KARACHI: Extraordinary bearish trend prevailed in local and international cotton markets. In the last three days the rate of cotton fell by Rs 2500 per maund while the spot rate fell by Rs 1700 per maund. The rate of Phutti also witnessed a decrease of Rs 1200 per 40 kg. The rate of Future Trading of New York Cotton was also below 20 cent.

Cotton production target in Punjab will not be achieved; however, rains have positive effects on cotton production. Buyers are less interested in Heimtextil. The 17% sales tax on cotton, Banola and Khal has been abolished due to the efforts of Pakistan Cotton Ginners Association.

After the fluctuations in the local cotton market during the last week an extraordinary bearish trend was witnessed. The international cotton markets also saw an extraordinary decline.

The textile mills are hesitant to buy because of decrease in the rate of US dollar, as well as, due to decline in the rate of Future Trading of New York Cotton for the month of December which after decreasing reached at 98 American cents.

Ginners, who had already oversold cotton, started selling cotton out of sheer panic. As a result, the price of cotton fell by about Rs 2,500 per maund and reached at the lowest level of Rs 18,500 to Rs 19,000 per maund. Later, the price continued to decline and the price of cotton fell to a low of Rs. 18,500 per maund. The price of Phutti also come down by Rs1000 to Rs1200 per 40 kg and was in between Rs.8200 to Rs 8600. There is a pressure in the market.

In Sindh province, the price of cotton was in between Rs. 18,500 to Rs 19,000 per maund. The rate of Phutti was in between Rs 8200 to Rs 8600 per 40 kg.

Due to rains in Punjab province, very few cotton factories are functional. However, the price of cotton in Punjab was in between Rs19,000 to Rs 19,500 per maund. The rate of Phutti was in between Rs 7000 to Rs 8200 per 40 kg.

In Balochistan, the price of cotton was Rs. 18,500 to Rs. 19,000 per maund while the rate of Phutti was in between Rs 8400 to Rs 8500 per 40 kg.

The spot rate committee of Karachi Cotton Association has reduced the spot rate by Rs. 17,00 per maund and fixed the spot rate at Rs. 18,800 per maund.

Naseem Usman, Chairman, Karachi Cotton Brokers Forum, said that the business volume has declined due to the continuous decline in demand for textile products due to the recession in the international markets. As a result, the demand for goods of exporters of local textile products has also declined and some importers are not abiding by the agreements reached earlier. Many importers are delaying delivery due to which there is a severe financial crisis in the market.

According to the USDA’s weekly export and sales report, 16,200 bales were sold for the year 2021-22 which is 39 percent less as compared from the previous week.

Vietnam topped the list with 6,300 bales. China came in second with 4,500 bales. Mexico came in third with 2,800 bales.

For 2022-23, two lac seventy seven thousand and three hundred bales were sold out of which China bought two lac thirty eight thousand and one hundred bales and Mexico bought thirty two thousand and six hundred bales.

According to reports, buyers are less interested in Heimtextil, a global exhibition of textile products held in Frankfurt, Germany.

Due to the efforts of Pakistan Cotton Ginners Association (PCGA), 17% sales tax on cotton, Banola and Khal was abolished.

Punjab may miss cotton sowing target for the year 2022-23 by around 340,000 acres as the provincial agriculture department is expecting that it will be sown over an area of slightly over 3.6 million acres of land against the target of 4 million acres.

According to the sowing position survey of cotton area 2022-23, the Crop Reporting Survey (CRS) wing of the Punjab Agriculture Department by June 01, 2022, the area brought under cotton sowing was 3.583 million acres against the target of 4 million acres. The department has also estimated that the expected area under cotton sowing will be at 3.645 million acres by June 30, 2022 when the survey will be completed.

The CRS report; however, said that 98.3 per cent of the expected area under sowing of cotton was achieved in the province by June 01, 2022 and break-up of it reveal that 97.7 per cent of the expected area was achieved in North Punjab and 98.3 per cent of the expected area crop sowing this year was achieved in South Punjab.

Director General Agriculture (Extension) Dr Anjum Ali Buttar while talking to Business Recorder on Friday confirmed that cotton sowing in the province would fell short against the target area which might also make difficult to achieve the production target of 6.6 million bales of the white gold crop.

He; however, said that the figures may reach 3.7 million acres by the time final figures would be tabulated as in some areas growers took the advantage of heavy pre-monsoon rains by re-sowing the crop on their land. Last year 2021-22, he said the total area brought under cotton cultivation was 3.161 million acres of land.

While talking about the major reason in not achieving the targeted sowing area despite good price of cotton during the last season, Dr Anjum said severe heat wave and unprecedented water shortage experienced by the country due to climate change at the time of sowing (March onward) were the main reasons behind shortfall in cotton sowing area.

As per the CRS data, Sargodha Division is expected to bring 111,000 acres of land under sowing of cotton, Faisalabad Division 63,000 acres, 3,000 acres in Kasur (Lahore Division), 72,000 acres of land in Sahiwal Division, 1.017 million acres of land in Multan, 727,000 acres of land in DG Khan and 1.653 million acres of land is expected to be brought under the cotton sowing in Bahawalpur Division.

Rapid depreciation in the value of the rupee and growing global demand led to Pakistan’s textile and clothing exports growing 28.26 per cent Y-o-Y to $17.62 billion in the first 11 months of this fiscal year (11MFY22). As per Pakistan Bureau of Statistics (PBS), Pakistan’s textile and clothing exports grew 56.02 per cent Y-o-Y during May this year. RMG exports grew 30.63 per cent in value and 49.70 per cent in quantity during July-May, while knitwear exports increased 36.44 per cent in value but dipped 4.34 per cent in quantity. Value of bedwear exports grew 21.68 per cent. However, its quantity decreased by 15.19 per cent. Pakistan’s towel exports increased 21.66 per cent in value and 7.17 per cent in quantity, whereas exports of cotton cloth rose by 26.81 per cent in value and 7.14 per cent in quantity.

Exports of cotton yarn increased 24.18 per cent, and those of yarn made from material other than cotton increased by 109.68 per cent. Pakistan’s made-up article exports excluding towels surged by 15.19 per cent, while exports of tents, canvas, and tarpaulin dipped by 2.16 per cent during the period under review. During the review period, the export of art, silk, and synthetic textiles increased by 29.36 per cent.

Textile machinery imports increased 47.24 per cent Y-o-Y to $722.605 million in July-May. Import of raw cotton increased 25.28 per cent while the import value of synthetic fibres rose 19.29 per cent followed by import of synthetic and artificial silk, whose imports rose by 28.80 per cent during the period. In 11MFY22, imports of used clothing increased by 46.90 per cent compared to the same period last year.

However, Pakistan Hosiery Manufacturers & Exporters Association (PHMA) Central Chairman Shahzad Azam Khan has said the commitment of the Federal Board of Revenue (FBR) to instantly release exporters’ tax refund claims seems to be just an eyewash, as inordinate delays in the payment of sales tax refund claims under FASTER system continues.

In a press statement, Shahzad Azam Khan observed that the value-added textile exporters are facing severe liquidity crunch and they need the refunds payment like government required IMF loan.

“It’s a question of survival amidst acute liquidity crunch and we need the help of the finance minister. Like government is pursuing the IMF in search of dollars in the same way we also need the government’s help to save the industry from bankruptcy by releasing its refunds,” he appealed.

He said that the PHMA has been approached by various members informing that they have been facing inconvenience owing to delay in refunds payment despite the fact that their refund payment orders (RPOs) were generated as well as approved during the month of May 2022.

He called for release of sales tax refunds within the specified timeline as per law and rules, as any further delays will cause them financial hardships and liquidity crunch owing to high sales tax rates.

He said that the matter has also been brought to the immediate attention of Federal Minister for Finance & Revenue Miftah Ismail as well as the FBR officials during exporters’ recent meetings in Islamabad.

He termed the new system slower, arguing that nothing has changed in the newer system. He said that the PHMA took lead in assisting the FBR to upgrade and streamline the FBR’s Sales Tax Returns’ Faster System which was launched subsequent to the imposition of Sales Tax on textile industry which was previously regulated under SRO 1125 under “No-Sales Tax, No-Refund” regime. He said that the core objective of the FBR’s Sales Tax Faster system is to expedite refunds payment of export-oriented sectors within 72 hours of submission of relevant claims under the law to avoid any liquidity pressure on the exporters. The system, previously, had many glitches upon its launching which were improved and streamlined in consultation with the PHMA and other stakeholders’ associations.

Copyright Business Recorder, 2022