Weekly Cotton Review: Spot rate increases as bullish trend prevails

07 Nov, 2022

KARACHI: Bullish trend prevailed in local cotton market under the influence of international cotton market. A significant decrease in cotton production by 41percent is being forecast. The total production of cotton is expected to be around 50 lac bales. Around 65 lac bales of cotton will have to be imported. At present, the import contracts of about 48 lac bales have already been signed.

In the local cotton market during the last week a bullish trend prevailed. An increase of Rs 1,000 per maund was witnessed in the rate of cotton. In the first three days of the week a bearish trend, prevailed in the market. The rate of Future Trading of New York Cotton after decreasing reached at seventy one American cents per pound but on Thursday evening it witnessed an increase of sixteen American cents and reached at the highest level of eighty seven American cents, and China was prominent in buying the American cotton. The speculators who had earlier sold the cotton again started taking interest in buying. The ginners are also hesitant to sale on the hope of increasing the rate of cotton.

On the other hand, on Thursday Pakistan Cotton Ginners Association issued a report according to which seed cotton (Phutti) equivalent to over 3.7 million or exactly 37,07693 bales has reached ginning factories across the country till November 1, 2022, with a decrease of 40.74 percent as compared to corresponding period of last year.

However, textile spinners have also adopted a wait & see policy due to which the business volume is relatively low. Time will tell what direction the market takes in the coming days, as the international recession continues and the conflict between Russia and Ukraine is worsening. Apart from this, the political situation locally is also uncertain.

According to the sources of textile mills, there is recession in the demand and price of cotton yarn and textile products.

Due to extraordinary financial crunch almost fifty percent of the textile sector is closed. Many mills have laid off staff, leading to increased unemployment.

The rate of cotton in Sindh is in between Rs 14,000 to Rs 18,000 per maund. The rate of Phutti is in between Rs 6,000 to Rs 8,200 per 40 Kg.

The rate of cotton in Punjab is in between Rs 15,000 to Rs 18,000 per maund. The rate of Phutti per 40 kg is Rs 6,500 to Rs 8,500.

The rate of cotton in Balochistan is in between Rs 15,000 to Rs 18,000 per maund. The rate of Phutti is in between Rs 6,500 to Rs 8,500 per 40 kg

The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 2,00 per maund and closed it at Rs 16,700 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that mixed trend was seen in international cotton markets. The Rate of Future Trading of New York Cotton after reaching the lowest level of seventy one American cents per pound closed at the highest level of eighty seven American cents per pound.

According to the USDA Weekly Export and Sales Report for the year 2022-23, 191,800 bales were sold.

China was at the top by buying one lac twenty two thousand bales. Pakistan with 23, 200 bales and came second. Turkey was number third with 15,800 bales.

11 thousand 200 bales were sold for the year 2023-24.

According to a fortnightly report of Pakistan Cotton Ginners Association (PCGA) released on Thursday, over 3.5 million or 3,521,792 bales have undergone the ginning process, i.e., converted into bales. Cotton arrivals in Punjab were recorded at over two million or 2,072,293 bales registering a decrease of 29.40 percent as compared to corresponding period of last year when arrivals were recorded 2,935,119 bales.

Sindh generated over 1.6 million or 1,635,400 bales registering decrease of 50.77 percent as compared to corresponding period of last year when arrivals were recorded 33,21,900 bales.

Textile mills bought 3,036,129 bales while exporters purchased 4,900 bales and Trading Corporation of Pakistan (TCP) didn’t buy during the cotton season 2022-23.

Sanghar district of Sindh topped with cotton arrival figure of 795,447 bales followed by Bahawalnagar district of Punjab with 375,048 bales.

Total 609 ginning factories were operational in the country.

Exactly 666,664 cotton bales unsold stock was available in ginning factories.

Commenting on the report, Karachi Cotton Brokers Forum Chairman Naseem Usman said that it seems that the total production of cotton is expected to be around 50 lac bales. He also said that this year, due to the crisis in the textile sector, the consumption of cotton will decrease, which is expected to be around one crore 10 lac bales. It is expected that around 65 lac bales of cotton will have to be imported. So far, import agreements of 48 lac bales have already been signed.

Experts are of the opinion that the main reason for the decrease in cotton production in Pakistan is the establishment of sugar mills in the districts designated for cotton cultivation and the increase in sugarcane cultivation there.

Along with this, the quality of cotton has also decreased due to the sale of substandard seeds and adulteration of agricultural pesticides and fertilizers. In this regard, due to climate change and cotton pests (red cotton bug and dusky cotton bug), the country may face further decline in yield and quality of cotton per acre.

It is not possible to resolve the problem of reduction in cotton production in Pakistan without solving these problems. In addition, there is an urgent need to focus on research and development to increase cotton production. In this regard, cotton research institutions and agricultural universities should focus on starting research projects in collaboration with China or the United States so that hybrid cotton seeds can be developed which are capable of fighting climate change and also give good yields. If such seed are provided to the farmers at subsidized rates after testing, it is possible to increase the yield and quality of cotton, which will benefit both the farmer and the industry.

In this regard, an organization can also be formed at the national level in which research and development work can be done to increase the production and quality of cotton by setting a target through the representation of industrialists, farmers and the government.

Copyright Business Recorder, 2022

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