KARACHI: Correction in the cotton market was witnessed after a continuous bullish trend. There is increase of eighteen lac bales in the production of cotton. It is expected that demand of textile mills will be one Crore seventy lac bales.
Around eighty lac bales will be imported. So far agreements for the import of fifty lac bales have already been signed. Government has constituted Cotton Authority of Pakistan for increasing cotton production in the country. There is a proposal of fixing the support price of Phutti at Rs 5500 per 40 kg.
There was a correction in the local cotton market during the last week due to the less interest shown by the textile and spinning mills while the ginners insisted on selling cotton on high rates.
They were demanding high rates of cotton while millers were not in favour of increasing the rates. Many ginners were selling cotton on credit only to get higher rates. A few days back quality cotton was sold on credit basis at the rate of Rs 21,000 to Rs 22,000 per maund. Trading volume was also decreased.
However, the stock of cotton is decreasing with the ginners. The stock of one international organisation is also decreasing. On the other hand rate of cotton is not increasing as compared to the cotton yarn. Moreover, demand of cotton is also increasing and there is a parity issue between the rate of cotton and cotton yarn.
The effects of Covid-19 are decreasing now but the tension between Russia and Ukraine is increasing market concerns. Moreover, there is likely to be a political uncertainty in the country in the coming days. The cost of production is increasing due to inflation and the increase in power prices.
There are also complaints against FBR that they are harassing the traders of cloth and garments. This perception has negative effect on the market while financial crunch is also increasing. Karachi Chamber of Commerce and Industry and Federation of Pakistan Chambers of Commerce and Industry (KCCI) is also protesting against the raids of FBR in markets.
The rate of cotton in Sindh is in between Rs 18,000 to Rs 20,000 per maund. Phutti was almost not available. The rate of cotton in Punjab is in between Rs 19,000 to Rs 21,500 per maund. The rate of Phutti is in between Rs 7,000 to Rs 9,000 per 40 kg. The rates of Banola, Banola oil and Khal remained stable. In Balochistan all ginning factories were not operational.
The Spot Rate Committee of the Karachi Cotton Association has decreased the spot rate by Rs 100 per maund and closed it at Rs 20,100 per maund. Chairman Karachi Cotton Brokers Forum Naseem Usman has said that a mixed trend was seen in the international cotton market. Bearish trend was seen in the rate of Future Trading of New York Cotton.
The rate of Future Trading of New York Cotton after decreasing reached at 122 American cents. According to the weekly sales and export reports of USDA more than one lac fifty eight thousand bales were sold which is fourteen percent less as compared to the sale of last week.
China was on number after buying forty seven thousand and eight hundred bales. Pakistan was on number two with twenty three thousand and nine hundred bales and Vietnam was on the third place with twenty three thousand and eight hundred bales. The rates of cotton in Brazil, Central Asia and Africa remained stable while the rates of cotton in India overall remained stable.
Naseem Usman also told that last year, government has fixed the minimum support price of cotton on Rs5,000 per 40kg. It helped a lot in increasing the production of cotton in the country. The prices of cotton witnessed an upward trend in international market so it is recommended that price of Phutti should be increased and fixed at Rs 5500 per 40 Kg.
The government had imposed 17% sales tax on cotton and cotton-related products in the ‘mini-budget’. The government should revise imposition of 17% sales tax on cotton, Banola, Khal and Banola oil.
The establishment of Cotton Authority by Prime Minister Imran Khan was welcomed by stakeholders. It was recommended that government should include chairmen of APTMA, KCA and PCGA in the cotton authority. This will strengthen the Authority.
Separately, cotton arrival in Pakistan increased by 32.4% year-on-year, showed the latest fortnightly data released by the Pakistan Cotton Ginner’s Association (PCGA).
As per the report, total cotton arrivals surged to 7.434 million bales as of February 15, 2021, compared to 5.616 million bales in the same period last year, showing a difference of 1.82 million bales.
Cotton arrival in Punjab was 3.922 million bales as compared to 3.480 million bales in the same period last year, showing an increase of 0.442 million bales or 13%. On a fortnightly basis, cotton arrival recorded a marginal increase of 0.3% as compared to 3.908 million bales on February 1.
Similarly, cotton arrival in Sindh reached 3.512 million bales on February 15, as compared to 2.135 million bales reported in the same period last year, with an increase of 1.377 million bales or 64%. On a fortnightly basis, cotton arrival from Sindh remained almost unchanged.
Cotton is crucial for Pakistan’s textile sector, which accounts for the lion’s share of the country’s exports. The textile sector alone accounts for 3.4% of the Gross Domestic Product (GDP) of this South Asian country, as per the Asian Development Bank (ADB).
Pakistan’s textile group exports witnessed 24.73% growth during the first seven months (July-January) of the current fiscal year and remained $10.933 billion compared to $8.765 billion during the same period of the last fiscal year, as per the recent data published by the Pakistan Bureau of Statistics (PBS).
On a year-on-year basis, textile group exports witnessed 17.29% growth in January 2022, when compared to $1.323 billion in January 2021.
Naseem Usman, while commenting on the report, said that current season starts a month earlier while due to the arrival of Phutti earlier now the arrival of Phutti is slow and it is expected that season will end earlier. Actually, the stock of cotton has ended but due to the extraordinary increase in the rate of cotton textile mills have restricted their purchase. Moreover, one international organisation had a stock of six lac bales but now the organisation is involved in off and on buying of the stock.
The organisation had the stock of eighty thousand bales. According to the sources it is expected that seventy lac bales will be produced in the country while the demand of textile mills is of one Crore seventy lac bales out of which around eighty lac bales will be imported. Till now agreements for the import of fifty lac bales have been signed.
The month of February is near ending and the government should take positive steps to increase the production of cotton in the coming season, especially by providing good quality seed. The government should also make arrangements for the import of quality cotton seed from abroad on the pattern of India, China and other cotton producing countries.
India imported cotton seed in 2003 from Monsanto in order to improve cotton production where as Monsanto offered the same to Pakistan at that time but unfortunately the higher authorities at time allegedly demanded kickbacks from them and they refused to provide cotton seed, say sources.
Copyright Business Recorder, 2022
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