Volume of business rises due to buying by mills
RECORDER REPORT
KARACHI: The local cotton market remained stable on Friday. Market sources told that mills were taking interest in buying due to which the trading volume increased.
Cotton Analyst Naseem Usman told that according to the data released by USDA till November which shows that there is no chance of bullish trend in the market in near future.
The country’s top export - textile sector on Wednesday sought the government’s priority towards the increase of a sizeable cultivation area of cotton crop and its output growth to safeguard the local yarn market.
Pakistan’s entire apparel textile sector relies widely on the local cotton production and manufacturing of yarn to meet its global orders, makers and exporters said.
“Due to decline in cotton production, the production of value added textile sector has suffered a lot owing to unavailability of yarn,” Muhammad Javed Bilwani, the Chairman, Pakistan Apparel Forum, said.
Bilwani said textile exporters have urged the government to pay attention to cotton production, cultivation area and cotton yield in order to support the value-added textile chain as cotton and cotton yarn are basic raw materials for its survival and development.
Owing to a decline in cotton harvest, the production of value-added textile sector has suffered due to unavailability of cotton yarn, and textile exporters are hesitant to finalise new export orders.
Naseem told that cotton was always considered to be a resilient and reliable lifeline of Pakistan’s economy; however, the reduction in its productivity over several years has negatively impacted the performance of entire Textiles sector. Pakistan is fifth largest cotton producer in the World and accounts for 6 percent market share in overall production.
Over the last 10 years, cotton production has shrunk by 50 percent from 14.81 million bales to under 7.5 million bales (forecast this year) and as a result Pakistan’s Textile Sector and economy has suffered considerable losses.
The production shortfall has forced the entire value chain to rely on imported cotton, to meet this shortfall with import expenditure of over 5 billion dollars (from FY16 to FY20) on cotton imports in order to meet the demands of the domestic Textile industry. The deficit for FY21 will require an additional $2 billion for cotton imports.
Importance of the cotton crop can be gauged from the fact that its share of agricultural GDP is 4.1 percent and in overall GDP is approximately 0.8 percent. Other bye products are cotton seed with a significant contribution for local oil production and of cotton cake that improves milk production.
Cotton being the basic raw material for the roughly 400 textile mills of Pakistan, which earn 60 percent foreign earnings and contribute 8.5 percent in GDP; accounts for almost 70 percent of the basic cost and therefore any movement in price or quantity of cotton has significant impacts on production and the farmer’s revenue. Farmers’ decisions are subject to the relative cost of production from the competing crops, government support and input availability.
Importance of new seed technology can be assessed from the fact that Pakistan is losing at least $2 billion directly and at least $8 billion USD per annum on account of low production of cotton. 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 economy. A normal cotton crop provides livelihood and employment to millions of the poor families and goes a long way in the struggle to fight off poverty as it distributes money against the very poor rural population.
The low profitability of cotton farmers is entirely due to the falling productivity as cotton in Pakistan is already priced at levels above international parity.
Meanwhile, the cotton production in the country witnessed an alarming decline of 2.8 million bales says a report release by Pakistan Cotton Ginners Association. The report says that more than 4 million bales were produced in the country which is 41.47% less as compared to more than 6.8 million bales produced till November 15 last year.
According to the statistics released by Pakistan Cotton Ginners Association till November 15 local textile mills bought more than 3.1 million bales which is around 40.56% less as compared to the last year buying of more than 5.2 million bales during this period. The ginners had the stock of 800,000 bales which is 43.20% less as compared the last year stock of more than 1.5 million bales.
Chairman Karachi Cotton Brokers Forum Naseem Usman while commenting on the report said that as per the statistics of the report this year 5.5 million bales will be produced in the country adding that around 7 million bales will have to be imported to fulfil the demands of the local industry.
Chairman Pakistan Cotton Ginners Association Dr Jasomal Limani told Naseem Usman told that major reasons, behind low production of cotton this year is non availability of good quality seeds, substandard pesticides and to some extent climate change.
Jasomal also said that he talked to federal minister for Industries Hammad Azhar and federal minister for National Food Security Syed Fakhar Imam regarding alarming decline in the cotton production. Both the ministers assured that they will play their role regarding giving incentives to the farmers. They also assured that import duty on pesticides will be reduced.
Dr Jasomal stressed on the need of introducing efficient technology and called for ensuring availability of quality seeds and good quality pesticides.
Textile exports during the month of October 2020, clocked in at a record US$1.3 billion, jumped by 6% YoY and 8.4% MoM.
This takes the total textile exports in 4MFY21 to reach at US$4.8 billion, up by 3.78% YoY from US$4.586 billion.
The rise in exports can be attributed to the strong orders for winter season in the West, which usually tend to be shipped by mid-October, a report by Intermarket Securities highlighted.
According to the report, most of the large exporters have orders filled till March 2021.
The data released by Pakistan Bureau of Statistics (PBS) revealed that the rise in textile exports during 4MFY21 was mainly the resultant of rise in exports of value added segments where Towels, Knitwear, Bed-wear and Readymade garments have surged respectively by 12.35% YoY, 12.3% YoY, 10% YoY and 4.66% YoY to US$283.25 million, US$1.18 Billion, US$899.5 million and US$947.4 million recorded compared to 4MFY20.
Meanwhile, Prime Minister Imran Khan has approved Textile Policy 2020-25 for onward submission to the Economic Coordination Committee (ECC) of the Cabinet. All Pakistan Textile Mills Association thanked Prime Minister Imran Khan and Advisor to Prime Minister on Commerce Razak Dawood for the approval of the textile policy.
According to the draft policy, the government will provide consistent, long-term policies for the foreseeable future, while undertaking following measures: (i) electricity will be provided at cents 9/kWh; (ii) RLNG at $6.5/MMBtu; (iii) system gas at Rs. 786/MMBtu during the policy period; (iv) Long-Term Financing Facility (LTFF) and Export Financing Scheme (EFS) rates will not be changed; (iv) review of LTFF and refinance scheme for SMEs and indirect exporters and building cost will be included; and (v) Brand Development Fund will be launched.
The government will extend fiscal incentives of Rs 838 billion for five years. Of this, the impact of electricity at cents 9/kWh - all inclusive is estimated to be Rs 123 billion, RLNG - Rs 111 billion, DLTL for textiles and apparel products (garments/technical textile at 4 percent and made ups at 3 percent) - Rs 420 billion, LTFF to continue at 5 percent - Rs 75 billion and EFS to continue at 3 per cent - Rs 109 billion.
Naseem told that 400 bales of Dadu were sold at RS 9400 per maund, 200 bales of Sanghar were sold at Rs 7800 per maund, 1400 bales of Khairpur were sold at Rs 8650 to Rs 8700 per maund, 1800 bales of Rohri were sold at Rs 8650 to Rs 8900 per maund, 2600 bales of Saleh Pat were sold at Rs 8950 to Rs 9300 per maund, 600 bales of Upper Sindh were sold at Rs 9075 to Rs 9400 per maund, 2000 bales of Khanpur were sold at RS 9550 per maund, 400 bales of Bagho Bahar were sold at Rs 9550 per maund, 1200 bales of Rahim Yar Khan were sold at Rs 9450 to Rs 9500 per maund, 800 bales of Sadiqabad were sold at Rs 9500 per maund, 600 bales of Haroonabad were sold at Rs 9475 per maund, 800 bales of Fort Abbas were sold at Rs 9450 per maund, 400 bales of Dera Ghazi Khan were sold at Rs 9300 per maund and 600 bales of Tunsa Shareef were sold at Rs 9200 per maund.
He told that rate of cotton in Sindh was in between Rs 8400 to Rs 9200 per maund. The rate of cotton in Punjab is in between Rs 8800 to Rs 9400. He also told that Phutti of Sindh was sold in between Rs 3300 to Rs 4200 per 40 Kg. The rate of Phutti in Punjab is in between Rs 3700 to Rs 4600 per 40 Kg.
The rate of Banola in Sindh was in between Rs 1600 to Rs 1750 while the price of Banola in Punjab was in between Rs 1500 to Rs 2200. The rate of cotton in Balochistan is in between Rs 9000 to Rs 9100 while the rate of Phutti is in between Rs 4000 to Rs 5000.
The Spot Rate remained unchanged at Rs 9300 per maund. The Polyester Fiber was available at Rs 158 per Kg.
Cotton Spot Rates
RECORDER REPORT
KARACHI: Official KCA spot rates for local dealings in Pakistan rupees on Friday (November 20, 2020).
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The KCA Official Spot Rate for Local Dealings in Pakistan Rupees
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FOR BASE GRADE 3 STAPLE LENGTH 1-1/16"
MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL
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Rate Ex-Gin Upcountry Spot Rate Spot Rate Difference
For Price Ex-Karachi Ex. KHI. As Ex-Karachi
on 19-11-2020 In Rupees
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37.324 kg 9,300 180 9,480 9,480 NIL
Equivalent
40 kgs 9,967 193 10,160 10,160 NIL
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Copyright Business Recorder, 2020
