ANL 34.10 Decreased By ▼ -1.21 (-3.43%)
ASC 14.40 Decreased By ▼ -0.35 (-2.37%)
ASL 25.50 Decreased By ▼ -0.50 (-1.92%)
AVN 86.55 Decreased By ▼ -2.55 (-2.86%)
BOP 7.71 Decreased By ▼ -0.06 (-0.77%)
BYCO 10.23 Increased By ▲ 0.18 (1.79%)
DGKC 122.00 Decreased By ▼ -0.65 (-0.53%)
EPCL 56.60 Decreased By ▼ -1.60 (-2.75%)
FCCL 23.75 Decreased By ▼ -0.13 (-0.54%)
FFBL 27.95 Decreased By ▼ -0.80 (-2.78%)
FFL 15.15 Decreased By ▼ -0.48 (-3.07%)
HASCOL 9.36 Decreased By ▼ -0.24 (-2.5%)
HUBC 77.87 Decreased By ▼ -1.27 (-1.6%)
HUMNL 6.30 Decreased By ▼ -0.11 (-1.72%)
JSCL 19.85 Decreased By ▼ -0.95 (-4.57%)
KAPCO 39.45 Decreased By ▼ -0.45 (-1.13%)
KEL 3.78 No Change ▼ 0.00 (0%)
LOTCHEM 15.95 Decreased By ▼ -0.65 (-3.92%)
MLCF 46.40 Increased By ▲ 0.40 (0.87%)
PAEL 34.65 Decreased By ▼ -0.91 (-2.56%)
PIBTL 10.19 Decreased By ▼ -0.15 (-1.45%)
POWER 9.13 Decreased By ▼ -0.15 (-1.62%)
PPL 85.00 Decreased By ▼ -0.90 (-1.05%)
PRL 24.05 Decreased By ▼ -0.67 (-2.71%)
PTC 9.61 Decreased By ▼ -0.29 (-2.93%)
SILK 1.40 Increased By ▲ 0.14 (11.11%)
SNGP 41.23 Decreased By ▼ -0.40 (-0.96%)
TRG 153.10 Decreased By ▼ -12.00 (-7.27%)
UNITY 30.65 Increased By ▲ 0.25 (0.82%)
WTL 1.69 Increased By ▲ 0.13 (8.33%)
BR100 4,822 Decreased By ▼ -52.4 (-1.08%)
BR30 25,139 Decreased By ▼ -561.69 (-2.19%)
KSE100 44,914 Decreased By ▼ -392.06 (-0.87%)
KSE30 18,363 Decreased By ▼ -174.88 (-0.94%)

Pakistan Deaths
Pakistan Cases

As ginning factories turn off their machines for the season, the marketing year 2020-21 will probably be remembered as the worst ever in half century. Almost all of cotton production this year has already arrived at the doors of ginning units, all except the Cotton Crop Assessment Committee are persuaded that annual output will stay shy of 6 million bales (of 170 kg), let alone the ‘considered’ forecast of 7.7 million bales.

Meanwhile, Pakistan imported 5 million bales of ‘cotton, carded or combed’ during CY20, another well-anticipated first. What’s comforting is that average unit price of imports clocked in at $1.63 per kg, only nominally higher (3 percent) than monthly average rate of Cotlook A index during the calendar year. What’s concerning, however, is the sharp rise in international cotton prices since April 2020. Cotton spot prices in February 2020 are not only 40 percent higher than the levels they crashed to at the height of pandemic last year, but they are also 14 percent higher on year-on-year basis. In fact, Cotlook A index is at highest in 30 months, raising alarms over how long before spinners’ forward buying gives in and creates a cost spiral for domestic textile value chain.

A note of caution, however, is necessary. While poor domestic crop output obviously has effects on price of ginned cotton, it must be remembered that domestic cotton price is pegged with international indices, and thus moves in tandem with it. Thus, poor domestic output cannot be blamed for higher procurement prices for spinning mills or– as insisted by few experts – used as a pretext for imposing price caps or floors on ginned cotton prices.

Similarly, stakeholders on cotton policy must take into account the winners and losers of the ‘alarmingly’ high cotton import bill. While macro indicators such as widening trade deficit due to raw material import are certainly losers, it must be remembered that change in cotton prices has historically been a pass-through element for textile value chain; and does not necessarily have an adverse impact on profitability of garment exporters, especially during periods of exchange rate stability.

Likewise, cotton growers have also been major beneficiaries, especially those who waited out and avoided contract sales in August and September, and instead sold off their produce in last calendar quarter when price quickly climbed by more than one-fourth. Rise in cotton price index managed to somewhat also mitigate the adverse effect of poor yield this year. Other growers who switched over their land use to substitute, more profitable crops such as cane, maize, and rice will also have little to complain about.

Has the spinning industry suffered? Only to the extent that inefficiencies in logistics and cargo release turn-around-time at ports are concerned. Big textile houses in fact made hay by entering forward contracts when prices were at bottom at the height of pandemic, averaging out their production costs for rest of the year.

Poor cotton output is indeed bad for trade deficit, but it must be highlighted that Pakistan’s textile exports during 7MFY21 are at their highest ever. So far, the country has imported 2.5 million bales of raw cotton in FY21. Keep them coming!