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Coronavirus
LOW Source: covid.gov.pk
Pakistan Deaths
28,344
1624hr
Pakistan Cases
1,267,393
56724hr
1.45% positivity
Sindh
466,945
Punjab
438,636
Balochistan
33,159
Islamabad
106,615
KPK
177,240

KARACHI: The prices of cotton in local market witnessed a significant decline of Rs 200 to Rs 250 per maund as downward trend in the prices of cotton was seen in international markets. The sowing of cotton has completed. Contradictory claims regarding production of cotton are made. Hedge Trading should be restored in Karachi Cotton Association. It is inappropriate, inactive and unsuitable in Pakistan Mercantile Exchange.

In the local cotton market during the last week purchasing by textile mills continued as well as the arrival of Phutti was also continue due to which the trading volume increased little bit. During the last two days of the week the quality of cotton was affected due to arrival of Phutti which was affected by rain and rate of cotton decreased by Rs 200 to Rs 250 per maund although the ginners took interest in buying according to their needs. Due to arrival of low quality cotton during the last two days textile mills also decreased their buying.

The rates decreased in the market due to the panic however in the coming week due to the arrival of Eidul Azha the fare of transport will be increased due to the delivery of sacrificial animals and hardly any transport will be available for the delivery of cotton as a result of which mills also reduced their purchase. It is expected that business of cotton will fully resume after Eidul Azha holidays.

In Sindh the rate of cotton after decreasing by Rs 200 per maund is in between Rs 8150 to Rs 8200 per maund. The rate of Phutti after decreasing by Rs 200 per 40 kg is in between Rs 3400 to Rs 3600 while the rate of Banola is in between Rs 1500 to Rs 1600 per maund.

In Punjab the rate of cotton is in between Rs 8400 to Rs 8500 per maund. The rate of Phutti is in between Rs 3200 to Rs 3800 per 40 kg while the rate of Banola is Rs 1550 to Rs 1600 per maund. In Balochistan the rate of cotton is in between Rs 8250 to Rs 8300 per maund. The rate of Phutti is in between Rs 3700 to Rs 3800 per 40 kg.

The Spot Rate Committee of Karachi Cotton Association has decreased the rate by Rs 150 per maund and closed it at Rs 8250 per maund. Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all bearish trends prevails in international market.

The price of New York cotton fell from 63 American cents to 60 cents. There are two reasons of decreasing the rates of New York Cotton firstly according to the weekly report of USDA the export of cotton decreased by 13 percent although according to the report China was the biggest importer. Secondly as a result of the increasing tension between China and America if China suspend its imports of cotton from America or decrease the imports it will have a negative impact on the Rate of Promise (Waday Ka Bhao) of New York Cotton because America and China are reducing their diplomatic ties.

The arrival of new cotton has started in Brazil and the rate of cotton is low there while Argentina is also selling cotton on low rate. The bearish trend continues in rate of cotton in India. The Cotton Corporation of India has started selling cotton to textile mills from their stock due to which ginners were facing difficulties in selling their stock.

According to the reports monsoon rains in India will be twenty five percent more due to which there will increase in the production of cotton as well as the production of other agriculture products will be increased. Due to high cotton production, cotton prices in India will continue to be under pressure next season.

According to the information received the sowing of cotton has completed in the country. The sowing of cotton in Punjab is 2.5 percent less while in Sindh sowing was 2.7 percent more. Moreover, according to the estimates of agriculture Minster Punjab Malik Noman Ahmad Langrial 75 lac bales will be produced in Punjab. According to experts of Sindh 35 lac bales will be produced in Sindh while one lac bales will be produced in Balochistan and Khyber Pakhtunkhwa. According to the unofficial estimates eleven million bales will be produced in the country. However, according to estimates of private experts eighty seven million bales will be produced in the country. According to the report of USDA sixty five lac bales will be produced of 480 pounds which is 90 lac bales of 150 kg in Pakistan. However, it is premature to estimate cotton production at this time because the cotton plant is fragile and weather conditions affect it more.

Meanwhile, reports of attack of whitefly and Pink Ballworm on the cotton crop are coming from several cotton growing areas of Punjab. Minister for National Food Security and Research Syed Fakhar Imam in its statement few days back stressed on the need of starting cotton Hedge Trading in Pakistan Mercantile Exchange Limited (PMEX). Minister himself is an agriculture expert said that hedging could be an alternative source of marketing for giving a level playing field and facilitating a smooth flow of national and international trading in cotton as well increasing the production of cotton. Minister who himself is a cotton grower he may be involved in Hedge Trading when it took place in Karachi Cotton Association.

However, government had started Hedge Trading in PMEX seven years ago it is inactive and unsuitable in Pakistan Mercantile Exchange because delivery is not possible there so practically there is no business of Hedge Trading in PMEX for the last seven years.

Karachi Cotton Assosiation was involved in Hedge Trading after the establishment of Pakistan till 1976. After that former Prime Minister Zulfiqar Ali Bhutto nationalized ginning factories, flour mills and rice mills. After Bhutto former President General Zia-ul-Haq suspended the Hedge Trading in KCA. After that many governments came who hinted to start Hedge Trading but bureaucrats and vested interest was the biggest hurdle in the resumption of Hedge Trading in KCA.

Moreover, press release issued by the Karachi Cotton Association says that KCA understands from the reports appeared in a section of press that while chairing a meeting on cotton by Federal Minister for National Food Security and Research, the official of Pakistan Mercantile Exchange Limited (PMEX) discussed with the Federal Minister in detail the proposal of Hedge Trading in cotton.

The KCA believes that in order to stabilise cotton prices in the country, Hedge Trading in cotton should be resumed for the benefit of the cotton trade under the aegis of the Karachi Cotton Association with the consultation of all stake holders of cotton economy. Only KCA has the relevant experience, registered cotton brokers, Fibber graph technology as well as they had made some changes in Bye Laws and they have the facility of delivering so Hedge Trading will only be successful in KCA. As cotton marketing involves a tremendous business risk, it was therefore, necessary that there should be some form of price insurance to reduce the risk of volatile fluctuation in prices.

As per media reports the government has extended the facility of provision of electricity and gas to the export oriented textile industry till June 30, 2021. It is expected that there will be a record increase in the export of cotton products.

Cotton ginners told that government had announced provision of electricity and gas on subsidised rates of 7.5 cent per unit and 6.5 per MMBTU till June 30, 2021 to textile export sector in order to increase the exports. Few days back All Pakistan Textile Mills Association has appealed to the Prime Minister Imran Khan to extend the date of provision of electricity and gas to the textile and exporters sector for one year.

The cabinet has given the approval of the extension and formal notification will be issued in two to three days. However sources are claiming that textile mills who were not directly exporting their products but they were selling their products to the export oriented textile industry have to provide all the documentary evidence to the power supply companies to regain this status. For which the power companies have also issued notices to such textile mills for these documentary evidences.

Ginners said that due to extension of the provision of electricity and gas to domestic textile sector on subsidised rates till June 30, 2021 led to a significant reduction in the production cost of textile mills and a record increase in domestic exports. As a result of which it is expected that increasing trend was witnessed in the prices of Phutti and cotton.

Copyright Business Recorder, 2020

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