Weekly Cotton Review: Rate stable as ginning picks up steam

13 Jun, 2022

KARACHI: The rate of cotton remained stable. Bullish trend prevails in international cotton markets. There are recommendations for increasing the support price of cotton from Rs. 8000 to Rs9000. Currently, cotton production is said to be satisfactory; however, heavy rains may affect the crop. There are complaints that textile and ginning sector was ignored in the budget. However, Pakistan Hosiery Manufacturers Association has suggested for increasing exports.

Cotton prices had been on the rise in the local market during the last week due to interest in buying shown by textile mills. The arrival of Phutti of new crop is increasing gradually. As many as 18 ginning factories are working in Sindh and producing 2000 bales daily. However, cotton prices remained under pressure due to less buying in the market on Friday and Saturday.

Ginning factories will soon start their operations in some areas of Burewala and Khanewal in Punjab province. Ginning factories are expected to start from June 15 but trading volume is expected to increase from July 15. If the weather conditions remain favourable this year cotton production will increase.

The Federal Agriculture Committee has set the target of production of 11.034 million bales which is expected to be achieved.

Cotton prices are also expected to rise in international markets in the new season, forcing textile spinners to be cautious in purchases. The economic situation of the country is not good. No one is looking seriously to stop the high flight of US dollar. The political situation is also instable. There is an increasing trend in the prices of petroleum products. Electricity load shedding is also on the rise. It is expected that these difficulties will increase in the coming days. In such a situation it will be very difficult to do business.

International cotton prices are also fluctuating, which will make it very difficult to make business decisions.

The price of cotton in Sindh and Punjab was in between Rs.21,000 and Rs.23,000 per maund. The rate of Phutti per 40 kg was in between Rs 9000 to Rs 10,000. Increasing trend in the price of Banola, Khal and oil was observed.

The spot rate committee of Karachi Cotton Association has kept the spot rate unchanged at Rs. 21000 per maund.

Naseem Usman, Chairman, Karachi Cotton Brokers Forum told that bullish trend prevails in international cotton markets after some fluctuation. The Rate of Future Trading of New York Cotton for the month of July after increasing from 138 American cents reached at the highest level of 146.52 American cents and then closed at 145.20 American cents.

According to weekly USDA’S export report more than two lac fifty nine thousand bales were sold which is 27 percent less as compared to the sale of last week

China topped the list with more than one lac fourteen thousand bales. Vietnam came in second with more than one lac four thousand bales. Turkey came in third with more than sixteen thousand bales.

More than 2 lakh 2 thousand 900 bales were sold in 2022-23. China topped the list with more than sixty six thousand bales. Guatemala came in second with more than twenty five thousand bales. Mexico came in third with eleven thousand bales.

A legislative body of Upper House of parliament last week recommended fixing the minimum support price for the cotton at Rs 8000-9000.

The recommendation was made during Senate Standing Committee on National Food Security and Research held in the Parliament House chaired by Senator Syed Muzafar Hussain Shah.

The Ministry earlier informed that the minimum support price for cotton has been fixed at Rs. 5,700, which the Chairman committee said was not enough to meet the requirement. The recommendation regarding fixing the support price will be taken up with the Economic Coordination Committee, the Ministry Informed.

Regarding the matter of fixing the minimum support price for the cotton, the Chairman Committee observed that non-fixation of the minimum support price for the cotton has forced the farmers to shift to other crops, causing great loss to cotton production.

The panel head stated that cropping zones must be made and the federal government, being the coordinating and focal agency, should prevail upon the provinces to enforce implementation of such zones. Otherwise, the committee fears that in the coming years, cotton cultivation will further decrease, causing a huge loss to the national exchequer.

Separately, Chairman Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Mian Kashif Zia, while addressing a delegation of trade and investment officers, said that the widening gap between imports and exports is the biggest challenge for trade and investment officers. This can only be filled through close liaison and joint efforts with the stakeholders of the textile sector.

He said trade and investment officers serving as ambassadors in more than 50 friendly countries could play a significant role in boosting exports. He said that it was important for these officers to be in constant touch with the members of PHMA and hold monthly online meetings so that the joint efforts could help in increasing the exports of Pakistan.

He said that we should reduce our dependence on foreign loans and increase value-added textile exports, in order to earn valuable foreign exchange for the country; as countries which are economically strong are not only prosperous internally but they are also viewed with respect in the international community.

He said that the Ministry of Commerce should set targets for trade and investment officers and those officers who meet the annual export target in the respective country should be given special incentives so that Pakistan’s exports could be easily increased.

Mian Kashif said that the knitwear garments sector is not only a leader in the textile group but also provides employment to a lot of people. He said that exports of knitwear in the textile group reached 3.8 billion dollars in 2020-21 and 4.2 billion dollars in 2021-22 (ten months) with an increase of 35 percent. Textile exports topped the list with exports of 15.4 billion dollars in 2020-21, while exports in 2021-22 (ten months) increased to 15.98 billion.

Mian Naeem Ahmed, former Chairman PHMA (North Zone), citing the example of Bangladesh, said that despite the fact that there is no cotton production in that country, its exports have reached 45 billion dollars while Bangladesh’s target by 2023 is 80 billion dollars, 80 percent of which is in the textile sector.

He said that the main problem of our country is lack of consistency in policies. He said the textile sector is the backbone of our economy, which not only earns a lot of foreign exchange for the country but also provides employment to millions of people. Therefore, whatever the regime, the focus of our rulers should be on increasing exports.

Syed Zia Alamdar Hussain, former President Faisalabad Chamber of Commerce and Industry said that we should be allowed to import yarn from India through Wagah border which would not only make yarn available at cheaper prices but also reach our factories in less time.

Addressing on the occasion, Commercial Counsellor of Afghanistan said that if coal was brought into the country through NLC containers, its price could be reduced from Rs53/Kg to about Rs35.

On behalf of the delegation of trade officers, Qamar Zaman thanked the PHMA members and said that the newly appointed trade officers would play a key role in exploring new markets and increasing exports. They will remain in constant touch with all trade associations.

Mian Kashif Zia thanked the members of the delegation and expressed confidence that all the officers posted abroad would ensure the utilisation of all opportunities for trade and investment during their deployment abroad.

The USDA’s June Global Supply Demand Report, released on Friday morning, pointed some changes in the global cotton situation and outlook. Global carryover was projected to decrease by 47,000 bales as global production increased by 199,000 bales from the previous month, and global consumption was reduced by about 450,000 bales. There were only slight changes in production and consumption in different countries. Thus, by 2022-23, both global production and global consumption are forecast to be at 121 million bales. The market’s reaction to the report was initially strong, but prices fell that day. Thus, the market made slight correction in prices over the weekend. Nevertheless, the market continues to rise.

The Old Crop July contract will remain very volatile as on-call sales, with only one week of trading remaining the number of on-call purchases will increase.

Pakistan’s textile exports are set to dramatically dip as the sector is hobbled by a nationwide energy crisis forcing daily power cuts on factories, with an industry leader warning about “a state of emergency” for the manufacturing hub.

The South Asian nation is in the midst of a dire economic crisis, with runaway inflation, a depleted rupee and dwindling foreign exchange reserves, hampering energy imports.

Meanwhile a heatwave has caused a surge in electricity demand, leaving a shortfall of over 7,000 megawatts - one-fifth of Pakistan’s generation capacity - on some days this month, according to government figures.

The energy shortage has hit hard Pakistan’s vital textile industry, which supplies everything from denim to bed linen towards markets in the US and Europe, and accounts for 60 percent of the country’s exports.

“The textile industry is in a state of emergency,” Qasim Malik, the vice president of the Chamber of Commerce in the manufacturing hub of Sialkot, told a foreign news agency.

With authorities forced to ration the power supply with staggered blackouts, Malik said the “unannounced and unscheduled” outages disrupt the textile supply chain, which is “causing millions of rupees of losses”.

“Should the power cuts persist there could be a decline of more than 20 percent in exports,” warned Sheikh Luqman Amin of the Pakistan Readymade Garments Manufacturers and Exporters Association.

Larger factories tend to have independent power plants, leaving small and medium-sized factories in cities such as Lahore, Faisalabad and Sialkot most exposed.

Owners have complained of power cuts of eight to 12 hours on a daily basis and face the dilemma of lower production or installing generators powered by petrol, which is also sharply rising in cost.

“We can’t accept new orders because we are already behind on previous ones,” said Sialkot garment factory owner Usman Arshad.

“Things can’t continue to go on this way.”

Despite the nation’s economic woes, textile exports surged 28 percent to a record $17.67 billion in the fiscal year July-May 2021/ 22, the All Pakistan Textile Mills Association reported this week.

The Pakistani industry was buoyed by the tail end of the coronavirus pandemic, when it was freed of restrictions earlier than regional rivals India and Bangladesh.

Copyright Business Recorder, 2022

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