KARACHI: Overall decline in cotton prices, with spot rates dropping by Rs 700 per pound. Trading volume remain relatively low. Heavy rains have severely damaged cotton crops in Sindh and Punjab provinces, sparking fears of a 20% decrease in overall cotton production.
Industry stakeholders demand a 4-5% reduction in interest rates.
Inadequate research funding cited as a major factor behind declining cotton yields.
Last week, Pakistan’s domestic cotton market experienced a decline in prices due to panic selling by growers.
On the first day of the week, growers hastily sold their cotton, resulting in a staggering Rs. 1,000 per maund drop in prices.
On Saturday, prices had stood at Rs 19,000 per maund, but by Monday, they had dropped by Rs 800-1,000 per maund.
Despite this, spinning mills showed lukewarm interest in purchasing, leading to relatively low trading volume.
Moreover, cotton arrivals remained stagnant due to rains, with no significant increase observed.
According to textile spinners, several spinners were purchasing cotton as needed, driving a continuous upward trend in the market until Saturday. However, on Monday, mills suddenly withdrew their support, triggering panic among growers, which led to a sharp decline of Rs 1,000 per maund in cotton prices.
Sindh Agriculture Minister Sardar Muhammad Bakhsh Mehr stated that recent rains have caused approximately Rs. 87 billion in damages to crops in Sindh. The cotton crop, spanning over two lac and ninety three thousand acres, has been severely affected.
In Punjab, various crops, including cotton, have suffered significant damage in different regions.
Analysts estimate that the rains have caused around 30% damage to cotton crops.
Separately, the Karachi Chamber of Commerce and Industry (KCCI), Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and All Pakistan Textile Mills Association (APTMA) have urged the State Bank of Pakistan (SBP) to significantly reduce interest rates, which could lead to an improvement in the economy.
Pakistan’s spinners are increasingly interested in importing cotton due to domestic production shortages and quality issues. According to import agents, approximately import agreements of sixteen lac bales have been signed.
The price of cotton in Sindh province is in between Rs 17,700 to Rs 18,300 per maund. The rate of Phutti is in between Rs 6,000 to Rs 7,200 per 40 kg.
The rate of cotton in Punjab is in between Rs 18,000 to 18,500 per maund as per quality.
The price of Balochi Cotton is in between Rs 19,400 to Rs 19,500 per maund.
In Balochistan the rate of cotton in between Rs 17,800 to 18,000 per maund while the price of Phutti is in between Rs 6,000 to Rs 8,800 per 40 kg.
The Karachi Cotton Association’s Spot Rate Committee reduced spot rates by Rs 700 per maund, closing at Rs 18,300.
Karachi Cotton Brokers Forum Chairman Naseem Usman stated that international cotton prices experienced fluctuations.
According to the USDA’s weekly export and sales report for the year 2024/25 more than two lac and seven thousand bales were sold.
Pakistan purchased seventy one thousand and four hundred bales and stood first. India purchased forty one thousand and eight hundred bales and stood second. Turkey purchased twenty two thousand and seven hundred bales and was at number third.
For the year 2025/26 eight thousand and four hundred bales were sold. Mexico purchased fifty one hundred bales and stood first and Costa Rica purchased three thousand and three hundred 3,300 bales and was on number second.
Punjab Agriculture Secretary Iftikhar Ali Sahou presided over a meeting to review the cotton crop situation and the impact of recent rains. The meeting was attended by representatives from the department and other stakeholders.
Secretary Sahou stated that 3.4 million acres of land have been cultivated with cotton in Punjab.
All possible resources are being utilized to achieve cotton production targets.
September is a critical month for cotton, and field activities will be intensified to guide farmers. Farmers will be advised on better cotton crop management. He further directed officials to prepare a feasible plan to make Bahawalpur Division a Cotton Valley.
He directed to issue timely advisories to protect cotton crops from pests and diseases. Release technical advisories based on weather forecasts.
The meeting was attended by Additional Secretary Agriculture Task Force Punjab, Rana Shabir Ahmed Khan.
Director General Agriculture Extension Punjab, Chaudhry Abdul Hamid Director General Agriculture Pest Warning, Dr Aamir Rasul, Progressive cotton farmers, Syed Hasan Raza and Khalid Mahmood Khokhar.
The All Pakistan Textile Mills Association (APTMA) has called upon the Monetary Policy Committee (MPC) to reduce interest rates by at least 400 basis points during its upcoming meeting on September 12, 2024.
The association said that current economic environment demands urgent action to alleviate the financial strain on the industrial sector, particularly as inflation continues to decline.
“We are deeply concerned over the prevailing interest rates, which stand at an overwhelming 19.5 percent. This figure translates to a real interest rate of approximately 10 percent, a level that is incomprehensible and unprecedented given current economic realities. With inflation on a steady downward trajectory since November 2023, the MPC needs to align its monetary policy with the evolving economic conditions to support the struggling industrial sector.”
According to the Pakistan Bureau of Statistics (PBS), inflation fell to 11.1 per cent in July 2024 and further decreased to 9.64 per cent in August 2024. Despite this notable reduction, the MPC has yet to adequately adjust interest rates. Such high real interest rates are counterproductive, stifling economic growth and hindering the industry’s ability to access much-needed capital.
The textile sector is the backbone of Pakistan’s economy, driving innovation, employment, and exports. However, the exorbitant cost of borrowing has rendered it nearly impossible for businesses to secure working capital and make investments, the APTMA added.
According to the association, in this challenging economic environment, if the government cannot provide any other form of relief to the industry, the least it can do is ensure that borrowing costs are brought down to a feasible level. High real interest rates are discouraging investment in critical sectors, including textiles, which is Pakistan’s largest export-oriented industry. Without affordable financing options, the industry cannot expand, innovate or compete effectively in international markets. This not only jeopardizes our export potential but also threatens the livelihoods of millions of workers employed in the sector.
The current monetary policy is misaligned with the ongoing efforts to stimulate economic recovery. The MPC’s primary objective should be to create an enabling environment for growth. Given the substantial decline in inflation, there is ample room for a significant reduction in interest rates. Such a move would not only ease the financial burden on businesses but also invigorate the economy by boosting investment, enhancing productivity, and creating job opportunities.
In this context, the APTMA urges the MPC to take decisive action in its upcoming meeting and reduce interest rates by at least 400 basis points. It must be emphasized that a drastic reduction in interest rates is essential to revitalize the economy, create fiscal space for public expenditures, and ensure the survival and growth of key industries.
Per the APTMA, the MPC should recognize the urgency of the situation and respond accordingly. A significant cut in interest rates is not just desirable but necessary for the economic wellbeing of the country.
It is time for the MPC to act in the best interest of Pakistan’s economy by aligning monetary policy with the current inflationary trends and supporting the private sector in its efforts to drive economic growth.
Sajid Mahmood, Head of the Transfer of Technology Department at the Central Cotton Research Institute Multan, highlights the critical factors contributing to the alarming decline in cotton production. These include inadequate resources for research and development, the textile industry’s inappropriate role, the absence of a fixed support price for cotton, and lack of farmer-friendly policies.
Notably, the All Pakistan Textile Mills Association has influenced most large textile industry groups to neglect paying the cotton cess to the Pakistan Central Cotton Committee (PCCC) for eight years, violating the Cotton Cess Act. This has severely impacted the PCCC, a vital research institution, by limiting its resources and hindering breeding programs focused on developing climate-resilient, pest- and virus-resistant seeds.
To effectively address challenges like climate change, whitefly, pink bollworm, and viruses, research institutions require timely resource allocation. The textile industry must recognize the direct correlation between cotton production and their business sustainability. Without cotton, the industry’s survival is at risk, and continued neglect may lead to a crisis.
To stabilize cotton production, textile mills must reassess their approach, resume paying the cotton cess, and actively contribute to cotton research. Concerted efforts from both the government and the textile industry are essential to halt the decline in cotton production.
Although the Pakistan Central Cotton Committee boasts the country’s largest research infrastructure and skilled agricultural scientists, financial constraints limit the scope of their research. The textile industry must assume its responsibility in supporting cotton research and development. Substantial financial backing from both the government and private sector is crucial for developing modern, resilient seeds. Furthermore, farmers require adequate support prices to enhance their production capacity.
Copyright Business Recorder, 2024
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