Weekly Cotton Review: Bullish trend prevails due to panic buying; cotton crop is satisfactory

KARACHI: The spot rate of cotton witnessed an increase of Rs 300 per maund. Mixed trend was seen in the international cotton markets. Over all cotton crop is satisfactory excluding some areas. Need to focus on increasing cotton production for the survival of value added sector.

Due to the exorbitant increase in shipment fares, government should allow import of cotton from India like medicine.

Bullish trend prevails in the local cotton market due to the panic buying by the textile mills. Although due to the fluctuation in the Rate of Promise (Waday Ka Bhao) of New York Cotton fluctuation was seen in the local market also. However, over all bullish trends prevails in the market.

The Rate of Promise (Waday Ka Bhao) of New York Cotton at one time crossed 95 American cents per pound which is highest in seven years. However, on Thursday night the rate decreased by 2.18 American cents.

Due to the Muharram Ul Haram holidays the trading volume remained a little bit low. Ginners were cautious in selling because they had already sold over the stock. The supply of Phutti was also adequate as compared to the purchase of cotton.

As the price of cotton increased, so did the price of Phutti. On the other hand big textile groups continued the purchase Phutti from abroad on high rates.

Due to crisis like situation the rate of cotton reached at Rs 14200 per maund which is highest in eleven years. Moreover, under the influence of fluctuation in the Rate of Promise (Waday Ka Bhao) of New York Cotton fluctuation was seen in the local cotton market however over all market remained bullish.

The rate of cotton in Sindh after fluctuation is in between Rs 13700 to Rs 13800 per maund. The rate of Phutti is in between Rs 5500 to Rs 6200 per 40 kg. The rate of Banola is in between Rs 1700 to Rs 1800 per maund. The rate of cotton in Punjab is in between Rs 13900 to Rs 14200 per maund. The rate of Phutti is in between Rs 5500 to Rs 6200 per 40 kg. The rate of Banola is in between Rs 1750 to Rs 1850 per maund. The rate of cotton in Balochistan is in between Rs 13750 to Rs 13900 per maund. The rate of Phutti is in between Rs 5900 to Rs 6300 per 40 kg. The rate of Banola is in between Rs 1800 to Rs 1900 per maund.

The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 300 per maund and closed it at Rs 13800 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all bullish trends prevails in cotton market. Significant increase was witnessed in the Rate of Promise (Waday Ka Bhao) of New York Cotton which crossed 95 American cents per pound which is highest in seven years. After that fluctuation remained continued in the market.

According to the weekly export report of USDA there is some decrease in export as compared to last week. However, it has some negative impact on the market despite of the fact China remained biggest importer this week.

Although, Pakistan is number one in the imports of 2022-23. Brazil's import will be less because its cotton production was effected, although bullish trends were seen in the rate of cotton.

Bullish trend was witnessed in the rate of cotton in Africa and Central Asian states. Slight decrease was witnessed in the rate of cotton in China. In India, the rate of cotton remained stable due to the partial arrival of Phutti.

As cotton prices continue to rule high, state-run Cotton Corporation of India Ltd (CCI) sees no scope for market intervention in the new season starting October. CCI, which made a record purchase of cotton at the minimum support price (MSP) during the 2020-21 season, expects its carry forward stocks for the next year to be in the range of 2-3 lakh bales.

Ahead of the cotton harvest season starting mid-September, the raw cotton (kapas) prices are currently ruling high at over 7,000 per quintal. Also, cottonseed prices are hovering around 4,500-5,000 per quintal.

Everything is in a booming mode, and I think the CCI's intervention may not be required as farmers are already getting 30 per cent more than the MSP rates. Next year, they may be fully satisfied with the market forces," P K Agarwal, chairman and managing director, the CCI told Business Line. "However, as per our duty, CCI would be fully preparing for the MSP operations," Agarwal said, adding that the intensity will certainly be lower.

As per information the situation of cotton crop is satisfactory. Although, the cultivation area of cotton in Punjab decreased by nine lakh acer. However, if per acer yield will be increased then there are chances that cotton production will improve a little bit. On the other hand as per information received from Sindh the situation of cotton crop is satisfactory while according to cotton trader of Umar Kot Gomal Seth the situation of cotton crop in the beginning was very good but lack of rains effects the growth of plant. Moreover, Pink Ball Warm had attacked cotton crop in Umar Kot.

Cotton trader of Digri and vice president Mir Pur Khas Traders Union Haji Yunas Memon said that position of cotton crop in Digri is better than last year. The position of cotton crop in Upper Sindh, Rohri and Saleh Pat is satisfactory. Cotton sowing is good in Dharki and Ghotki.

A steep rise in sea freight, besides shortage of cargo vessels and containers, has increased shipment delivery span by up to 90 days, according to the apparel sector.

Freight charges of the seaborne trade have soared by 700 percent with shortage of containers and vessels that brought about a slowdown in cargo delivery from 45 days to 90 days, it said. Amid such crisis, the value textile sector of Pakistan is facing cotton and yarn import problems for delayed shipments to meet the export orders deadline, the sector added.

"The shortest route to import cotton and cotton yarn is from India through land route and other from Uzbekistan through Afghan transit," Javed Bilwani, chairman, Pakistan Apparel Forum, said on Tuesday. Import of cotton and its yarn should be permitted from India at par with the medicines already being brought via Wagah border land route, he said. The country's value-added textile exporters found an opportunity to capitalise on a better Covid-19 situation in Pakistan compared to its competing nations to make more apparel exports to the world markets, he said. But now, he said, improving Covid-19 conditions in competing nations like Bangladesh, India, Sri Lanka and Vietnam is setting a stiff challenge to Pakistan globally since the local market offers an unviable price for the inputs.

Among all the textile exporting countries of the world, Bilwani said, prices of cotton and its yarn, electricity, gas, water, labour wages, seaport charges and local transportation are comparatively higher in Pakistan. Still textile exporters with their efforts are able to export textile products worth $15.40 billion during the fiscal year 2020-21 from a better Covid situation in the country, as industries were exempt from the lockdown, he added. The textile sector contributes more than 60 percent in the total national exports and earns the highest foreign exchange, he said, adding that the sector provides huge employment but lacks a deserving attention of the government. "The government must accord priority and attention to the cotton production, cultivation area and cotton yield in order to support the entire value added textile chain because cotton and cotton yarn are basic raw materials for the survival and development of textile export sector," he said.

A fall in cotton production made it hard for the country's apparel sector to face unavailability of the cotton yarn on the local market, he said. The rising crisis demands an immediate attention of the government to step up efforts for short, medium and long term measures with a concrete policy to increase cotton production locally, he said. He said that the government should provide free top quality GM cotton seeds to the farmers. The seeds have a toxin that kills selective insects and helps crops for a better output. Fertiliser and pesticides should also be provided to the growers on subsidized rates by the government.

Copyright Business Recorder, 2021