Bullish trend prevails in local market
NASEEM USMAN
KARACHI: Under the influence of increasing trend in the prices of cotton in international cotton market bullish trend prevails in the local cotton market.
Advisor to Prime Minister on Commerce Abdul Razak Dawood said that there is no plan of government to allow duty free import of cotton from India to bridge the short fall. Lahore Chamber of Commerce and Industry demanded to impose agriculture emergency in the country in order to increase production of cotton. Pakistan Cotton Ginners Association, Pakistan Cotton Brokers and Karachi Cotton Brokers Forum are actively playing their role for increasing the production of cotton while main stake holders like All Pakistan Textile Mills Association and Karachi Cotton Association are not much active.
In the local cotton market during the last week bullish trend was witnessed because textile mills had taken interest in the buying of good quality cotton and the ginners sold the cotton on high rates.
Record increase was witnessed in the rate of cotton due to which the spot rate reached at Rs 11,100 per maund which is highest in eleven years while the rate of Balochi and Afghani cotton reached at highest level of Rs 11300 to Rs 11500 per maund while the rate of cotton sold on the basis of borowing reached at Rs 11700 per maund. Fluctuation was witnessed in the rate of Phutti as per it’s quality.
According to the experts the way rate of cotton is increasing in international cotton market and the decrease in the production of cotton at local level is alarming the rate of cotton may increase to some extent but up till now chances are very low that rate of cotton will decrease.
The big textile groups had signed agreements for the import of cotton from abroad in reasonable price. The demand of cotton and cotton yarn is continuously increasing in local and international markets while export agreements of textile products were signed in large numbers due to which up till now textile sector is in winning position.
The rate of cotton in Sindh is in between Rs 10200 to Rs 10700 per maund. The rate of Phutti is in between Rs 4000 to Rs 4700 per 40 kg. The rate of Banola is in between Rs 1700 to Rs 1900 per maund. The rate of cotton in Punjab is in between Rs 10300 to Rs 11000 per maund while the rate of Balochi and Afghani cotton is in between Rs 11300 to Rs 11500 per maund. The rate of Phutti is in between Rs 4000 to Rs 5500 per 40 kg. The rate of Banola is in between Rs 1700 to Rs 2100 per maund. The rate of Phutti of Dalbadin in Balochistan is in between Rs 5500 to Rs 5600 per 40 kg while cotton in Balochistan is not available.
The Spot Rate Committee of the Karachi Cotton Association has increased the spot rate by Rs 400 per maund and closed it at Rs 11100 per maund which is highest in 11 years.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all bullish trends was witnessed in international cotton market especially significant increase was witnessed in the Rate of Promise (Waday ka Bhao) of New York Cotton which after increasing reached at the highest level of 87.37 American cents. The reason behind increasing trend is World Agricultural Supply and Demand Estimate (WASDE) report which shows decrease in cotton production and increase in demand as well as shows decrease in closing stock. It also shows decrease in production of cotton as compared to last year.
On the other hand weekly export report of USDA shows an increase of 36 % in exports. This time also China is the biggest exporter. Bullish trend was witnessed in the rate of cotton in Brazil, Africa and Central Asian states while significant increase was witnessed in the rate of cotton in India.
Naseem Usman told that cotton production in the country was lowest in thirty years. The cotton production in the country is 33 % less as compared to last year due to which textile mills are depending on imported cotton. Up till now import agreements of 45 lac bales have been signed and the delivery of the cotton is going on fast track.
According to experts this year 70 lac bales of cotton will be imported of worth three billion dollars to fulfill the local demand. If Banola and oil is added then national exchequer will have to bear the loss of 4 billion dollars.
On the other hand increasing exports of textile products are also generating significant revenue and textile sector is growing. Due to growth in textile sector people will get jobs. If government will focus on increasing production of cotton in the country then foreign exchange of worth billions of dollars can be saved which is spend on importing cotton.
However, concerned government departments are actively playing their role for increasing the production of cotton in the country. Minister for National Food Security and Research Syed Fakhar Imam in its statement said that 30 lac ton certified seeds of cotton have prepared while the demand is of 40 to 45 lac seeds which will soon be prepared.
Meanwhile, for many days the news was circulating in social media and news papers that during a zoom meeting Advisor to Prime Minister on Commerce Abdul Razak Dawood have hinted that cotton may be imported from India in order to fulfill the local demand.
Although, there are trade sanctions between Pakistan and India, the issue was being debated between textile manufacturers and textile exporters. Textile manufacturers are in favor of importing cotton from India while textile and spinning sector have reservations on it. After wards Advisor to Prime Minister on Commerce Abdul Razak Dawood denied this news.
On the other hand the Economic Coordination Committee is unnecessarily delaying in giving approval to the textile policy. The policy was presented in the meeting of ECC three times but it was not approved by the committee despite of the fact that Prime Minister Imran Khan has already approved the policy.
Pakistan Cotton Ginners Association is very active regarding increasing the production of cotton. Chairman PCGA Dr Jasu Mal Limani through seminars and TV interview is trying to put pressure on the government that effective steps should be taken to increase the production of cotton in the country while APTMA which is the biggest buyer of cotton and the only cotton organization in the country Karachi Cotton Association is not much active.
There are very little chances of increasing cotton production in the country because for the last many years farmers bear loss due to the low cotton production and they started showing interest in growing other crops.
Sources are claiming that government interest is not seen in increasing the production of cotton. Last year government has allocated Rs 381 billion for agriculture on emergency grounds but not a single penny was allocated for cotton while government is giving incentives to farmers for increasing the production of sugar cane. The government is also giving incentives to farmers for increasing the wheat production while government is continuously ignoring cotton crop which is a cash crop and considered as a backbone for the economy of the country.
Chairman Karachi Cotton Broker’s Forum and senior member of Cotton Advisory Committee of KCA Naseem Usman while addressing a press conference on Friday in KCA Brokers Advisory Committee Room has said the production of mere 5.6 million cotton bales in Pakistan was “alarming”. He said that enhanced collaboration among all stakeholders including growers, ginners, weavers, KCA and exporters is required to revive the cotton crop and boost its production.
Naseem said that unfortunately the cotton production in Pakistan was badly hit due to shifting of cotton areas to sugarcane crop and the lack of research for new varieties of quality seeds. He stressed the need for ensuring the crop zoning in order to stop farmers from switching to other crops which would be largely beneficial for agriculture sector development and economic growth. He said that there is dire need for revamping seed production technologies in order to enhance per-acre crop output and maximize farmers’ income to compete in international markets as well as fulfilling the domestic raw materials needs of the industry.
Naseem said that due to severe decline in cotton production up till now 800 units of ginning industry had closed their units. The cotton ginning industry has the ginning capacity of two crore bales but the capacity is reduced to 55 lac bales due to decline in cotton production. Instead of relying on imported cotton we should evolve a comprehensive strategy for increasing the production of cotton in the country, he added.
He suggested the government to abolish all kinds of taxes including sales tax and other taxes for the revival of cotton so that farmers can get reasonable price.
The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to declare a cotton emergency in the agriculture sector as a fall in cotton production has started affecting the economic chain. LCCI President Mian Tariq Misbah, along with Senior Vice President Nasir Hameed Khan and Vice President Tahir Manzoor Chaudhry, told the media, after a meeting on Thursday, that the lower cotton production had impacted the textile sector, other industries directly or indirectly associated with it, ginners and growers.
The LCCI office-bearers said that textile was the largest export-oriented sector, contributing around 60% to total exports of the country. Cotton production has declined persistently since 2017-18 when the harvest was 11.9 million bales. Production declined 17.5% to 9.8 million bales in 2018-19 and further dropped by 6.9% to 9.18 million bales in 2019-20.
The Federal Board of Revenue (FBR) has taken a major policy decision of not reverting back to sales tax zero-rating regime for five export-oriented sectors including textile, leather, surgical, carpets, and sports goods, in the upcoming 2021-22.
