Sindh missed their plantation targets by 25.7 per cent and 16.7pc, respectively.

During the 2020-21 season, the cotton crop was planted on 2.079m hectares, showing a contraction of 17.4pc over the previous year's 2.517m hectares.

Since 1986-87, cotton has been planted on an area above or close to 2.428m ha, reaching a high of 3.19m ha in 2004-05. The country harvested 14.26m bales in 2004-05, compared to just 5.57m bales in 2020-21 - a whooping 61pc decline in the last 16 years.

This gradual decrease in cotton output has been forcing the country to rely more and more on lint imports as the textile industry needs 16mn bales per annum to meet its demands. During the 9MFY21, lint imports reached $1.838bn and the figure is likely to cross $2.5bn mark by the year end, further tilting the foreign trade balance against Pakistan.

Cotton crop was blatantly overlooked in Prime Minister's Agriculture Emergency Programme two years ago. The authorities disapprove any question about the crop's viability, saying "agriculture does not end with cotton".

Climate change, harsh weather, pest attacks and poor quality seeds are just some of the reasons that have adversely affected cotton. Add intensifying water crisis, increase in production costs and no minimum support price into the mix and the crop has little appeal for growers.

Talking to media a senior agriculture officer said that cotton was losing ground in the past in the wake of mealybug and cotton leave curl virus attacks. "However, the trend would reverse next year because of the profit the crop still promises," the officer said, requesting anonymity.

Central Cotton Research Institute, Multan, Director Dr Zahid Mehmood, who has recently been tasked by the federal government to ascertain the reasons behind shrinking cotton acreage, also stresses this point by saying that cotton cannot be revived until its production is linked with productivity and profitability. "The farmer is ready to plant cotton if, like sugarcane, the crop gives him Rs 100,000 per acre income."

About the challenges facing cotton in the form of alternative crops like maize and rice, he says these alternatives are short lived as prices of these crops dropped this year after a robust demand in the last two seasons.

He goes on to add that the government should announce an indicative price for cotton and make textile millers pay a better price to the growers to attract them back to the crop. "The textile industry is paying more for import of lint than what it offers to local growers," he added.

Adil Bashir, a textile industry representative, noted that local cotton was costlier than imported one in terms of staple size and contamination.

About fixing a minimum support price, he said that it not the price but rather dropping yield that was an issue. The research institutes should come up with seed varieties capable of a better yield and resilient to the climate change for reducing gate price of cotton, Bashir added.

Moreover, US ban on Xinjiang cotton may push China to open up to more imports to meet demand. Washington banned entry of all products using cotton from Xinjiang early this year over China's alleged ill-treatment of its ethnic Uygur Muslim minority.

Beijing may issue another batch of import quotas soon to meet rising global demand for textiles after awarding 700,000 tonnes last month, an analyst said

Hennes & Mauritz-better known as retail brand H&M-also refused to use cotton from the region, which accounts for around 80 per cent of Chinese output and a fifth of the world's supply of the fibre. 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