KARACHI: The cotton market witnessed unprecedented volatility over the past four days, with prices fluctuating by Rs 3,500 per maund. Spot rates saw a variation of Rs 1,700 per maund. Trading volume initially surged but later dwindled.
Supply of Phutti increased briefly before declining again. Import contracts for cotton are being executed, and the textile sector remains active. Textile exports have seen an increase.
Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood has said despite this, the market continues to face a financial crisis. Recent rains in Punjab’s cotton-producing regions have boosted crop yields, potentially helping Pakistan escape the IMF’s grip.
However, All Pakistan Textile Mills Association has said that cotton yarn and cotton of worth $2.5 billion will be imported. It expressed severe concerns over the misuse of the Export Finance Scheme (EFS) facilities.
The local cotton market witnessed a significant decline in prices last week due to a substantial increase in Phutti supplies. Cotton price was dropped by Rs 1,500 to Rs2,000 per maund. This decrease prompted textile spinners to increase their purchases, resulting in higher trading volume and prices.
According to reports from Sindh and Punjab, the recent rains have led to a remarkable surge in Phutti supplies, indicating a possible resurgence of the cotton season. The quality of Phutti has also improved significantly, with better yields. Initial concerns about cotton production have ended, and Phutti production is now expected to exceed initial estimates. The increased supply of high-quality Phutti has revitalised the market, boosting hopes for a better cotton season.
Despite the textile sector’s ongoing crisis, a relative improvement is being observed. The government’s measures against Independent Power Producers (IPPs) are expected to lead to better energy supply in the coming days. Additionally, payments of stuck sales tax refunds are improving, fostering hopes that business activities will gradually transition from despair to recovery.
However, private textile spinners are facing increasing difficulties due to rising cotton yarn imports. A substantial increase in cotton yarn imports has been witnessed. Locally, decreased cotton prices and the surge in global cotton prices, particularly prices of New York cotton, have prompted mills to show greater interest in purchasing domestic cotton over imports.
Currently, Pakistan’s cotton consumption exceeds production, as a result of which imports will be increased. If conditions remain favourable, around 60 lac bales will be imported. So far, contracts for approximately 22 lac bales have been finalised, with additional import agreements under way.
Shipments of cotton and yarn from previous contracts have started arriving. Estimates suggest that around $2.5 billion will be spent on cotton and yarn imports this year.
The cotton market experienced unusual fluctuations over the past four days, with prices swinging by Rs 3,500 per maund. Spot rates also varied by Rs 1,700 per maund. In Sindh, cotton prices after fluctuations remained in between Rs 17,500 to 18,000 per maund while Phutti prices were in between Rs 7,000 to 8,200 per 40 kg.
In Punjab, cotton prices were remained in between Rs 18,000 to 18,500 per maund while Phutti prices were remained in between Rs 7,500 to 8,500 per 40 kg.
In Balochistan, cotton prices were in between Rs 17,800 to 18,200 per maund. Balochi cotton prices were quoted between Rs 18,800 to 19,000 per maund.
The Karachi Cotton Association’s Spot Rate Committee reduced the spot rates by Rs 700 per maund and closed it at Rs 18,000 per maund.
Chairman of the Karachi Cotton Brokers Forum, Naseem Usman, stated that the international cotton market is witnessing an upward trend in prices. The recent surge in New York cotton prices is attributed to hurricane concerns and reduced production. Despite ongoing trade tensions between China and the US, New York cotton prices continue to rise.
According to the USDA’s weekly export and sales report for the 2024-25 season, as many as 87,800 bales were sold. Turkey led the purchases with 31,500 bales, followed by Pakistan with 31,100 bales, and Vietnam with 13,300 bales.
The All Pakistan Textile Mills Association (APTMA) has expressed serious concerns over the misuse of the Export Facilitation Scheme (EFS) following the withdrawal of sales tax exemptions on local supplies for export manufacturing under the Finance Act 2024. This policy change has led to the rampant misuse of EFS, resulting in a significant increase in yarn and other intermediate inputs imports, largely for domestic market sale under the guise of export manufacturing.
Chairman APTMA emphasised that this misuse harms local industry, affecting the livelihoods of millions nationwide. In August, Pakistan’s textile and apparel exports saw a 13% increase. However, the country may spend $2.5 billion on cotton yarn imports due to low domestic cotton production. He stressed that APTMA continues to highlight the negligence in policy-making, which has led to this crisis. The association urges the government to address the issue and prevent further damage to the local textile industry.
However, Sajid Mahmood, head of the Technology Transfer Department at the Central Cotton Research Institute in Multan, emphasised the significance of cotton production and exports in Pakistan’s economy. He noted that the IMF’s $7 billion loan to Pakistan is equivalent to approximately 5 million bales of cotton, highlighting the importance of cotton in the country’s economy.
Mahmood stated that Pakistan’s textile industry earns $1.5 billion in foreign exchange from exporting products made from just 1 million bales, while Bangladesh exports around $6 billion worth of products from the same amount. He stressed that if the government financially supports the Central Cotton Committee and updates its research programs, Pakistan can regain its past production levels of 15 million bales.
Investing in research and development will not only increase cotton production but also improve its quality, leading to increased exports and foreign exchange. This would eliminate the need for IMF loans, making Pakistan’s economy self-sufficient. Mahmood emphasised that investing in research is crucial to achieving desired results.
Furthermore, if Pakistan’s textile industry (APTMA) honestly pays cotton cess and implements the Cotton Cess Act correctly, cotton production can be further increased. This would save billions of dollars spent on importing cotton, meeting domestic needs through local production. As a result, the country’s economic situation will improve, and local farmers and the agricultural sector will be stabilised.
Copyright Business Recorder, 2024
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