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LAHORE: The Spot Rate Committee of the Karachi Cotton Association on Wednesday increased the spot rate by Rs 500 per maund and closed it at Rs 21000 per maund.

Cotton Analyst Nassem Usman told that local cotton market remained stable. The market witnessed some trading activity 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.

2000 bales of Punjab (trader to mill) were sold at Rs 22200 to Rs 22500 per maund, 600 bales of Rahim Yar Khan were sold at Rs 21000 per maund and 100 bales of Lodhran were sold at Rs 21000 per maund.

Pakistan’s textile sector output may finally be coming off the ventilator, after spending four years in the ICU. According to latest Large Scale Manufacturing (LSM) data released by PBS, industry’s cotton yarn output rose by 0.70 percent during 8-month of the ongoing fiscal, while cotton cloth output rose by 0.28 percent against same period last year.

These growth rates do not look much on first glance; however, all growth is relative. Between FY17 and FY21, cotton yarn and cotton cloth output rose at a CAGR of 0.04 percent and 0.05 percent per annum. Thus, the acceleration in growth rate during the ongoing year represents no small feat.

Although commentators may be quick to point to the rise in export earnings as the life force driving this resurgence, it is in fact the recovery in domestic cotton output that better explains spinning industry’s improved outturns. According to Pakistan Central Cotton Committee, domestic cotton output during 2021-22 marketing season is highest in three years.

Higher local cotton output – coupled with sustained import momentum – has improved availability of raw material in recent years for the local milling supply chain. Per USDA, domestic cotton consumption for 2021-22 is forecast at 14.4 million bales (of 170kg), up 8 percent against past 5-year average.

Although USDA’s forecast of both local production and imports during the current marketing year is suspect, the uptick in cotton demand is both visible and unmistakable. Cotton arrivals during July 2021 – March 2022 are up 32 percent over last year, according to fortnightly data released by Pakistan Cotton Ginners Association.

It’s one thing for government after government to ignore arguably the country’s most significant cash crop and also the main driver of the export industry. But it’s quite another for the policy framework to actually harm it in favour of other crops, like sugarcane, that are more central to the needs of the political hierarchy.

After all, one big reason for the fall in cotton output is diversion of a lot of land towards production of things that make our political elite more secure about its personal portfolios. It’s for a reason that it is said that the sugar lobby is always in power regardless of whichever party is in government.

And the latest body to make a fuss about declining cotton output directly threatening the economic security of the country is the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), not the least because it feeds into the largest exportable product category — textiles.

It’s a shame that cotton production has been reduced to 6-7 million bales per year, down from 10-12 million bales, just as textile exports are set to cross the $20 billion mark in the outgoing fiscal year.

Pakistan’s textiles became much more competitive after the Covid lockdowns because the country was able to open up ahead of much of the competitors; and while the commodity supercycle in the international market played against us in items like oil, copper, etc., it also won us something of a windfall in textiles.

But, considering the circumstances, increasing demand for our textile products also increases our demand for import of raw materials because we are experiencing declining output of cotton at the worst possible time. Meanwhile, ICE cotton futures edged lower on Tuesday, as a rally in the dollar and concerns over demand from COVID-hit China offset favourable weather and gains in wider grain markets.

The most-active second-month cotton contracts on ICE for July fell 0.17 cent, or 0.13%, at 135.24 cents per lb, at 11:51 a.m. ET (1551 GMT). It traded within a range of 134.75 and 137 cents a lb.

Despite weather forecasts continuing to show favourable dry for West Texas, with a hint of rain, the price dip shows the market is being weighed down by the lockdowns in China and the stronger dollar, said Keith Brown, principal at Keith Brown and Co in Georgia.

The dollar rose to a new high since March 2020 on expectations the Federal Reserve will aggressively hike rates, making cotton more expensive for overseas buyers.

China, one of the biggest consumers of U.S. cotton, reported 17,812 new coronavirus cases for April 25, while mass COVID-19 testing of all residents in Beijing expanded and prompted fears of a Shanghai-style lockdown after dozens of cases in the capital in recent days.

The US Department of Agriculture on Monday rated 27% of US winter wheat in good to excellent condition, the lowest for this time of year since 1989, as drought persists in the Plains wheat belt, driving wheat prices, with other grains also gaining.

President Cotton Association of India in an interview said that we believe in free trade. So far, we have not received any official confirmation from government for banning of cotton export.

If cotton export will be banned then definitely there will be pressure on selling on farmers and stockists due to this Indian cotton price may come down and ice futures may go up. As on today no much export contracts are happening due to Indian cotton rates are very high.

The Spot Rate Committee of the Karachi Cotton Association on Wednesday increased the spot rate by Rs 500 per maund and closed it at Rs 21000 per maund. Polyester Fiber was available at Rs 290 per kg.

Copyright Business Recorder, 2022


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