Weekly Cotton Review: Crisis-like situation exists in market on fall in rates

KARACHI: There is a crisis like situation in the cotton market because of continued decline in cotton prices. Business volume is also low. There is a difference of Rs 2,000 per maund in the rate of cotton as per quality.

However, All Pakistan Textile Mills Association has discussed major challenges faced by it with Commerce and Energy ministries and Federal Board of Revenue.

Trading Corporation of Pakistan (TCP) has linked the purchase of cotton with the approval of the Economic Coordination Committee. While Governor Punjab Balighur Rehman has announced that the government will buy each bale of cotton through the TCP. A meeting of Central Cotton Committee should be called, immediately.

In the domestic cotton market, the decline in cotton prices continued during the last week. Textile mills are making cautious purchases while ginners are selling cotton without any bargaining due to which cotton prices are nose-diving.

APTMA is appealing to the government for solving the issue of high cost of energy as it is very high compared to other regional countries. They are also complaining to the government about the issue of sales tax refund. The value of US Dollar against the PKR is also continuously falling.

Regarding these long-standing problems, meetings are also being held between APTMA and the relevant government agencies, but no positive decision has been announced as yet.

According to the reports, the price of gas is going to be increased drastically, due to which there will be a negative impact on the business.

Patron-in-Chief APTMA Gohar Ijaz has been appointed as Federal Minister of Commerce and Production. He used to complain to the government that Faisalabad and Lahore were turned into graveyards of the textile sector. Though, now he himself is trying to solve this problem but still the textile sector is not getting any relief.

On the other hand, recession continues in foreign countries. Earlier, the markets were affected due to the conflict between Ukraine and Russia. Now the conflict between Palestine and Israel has become worrisome.

There is a severe recession in local and international markets with regard to demand and rate of cotton. The quality of local cotton is decreasing day by day, due to which its price is also decreasing.

On the other hand, there is a dispute between Pakistan Cotton Ginners Association and Crop Reporting Department of Agriculture, Punjab regarding the data of cotton production in Punjab province. There is a difference of 13 lac bales between the statistics of two departments.

Every year the cotton crop assessment committee comprising of all stakeholders sets the cotton production target but surprisingly not a single meeting of CCAC has been held so far. CCAC will determine the exact production of cotton in Punjab.

However, Caretaker Federal Minister for Trade and Production Gohar Ijaz has said that this year the production of cotton in the country is expected to be around one Crore and twenty lac bales, while farmers’ associations, Kisan Etihad, says that the federal minister is overestimating the cotton production due to which the farmers will get low price of Phutti.

The rate of cotton in Sindh as per quality is in between Rs 13,500 to Rs 16,000 per maund. The rate of Phutti is around Rs 5,500 to Rs 7,000 per 40 kg.

The rate of cotton in Punjab is in between Rs 15,000 to Rs 16,000 per maund while the rate of Phutti is in between Rs 6,000 to Rs 7,200 per 40 kg.

The rate of cotton in Balochistan is in between Rs 15,500 to Rs 15,700 per maund and the rate of Phutti is in between Rs 7,000 to Rs 8,500 per 40 kg.

The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 8,000 per maund and closed it at Rs 16,000 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that mixed trend was observed in international cotton markets. The rate of Future Trading of New York Cotton was 86 American cents. According to the USDA’s weekly export and sales report of 2023-24, forty three thousand and four hundred bales were sold.

China was at the top by buying 21, 700 bales. Indonesia bought 6,700 bales and ranked second. Mexico bought 5,000 bales and came third.

APTMA has discussed major challenges with ministers of Commerce, Energy and officials of FBR. In its meeting with the commerce minister, APTMA appreciated the minister’s role in managing the exchange rate and controlling volatility.

The ministers of Commerce and Energy were apprised of the energy issues facing the industry. In particular the high power tariffs of 16 cents/kWh currently charged to the industry, and the uncertainty regarding gas/ RLNG availability and prices.

The Ministers informed the members that a solution is close to be found to ensure availability of gas/RLNG to the industry, and price disparity is also being addressed.

APTMA appreciated the efforts of the ministers for solving the issues of the industry but the acceptable solution for the electricity related problems faced by the textile industry is still pending.

As it is always discussed that the textile industry has an export potential of $2 billion per month out of which industry which has export potential of $650 million is closed. If electricity prices remain high for exporters, an increasing number of firms will closed.

Moreover, Trading Corporation of Pakistan has linked the purchase of cotton with the approval of the Economic Coordination Committee (ECC).

In the local cotton market there is an unprecedented decline in commodity prices. It is feared that cotton cultivation next year would be decreased due to this factor.

The Federal Committee on Agriculture has reduced the cotton production target from 12.7 million bales to 11.5 million bales.

Muhammad Baligh Ur Rehman, Governor of Punjab, has announced that the government would purchase each bale of cotton for which Trading Corporation of Pakistan will start buying.

Speaking at a ceremony at the Pakistan Cotton Ginners Association (PCGA) in Multan on Thursday, he highlighted the need for usage of modern technology for better production of cotton, as well as, other crops.

The governor said that farmers should go for early cultivation of the crop for better results as Pakistan’s economy and progress are directly attached with cotton.

He said that ginning factories would run with improved cotton and government had approved new varsities. Governor commends Punjab government’s measures.

He lauded the Punjab government’s measures for better production of cotton, said that initiatives were underway to give good rates to farmers.

Waheed Arshad Chaudhary, Chairman PCGA, briefed the governor about the issues being faced by the growers.

Copyright Business Recorder, 2023