KARACHI: Cotton prices continued to decline. Almost 50% of the textile sector is closed in most countries of the world. A significant reduction in the consumption of cotton has been witnessed. The financial crisis is increasing day by day. Textile and ginning sector of the country is facing a severe crisis.
The total production of cotton in the country is expected to be around 65 lac bales. The consumption is expected to be around 1.2 million bales. About 6 million bales will have to be imported. At present import contracts of 45 lakh bales have already been signed.
A bearish trend continued in the domestic cotton market during the last week. The price of quality cotton decreased by Rs 1,000 to Rs 1,500 per maund, as large groups of textile mills were attracted towards importing cotton. Due to the bearish trending in the rate of future trading of New York Cotton the rate of cotton in the domestic market is almost the same as in the international market.
The quality of imported cotton is better as compared to the quality of local cotton. According to the local importers up till now import agreements of 45 lac bales have been inked as the local cotton crop has been badly damaged due to heavy rains and catastrophic floods.
Experts estimate that the cotton production in the country will be around 65 lakh bales while the consumption of textile spinners is expected to be around 1 crore 20 lac bales.
However, the import of cotton is going on. About 1.5 lakh more bales will have to be imported. On the other hand, the textile sector in the world is in a state of great crisis. Textile mills in many major countries including Pakistan, India, Turkey, Bangladesh and Vietnam are running at about 50% capacity.
On the other hand, the major importers of textile products, especially the USA and Europe, are going through a severe recession. Import orders are being received from them in a very small number, but that too at a low price.
Some contacts which have been signed earlier were also cancelled. The payments of shipments were also delayed while some importers are paying in instalments due to which there is a great crisis in market.
The ginners having stock are perturbed due to the availability of imported cotton on cheap rates while the traders and farmers of Phutti are also worried about due to the decreasing prices of Phutti, as well as, low buying. The traders who had sold cotton to ginners on credit were worried about due to delay in payments. In this way overall cotton sector is in crisis.
The rate of cotton in Sindh as per quality is in between Rs 15,500 per maund to Rs 18,500 per maund. The rate of Phutti is in between Rs 6,500 to Rs 8,500 per 40 kg
The rate of cotton in Punjab is in between Rs 16,000 to Rs 18,700 per maund while the rate of Phutti is in between 7,000 to Rs 9,500 per 40 kg. The rate of cotton in Balochistan is in between Rs 17,500 to Rs 19,000 per maund and the rate of Phutti is in between 8,000 to Rs 10,000 per 40 kg
The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs1,300 per maund and closed it at Rs 17,500 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that overall bearish trend prevails in international cotton markets. The Rate of Future Trading of New York Cotton after fluctuation remained at eighty four American cents per pound. A little bit increase was observed in the rate of cotton in Indian Market due to un-seasonal crop.
As per USDA export and sales report more than one lac forty four thousand bales were sold including more than thirty three thousand bales which is nineteen per cent sold for the year 2022-23.
Pakistan is on the top of the list with more than fifty five thousand bales. Bangladesh is on number second with more than thirty one thousand bales. China is on number third with more than fourteen thousand bales. Other countries bought more than forty three thousand bales.
Meanwhile, Syed Mudbar Shah, an analyst of cotton, said that the American Agriculture Organization USDA has issued a monthly report on world cotton consumption and production, according to which there has been a big decrease in world consumption by 33 lac bales. The biggest decrease was seen in China, followed by India, Bangladesh, Pakistan, Turkey and Vietnam. Cotton consumption has decreased. The main reason for the decrease in cotton consumption is the increase in energy and food prices, due to which there is a significant decline in buying witnessed in United States and Europe.
Major apparel brands in the US and Europe currently don’t have the space to store new stock, which is why they are delaying their shipments from around the world.
Pakistan’s textile sector, which accounts for 65% of its exports, is currently under a severe pressure.
In Pakistan, 50 percent of spindles are silent, 60 percent of weaving mills are closed, while some shifts in garment factories are closed.
The cotton market in Pakistan has also been severely affected and the prices of quality cotton have dropped by Rs 4,000 to Rs 5,000 pet maund.
Now the question is what will happen after this monthly USDA report.
The size of the crop in Pakistan does not appear to be more than 55 lac bales but Pakistan’s cotton consumption is seeing a decline of 45%.
Bank interest rates in Pakistan are very high due to which the textile sector is not in a position to stock cotton. Therefore, the current cotton season will run at a slow pace, and despite the low crop, cotton factories will remain operational till January 2023.
The cotton market will remain at the position of Rs 15,000 to Rs 18,000 while good quality Phutti will remain at the position of Rs 9, 000 to Rs 10,000.
The price of cotton will remain stable, so the seed cake and oil.
It may be noted that at present there is a huge shortage of edible oil in the whole world
If the US dollar went up to Rs240 plus in Pakistan again, the cotton rate will be at Rs 21,000 per maund.
After the USDA’s monthly report, the yarn market, which was already quiet, has now turned into frenzy.
Currently, Pakistan’s textile sector is eyeing on Christmas and Germany’s Heimtextile exhibition. According to the experts things will start to improve only after these events.
After the USDA report, Pakistan’s farmers are not at a loss, but the entire textile sector has come under more pressure.
However, the government on Thursday set a wheat production target at 28.4 million tons for the Rabi season 2022-2023 from an area of 9.3 million hectares.
The decision to this effect was taken by the Federal Committee of Agriculture (FCA) meeting for Rabi season 2022-23, presided over by Tariq Bashir Cheema, Federal Minister for Food Security and Research (MNFS&R), said a senior official of MNFS&R.
He said that the FCA was informed that cotton production for 2022-23 is estimated at 6.3 million bales from an area of 2.1 million hectares, showing a decrease of 43.08 percent in production over the last year. The committee reviewed the performance of the Kharif crops (2022-23) and set production targets for Rabi crops (2022-2023), he said.
The official said that the meeting also fixed production targets for other crops including grams at 560,000 tons, potato at 6029 thousand tons, onion at 2422 thousand tons, and tomato at 622 thousand tons.
Copyright Business Recorder, 2022