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LAHORE: The local cotton market on Wednesday remained dull while the trading volume remained low. Cotton Analyst Naseem Usman told that the rate of cotton in Punjab and Sindh is in between Rs 18000 to Rs 21,000 per maund.

In Pakistan, Cotton yields have fallen by 26 percent from 880 kgs/hectare to 652 kgs/hectare over the last 10 years, while in Punjab the decline has been more pronounced and productivity has fallen by 36 percent. Therefore, APTMA urges the government to immediately announce a cotton support price of Rs 8,000 per maund of phutti for the upcoming season.

Pakistan is losing at least $ 5 billion directly on account of the low production of cotton. An increase in cotton production will have a direct impact of $ 1 billion per 1 million bales and a 7 times multiplier impact on the fiscal flows in the economy.

Cotton provides livelihood and employment to millions of poor families and it distributes money to the poor rural population especially women and reduction in the area and productivity has an extremely negative impact on poverty.

Overall cotton area in this decade has declined by 33 percent from 2.9 million hectares to 1.9 million hectares. Almost 1.5 million farmers grow cotton out of which 75 percent is grown in Punjab while rest is grown in Sindh, while cotton area in Punjab has decreased by 50 percent from 2.53 million hectares (2012) to 1.28 million hectares (2022).

Meanwhile, Bangladesh may import 1 million bales from American suppliers in 2022-23, up 43% y/y amid rising domestic use, the US Department of Agriculture’s Foreign Agricultural Service said in a report. The nation’s total overseas purchases may rise 2.3% y/y to 8.9 million bales.

According to the report, Indian cotton took 29% share in calendar year (CY) 2021, followed by Brazil, Benin, and US. Bangladesh produces very little cotton and must bring from abroad almost all the raw material used in its vibrant textile industry. Consumption to rise 3.3% y/y to 9.3 million bales of 480 lbs each.

In CY 2021, Bangladesh’s ready-made garment exports reached a record high of $35.8 billion, becoming second-largest exporter after China.

Cotton futures slid nearly the 600-point limit lower, and prices settled lower across the board. That was quite a distance from yesterday’s contract high closes. May settled at 13968, down 506 points; July settled at 13833, down 492 points; and Dec settled at 12095, down 252 points. The other months settled from 12 to 276 points lower, except the Dec-24 and March-25 both ended up 13 points.

Volume was 55,319 contracts, a big jump from yesterday’s Easter Monday volume of 26,506 contracts.

For the record, cotton had an 8th session of setting at least one new contract high. Today there were three: May-24 at 8780; July-24 at 8900; and Dec-24 at 8589. To correct from yesterday, there were 2, not 1, contract highs, as mentioned the Dec-23 at 9400 and not mentioned the Oct-22 at 12963.

“Just because it could” was as good of an answer to why the market crashed as any, but as one well-respected broker noted, sometimes it’s the “pile of rocks” that weighs on prices.

Today’s pile of rocks included a forecast tomorrow of 22-percent chance of rain in Lubbock with up to a 60-percent chance of rain in Corpus Christi as the first notable chances for rain as Texas enters its rainy season. Seasoned observers there screamed about bleak conditions and note that the 20-25 mile per hour winds likely all week in the High Plains don’t make the forecast look promising.

Another rock hitting cotton’s pile has been light inquiries and sales of cash cotton. Plus, the last 2 weeks of cancelations in the USDA Weekly Export report raises the question of whether more is ahead. Also adding to the pile for some time has been growing inflation and the worries of what that will do for cotton’s consumption.

Today was a day to look for bearish reasons. Even if there are few, finding bullish reasons is not easy, either. High prices have a way of rationing business.

By the way, cotton’s open interest fell to the lowest level in 10-months which meant a new 2022 low. Open interest began today at 215,153 contracts, down 3,270 contracts yesterday. Here is how this year’s open interest so far compares to the last 25 years:

The Spot Rate remained unchanged at Rs 20,500 per maund. Polyester Fiber was available at Rs 290 per kg.

Copyright Business Recorder, 2022

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