Weekly Cotton Review: Market stability preceded by significant fluctuations

KARACHI: Under the influence of Rate of Promise (Waday Ka Bhao) of New York Cotton the rate of cotton in local market after fluctuation of Rs 1000 per maund was stable.

According to the revised estimates of the Cotton Crop Assessment Committee (CCAC) it is expected that cotton production will be 8.46 million bales.

According to CCAC 18 Lac bales were produced in the country till September 1.

Cotton production in the country will be 150% more as compared to last year's production in September. Rains can affect the cotton crop. Power loom owners were worried about the increasing rates of cotton yarn.

In the local cotton market during the last week textile and spinning mills continued their buying, while ginners also took interest in trading.

The increasing trend in the rate of cotton remained continued for two days in the opening of the week but on Wednesday under the influence of rate of New York Cotton which is very high, it started decreasing and the bearish trend prevailed in the local cotton market. The reason behind increasing trend in the New York Cotton was increasing threat of hurricane which can affect the cotton crop but after the coming of the news that it will not effect cotton crop the bearish trend prevailed in the cotton market.

The local textile and spinning mills also reduced their buying while due to panic ginners started selling their cotton at lower rates. This is the reason that rate of cotton reached at the highest level and then started decreasing. The rate of cotton has decreased by Rs400 to Rs600 per maund. The rate of cotton in Sindh after decreasing from Rs13800 to Rs14000 per maund reached at Rs13450 to Rs13900 per maund. In the same way the rate of cotton in Punjab reached at the highest level of Rs13900 to Rs14450 per maund, and then after decreasing it reached Rs13800 to Rs14000 per maund.

The rate of Phutti also witnessed a decrease of Rs200 to Rs300 per 40kg. Moreover, after the increase in the Rate of Promise (Waday Ka Bhao) of New York Cotton by two American cents the market was stable.

Under the influence of Rate of Promise (Waday Ka Bhao) of New York Cotton the fluctuation of Rs1000 was witnessed in the rate of cotton in local market. Due to the rains in the cotton producing areas of Punjab and Sindh quality of cotton may be effected.

On the other hand, on Thursday evening the USDA weekly export report shows a decline of 57 %. The report had no impact on market. In the same way, there was no impact of the report of the Cotton Crop Assessment Committee (CCAC) on the market which shows decline in the cotton production target by 19.5 percent, i.e., from 10.5 million bales set for 2021-22 to 8.46 million bales, after missing the sowing target by 13.4 percent.

The Cotton production in the country will be 17 Lac ninety one thousand bales till September 1, 2021. Cotton production in the country will be 100% more as compared to last year's production in September 15.

According to the statistics released by Pakistan Cotton Ginners Association till September 1, the cotton production in the country will be 17 Lac ninety one thousand bales. Although, the report the report was not published last year but the report will be compared with the report of September 2019 in which 13 Lac fifty five thousand bales were produced the cotton production is 23 % more and if we compared it with September 2020 the cotton production was 10 Lac thirty five thousand bales which is around 7 Lac thirty five thousands bales more around 70% more as compared to last year.

According to the estimates cotton production will be in between 22 to 23 lLac bales till September 15 which is 150 % more as compared to the last year production.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that the reasons for the decline in cotton production in the country this year is that the sowing of cotton has taken place before its traditional timeframe. Cotton production is; however, still satisfactory.

Weather conditions are also favourable for cotton production and threat of disease is also reduced. The rains had not affected the crop as much as compared to last year. Per acre yield and rate of Phutti has increased.

The rate of cotton in Sindh after fluctuation is in between Rs13500 to Rs14000 per maund. The rate of Phutti is in between Rs5700 to Rs6100 per 40 Kg. The rate of Banola is in between Rs1650 to Rs1750 per maund. The rate of cotton in Punjab is in between Rs13800 to Rs14300 per maund. The rate of Phutti in Punjab is in between Rs5700 to Rs6200 per 40 Kg. The rate of Banola is in between Rs1750 to Rs1800 per maund. The rate of cotton in Balochistan is in between Rs13800 to Rs13900 per maund. The rate of Phutti is in between RS6200 to Rs6900 per 40kg. The rate of Banola is in between Rs1800 to Rs1900 per maund.

The Spot Rate Committee of the Karachi Cotton Association has decreased the spot rate by Rs150 per maund and closed it at Rs13900 per maund.

Naseem Usman also told that overall bearish trend was witnessed in the international cotton market. The Rate of Promise (Waday Ka Bhao) of New York Cotton after increasing reached at 95 American cents decreased and reached at 92.50 American cents. Later after increasing it reached at 94 American cents. Overall bearish trend was witnessed in the rate of cotton in Brazil and Central Asian States. The bearish trend was witnessed in the rate of cotton in India due to the partial arrival of new cotton crop.

The Cotton Crop Assessment Committee (CCAC) revised downward the cotton production target by 19.5 percent, i.e., from 10.5 million bales set for 2021-22 to 8.46 million bales, after missing the sowing target by 13.4 percent.

A meeting of the CCAC was held on Wednesday, which was chaired by Syed Fakhar Imam, Federal Minister for National Food Security and Research. Representatives of cotton growers, provincial agriculture departments, associations and senior officials of the NFS&R also attended the meeting.

Official sources revealed that a briefing was given to the committee and it was informed that sowing target was set at 2.310 million hectares; however, cotton was sown on 1.871 million hectares i.e., and hence 83.2 percent of the sowing target was achieved.

According to official documents, Punjab cultivated cotton on 1.279 million hectares against the target of 1.610 million hectares, i.e., missing the target by around 21 percent. Sindh was projected to cultivate cotton on 0.640 million hectares, but 93 percent target was achieved, i.e., 0.592 million hectares were cultivated. Khyber-Pakhtunkhwa (KPK) and Balochistan were projected to cultivate cotton on 0.0022 million hectares and 0.070 million hectares, respectively.

Sources revealed that the meeting was informed that after missing the sowing target, Punjab is estimated to produce 4.53 million bales of cotton against the target of 6.07 million bales set for 2021-22. Sindh is projected to produce 3.50 million bales against the target of four million bales. KPK will produce 0.0002 million bales against the target of 0.00417 million bales, while Balochistan is projected to produce 0.43 million bales, which was targeted for 2021-22.

The country is likely to miss its cotton production target

However, an official handout stated that the minister Imam welcomed the participants and thanked their participation and invited them all to share their feedback and recommendations for the development of cotton crop in Pakistan.

Imam was told that the province of Sindh expects production of 3.5 million bales in this season. He was briefed that the climate in this season has been much better than the last season and due to less rainfall overall production is expected to increase. The production of cotton in Punjab is expected to touch 4.5 million bales at an increase of approximately 8.5 percent from last year. Overall cotton production is expected to reach 8.46 million bales.

The minister was briefed that the year 2020 saw 398.6 mm rainfall, which had a devastating impact on the production, whereas, this year the rainfall was 78.6mm, which has improved the prospect of overall production.

Furthermore, he was told that the attack of Mealybug and Whitefly and CLCuV remained significant, which has adversely affected the production of cotton.

The production of cotton has reached the lowest level in the history of Pakistan. The rates of imported cotton are also very high due to which the rate of cotton yarn is almost double. The factory owners were worried because their production cost has doubled.

According to the factory owners, as their production cost has doubled because of the increase in the prices of cotton yarn, resultantly the textile exports have decreased by 11 %. The power loom industry which had came out of the crisis is once again in deep crisis.

Factory owners say the most expensive electricity is the reason for the increase in power loom sector. The price of electricity increases by Rs 1 to Rs 2 per unit every month. When this government came in to power, one electricity unit was of Rs13 which is now reached at Rs 27. Another reason is speculations behind destruction of power loom sector. Power loom owners have demanded from the government to take steps to bring down the prices of electricity and yarn.

Chairman of National Business Group Pakistan, President Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance, and former provincial minister Mian Zahid Hussain on Saturday said monthly exports of textile have reached to the mark of almost 1.5 billion dollars which is an encouraging sign.

Textile exports during last year's July were 1.272 billion dollars which have now jumped to 1.471 billion dollars, a jump of 15.61 percent, he said.

Mian Zahid Hussain said that local production of cotton should be increased and coupled with some other measures to boost exports.

Talking to the business community, the veteran business leader said that the exports sector also rely on imports to manufacture products whose cost sometimes increases by 35 percent; therefore, import duties on import of raw material should be reduced to boost exports.

He said that cotton production should be enhanced as 49 thousand tonnes of raw cotton has been imported in a month which is hitting the Forex reserves and increasing cost of doing business.

He noted that ease in lockdowns in the US and EU has contributed to enhanced exports which have prompted an increase of 96 percent in import of textile machinery which also reflects confidence of importers.

He suggested controlling hike in value of the dollar, resolve the issue of expansive energy and tackle other issues to improve confidence and exports.

Copyright Business Recorder, 2021