KARACHI: A significant surge has been observed in cotton prices, with a Rs1000 per maund increase in spot rates. The reduced supply of Phutti due to rainfall has led to increase in prices of both cotton and Phutti, amid low trading volume.
However, industry experts warn that the prolonged rains will have adverse effects on the cotton crop. According to Pakistan Central Cotton Committee (PCCC), cotton production is expected to range between 65 lac and 75 lac bales.
Pakistan’s cotton imports have seen a significant increase, as import contracts of 16 lac bales have already been signed. More agreements are under way.
According to all Pakistan Textile Processing Mills Association, textile sector’s woes continue to escalate, primarily due to exorbitant electricity and gas prices.
The local cotton market experienced disruptions last week due to persistent rainfall across Sindh and Punjab’s cotton belt, severely impacting business operations.
The supply of Phutti has significantly dwindled, and most ginning factories are either shut down or operating partially. Despite the availability of only rain-damaged and low-quality cotton, spinning mills were forced to purchase the available stock to meet their needs, resulting in a notable increase in cotton prices. Rate of cotton went up by Rs 1000-1500 per maund, while spot rate also was hiked by Rs 1000 per maund.
The ongoing rainfall has raised concerns about Pakistan’s cotton production, with varying opinions on the crop’s condition. Some experts claim that the crop has suffered damage in several regions, while others argue that the second picking season will yield better results if crop remains protected from disease.
Once the rains subside, Phutti supply is expected to increase around September 15, with relatively better quality. It is premature to predict the total crop yield, but most market sources estimate it to range between 65 to 75 lac bales.
Despite the worsening economic situation, the government continues to increase energy prices instead of reducing them. The recent gas shortage has exacerbated the challenges faced by industries and the textile sector, deepening the financial crisis. The Independent Power Producers (IPPs) are raising alarm, but government officials are merely offering assurances, with no tangible solutions. The situation remains unchanged, with no respite in sight.
The rate of cotton in Sindh province is in between Rs18,800 - 19,200 per maund while the price of Phutti is in between Rs 7,000 - 8,200 per 40 kg.
The price of cotton in Punjab province is in between Rs 18,800 - 19,200 per maund while the rate of Phutti is in between Rs 7,500 - 8,500 per 40 kg.
The rate of cotton in Balochistan is in between Rs 18,700 - 18,800 per maund while the rate of Phutti is in between Rs 7,000 - 8,600 per 40 kg.
The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 1,000 per maund and closed it at Rs 19,000 per maund.
Chairman of the Karachi Cotton Brokers Forum, Naseem Usman stated that international cotton prices have remained relatively stable. The New York cotton futures price is currently trading between 68 and 71 American cents per pound.
According to the USDA’s weekly export and sales report, 135,200 bales were sold for the 2024-25 crop year. Pakistan was on top of the list, purchasing 74,500 bales, followed by India with 17,800 bales, and Vietnam with 14,400 bales.
For the 2025-26 crop year, 700 bales were sold to Japan.
The USDA released its highly anticipated report, revealing an exceptionally positive sales and export update. US cotton sales saw a remarkable 45% surge.
Pakistan remained the top buyer, while India secured the second spot.
The report highlights the impact of US-China political tensions, as the US imposed sanctions on major Chinese companies. Consequently, China has completely withdrawn from purchasing US cotton.
This report is expected to generate overall mixed sentiments in the market.
The current monsoon rains will have a negative impact on the cotton crop in the country as rain causes various diseases in the crop. A senior official of the Ministry of National Food Security and Research (MNS&R) told Business Recorder that rains would have a positive impact on other major Kharif crops including sugarcane and rice but it will have a negative impact on cotton and maize.
President Kisan Ittehad Khalid Mehmood Khokhar has said that the country’s cotton production, already on a declining trajectory, will further deteriorate due to the ongoing rains. He said that rains will also have a negative impact on maize crop as farmers failed to cultivate the crop on time.
Khokhar said that currently cotton crop is at the fruit-opening stage; therefore, more rains in the cotton belt of the country will affect the crop. He further said that the yields of sesame (til), rice, and cotton have drastically reduced due to the heat wave, with temperatures reaching 48°C and an unprecedented heat index of 60°C.
A senior official of MNS&R told the National Assembly Standing Committee on National Food Security and Research meeting held last week that cotton production in the country is forecast to decline in 2024-25 due to high energy and financial costs which will constrain the textile sector’s growth. He further contended that the government has set a target of $25 billion for textile exports for 2023-24 but exports are expected to fall short of this goal.
The official said that the Federal Committee on Agriculture (FCA) during its previous meeting fixed the following production targets: cotton 10.8 million bales from3.12 million hectares; rice 8.7 million tons from over 3.1 million hectares of land; sugarcane at 76.7 million tons over an area of 1.3 million hectares; and maize at 9.3 million tons’ production from an area of over 1.5 million hectares of land.
The National Agromet Centre (NAC) of PMD in its advisory has urged farmers of cotton crop areas to drain out excess rainwater from the field as the accumulation of water affects food formation process in plants and may cause small balls to fall. Pest/viral attacks are expected in cotton and sugarcane crops during the monsoon hot and humid conditions therefore farmers should be very careful and take precautionary measures on time in this regard, the advisory further says. It further advised farmers obtaining crop water through tube wells to schedule irrigation according to the expected weather and to control weed growth in its present growing stage to forestall any negative impact on the crops and urged farmers to take timely precautionary measures to protect their crops, livestock and other property from any expected heavy rains.
The prolonged monsoon rains across Pakistan have severely impacted the cotton crop in Balochistan, Sindh, and Punjab, leaving stakeholders with varying opinions on the expected crop size.
According to a recent field survey by Islam & Sons, the conventional cotton crop is currently at the flowering and fruiting stages and appears healthy but exhibits excessive vegetative growth, which may affect future fruiting.
“The aftermath of the rains can sometimes be more detrimental, with September being a critical month for cotton due to its vulnerability to pest infestations, particularly whiteflies and PBW,” said Muhammad Kashif Islam.
Under ideal circumstances, a projected yield of around 7-8 million bales may be achievable, including both invoiced and non-invoiced cotton. However, it is still too early for precise predictions, with a clearer estimate expected after September 20th.
The rains have significantly impacted cotton quality, with reduced colour (RD) and other quality parameters not promising at this stage.
“Cotton quality is expected to improve as the crop progresses through the next phase of arrivals,” added Islam.
Regarding prices, Islam noted that they are governed by the demand and supply principle, with rising imported cotton bookings potentially affecting local rates.
Pakistan’s textile industry teeters on the edge of collapse as skyrocketing electricity and gas prices threaten to devastate the sector. The All Pakistan Textile Processing Mills Association (APTPMA) has issued a dire warning, citing unbearable costs, reduced productivity, and lost competitiveness in global markets. Chairman Muhammad Pervez Lala has slams government policies, prioritizing Independent Power Producers over industry needs, and demands urgent relief from crippling energy bills. He warned that the industry is on the brink of collapse due to the unbearable cost of doing business, reduced productivity, and loss of competitiveness in domestic and international markets.
Lala highlighted the energy crisis as the most significant hindrance to the industry’s growth, with electricity and gas prices skyrocketing. He emphasized that the Regional Competitive Energy Tariff (RCET) was withdrawn despite government assurances, further exacerbating the situation.
The APTPMA chief pointed out that Pakistan’s textile industry faces fierce competition from countries like Bangladesh, Vietnam, and India, and that expensive utilities and inadequate investment are hindering its ability to compete.
Lala criticised the government for prioritising Independent Power Producers (IPPs) over the industry, citing the massive payments made to IPPs without generating electricity. He demanded relief for industrialists, businesses, and the public from the heavy electricity bills. He highlighted other major issues, including high interest rates (19.5%), shifting of Final Tax Regime (FTR) to Normal Tax Regime (NTR), Non-reduction of customs duties on import of dyes & chemicals.
Lala concluded by cautioning that the textile processing industry’s challenges have worsened due to increasing energy prices and non-reduction of customs duties, emphasizing the need for reduction of energy prices to revive the industry, exports, and the economy.
Sajid Mahmood Head of the Transfer of Technology Department at the Central Cotton Research Institute in Multan, clarified in a phone conversation with this scribe that although it is commonly believed that textile mills pay the cotton cess, the reality is that the cost is ultimately passed on to the end-users who purchase the final products.
He explained that the cotton cess, which is Rs. 50 per bale, is a levy on cotton consumption or processing. This cost is included in the price of the products, similar to other production expenses. While it may seem that the textile mills bear this cost, it is actually the end-user who pays for it when buying textile goods.
Sajid Mahmood also highlighted the importance of government support and cooperation within the textile industry to boost cotton production in the country. He urged the government to annually announce and enforce a support price for cotton farmers, preventing exploitation by middlemen. He also called on the textile industry to ensure timely payment of the cotton cess to the Pakistan Central Cotton Committee, which is essential for advancing research and development in cotton production.
Copyright Business Recorder, 2024