Weekly Cotton Review: Prices remain stable

23 Dec, 2024

KARACHI: Cotton prices in Pakistan remained stable last week, however, trading activity was subdued. A bearish trend in the New York Cotton market also contributed to this.

Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmud has expressed serious concerns over a significant 33% decline in cotton production in the country. He warned that this could pose a major threat to Pakistan’s economy.

The textile sector and other industrialists are staging protests against the recent increase in gas prices. They are demanding that the government reconsider this decision.

Chairman Pakistan Cotton Ginners Forum Ehsan-ul-Haq has cautioned that the country could face a cotton crisis due to the government’s flawed policies.

Cotton prices in the local market remained relatively stable over the past week. According to the Pakistan Cotton Ginners Association, the country’s cotton production up to December 15 has reached fifty three lac and sixty seven thousand bales, which is twenty six lac and fifty six thousand and three hundred seventy three bales or 33.11% less than the eighty lac and twenty three thousand and seven hundred bales produced during the same period last year. In view of this significant decrease, textile spinners are showing increased interest in purchasing relatively good quality cotton, even though the international cotton market continues to be bearish.

Spinners are purchasing cotton on a two week credit basis due to a weak financial position, especially at the end of December. On the other hand, ginners are storing cotton to produce better quality cotton for sale in January.

Despite the initial low business activity, there seems to be an improvement. Due to lower cotton production reports, the total cotton production is expected to be around 56-57 lac bales, excluding unregistered bales.

Due to the decrease in the promised price of New York cotton, mills are becoming increasingly interested in importing cotton. According to cotton import agents, approximately contracts for the import of thirty six lac bales have already been signed. It is estimated that around 50 to 55 lac bales of cotton will need to be imported.

In Sindh province, the price of cotton per maund, depending on quality, is in between 16,000 to 18,000 rupees. The price of phutti per 40 kilograms is in between 6,500 and 8,400 rupees.

In Punjab province, cotton price is in between 16,500 to 18,000 rupees per maund, and phutti costs between 6,700 and 8,800 rupees per 40 kilograms.

In Balochistan province, cotton price is in between 16,700 and 18,200 rupees per maund, and phutti price is in between 7,400 and 9,000 rupees per 40 kilograms.

Balochi cotton price is in between 18,000 to 18,300 rupees, and Primark cotton price is in between 18,700 and 18,800 rupees per maund

The prices of binolla, khal, and oil remained stable. The Karachi Cotton Association’s spot rate committee maintained the spot rate at 17,300 rupees per maund.

Nasim Usman, Chairman of the Karachi Cotton Brokers Forum, has stated that there has been an overall decline in cotton prices in the international market. The price of New York cotton futures is currently ranging between 67.50 and 69 US cents per pound. According to the USDA’s weekly export sales report, 194,900 bales were sold for the 2024-25 year.

Vietnam topped the list by purchasing 42,400 bales. Pakistan came in second place by purchasing 37,000 bales.

Turkey secured the third position by purchasing 32,100 bales.

For the year 2025-2026, 6,900 bales were sold, all of which were purchased by Mexico.

Sajid Mahmood, Head of the Technology Transfer Department at the Central Cotton Research Institute, Multan, has expressed grave concern over the data released by the Pakistan Cotton Ginners Association (PCGA) up to December 15, 2024. Speaking with cotton analyst Naseem Usman, he emphasized that this year’s cotton production figures represent a significant challenge to Pakistan’s economy, necessitating urgent and comprehensive action. According to the PCGA, the country’s cotton production for 2024 stands at 5,367,334 bales, reflecting a sharp 33.11% decline compared to 8,023,707 bales produced in 2023.

Sajid highlighted the alarming regional breakdown, with Punjab witnessing a 34.44% reduction in production and Sindh experiencing a 31.80% decline. He identified key contributing factors, including climate change, water scarcity, and inadequate investment in seed technology research.

He acknowledged that the federal government has initiated measures to address the crisis. Federal Minister for National Food Security and Research, Rana Tanveer Hussain, has solicited proposals from stakeholders to revitalize cotton research and development.

Meanwhile, efforts to resolve the longstanding cotton cess dispute between the textile industry and the Pakistan Central Cotton Committee (PCCC) are progressing. Chairman APTMA, Kamran Arshad, has pledged to resume cotton cess payments from January 2025, with discussions underway to address outstanding dues. Additionally, the federal government is focusing on restructuring the

PCCC to strengthen its capacity to lead the sector effectively.

Sajid Mahmood underscored the importance of advancing research in modern seed technology and introducing climate-resilient cotton varieties to enhance productivity. He stressed that empowering institutions like the PCCC would not only revitalize cotton production but also ensure the socio-economic uplift of farming communities.

He proposed policy adjustments such as abolishing the sales tax on domestic cotton and imposing it on imported cotton to incentivize local production. Furthermore, he welcomed the government’s decision to lower interest rates, which he believes will have a positive impact on the cotton economy.

Sajid Mahmood concluded by emphasizing the economic potential of increased cotton production, stating that an additional one million bales could generate $1 billion in exports and create one million jobs. He called on all stakeholders to collaborate in research, development, and policymaking to ensure the sector’s recovery and contribute to the stabilization of Pakistan’s economy.

Furthermore, Ehsan ul Haq, the chairman of the Pakistan Cotton Ginners Forum, said in a statement that the government’s negligence and flawed policies have created the threat of a cotton crisis in the country. The 18% sales tax on the purchase of local cotton and cotton yarn, coupled with the duty-free import of these same foreign products, has plunged the cotton industry into a crisis. On the one hand, valuable foreign exchange is being transferred abroad, while on the other, the

textile, ginning, spinning, value-addition sectors, and cotton growers are facing a crisis.

Furthermore, industrialists have strongly opposed the proposed increase in gas prices and have urged the federal government to reconsider for the protection of export-oriented industries and small and medium-sized enterprises (SMEs). They have warned that such an increase will severely impact these sectors, resulting in significant losses to the national exchequer.

Former Chairman of the Pakistan Readymade Garment Manufacturers and Exporters Association (PRGMEA), Ijaz Khokhar, said that the latest proposed increase in gas prices will negatively impact the competitiveness of the country’s value-added and export products in the global market.

The Karachi Chamber of Commerce has appealed to the Prime Minister to reject OGRA’s proposal to increase the gas tariff. President of the Karachi Chamber, Javed Bilwani, stated that OGRA should have recommended a decrease in gas prices by reducing unaccounted-for gas losses.

The Ministry of Petroleum had promised a reduction in gas prices. He said that OGRA’s recommendations for an increase in gas prices are contrary to the government’s assurances. A further 25.78% increase in gas prices will deal a severe blow to industry and exports. Javed Bilwani said that instead of increasing gas prices, the government should stop gas theft.

Copyright Business Recorder, 2024

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