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Weekly review: bearish sentiment pervades the cotton market – Markets

KARACHI: Boredom prevails in the local cotton market. On the international cotton markets, the trend is mixed. There is an increase in water supply in the cotton growing areas of lower Sindh; however, the water crisis continues in Punjab.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called the steadily declining cotton production a direct threat to the country’s economic security. The Federation called on the government to take measures to increase cotton production in the country. However, All Pakistan Textile Mills Association (APTMA) has called on the government to fix the price of Phutti at Rs 8,000 per 40 kg for the coming season. APTMA has also submitted its suggestions to the Prime Minister regarding solutions to the problems faced by the industry.

In the local cotton market over the past week, the volume of trade has remained very low. If there was commercial activity, it was not recorded. We can say that gloom reigns over the cotton market. The ginners had a limited stock while an international organization had a stock of twenty-five thousand bales. All eyes are on the next season. Although there is severe water shortage in the country, water supply in the cotton growing areas of lower Sindh has increased and cotton planting is accelerating.

Cotton plantings are expected to increase in the coming season. Although the Federal Agriculture Committee has fixed the price of Phutti at Rs 5700 per 40 Kg, but according to farmers and people related to the cotton industry, the support price is less considering the increase in input prices and also relative to increase international market tariffs the local support price is low.

Considering all these factors, APTMA urged the government to immediately announce a cotton support price of Rs 8,000 per 40 kg for the coming season. After the fluctuation of crude oil prices in the international cotton market, crude oil prices have generally increased, and therefore the rate of polyester fiber also has an upward trend. Some factories have increased the use of polyester fiber after cotton prices increased.

On the other hand, once again, the US dollar rate started to rise. Many textile factories are worried that due to the increase in cotton rate, it will be difficult to achieve parity between cotton and cotton yarn. On the other hand, there is a decrease in the demand and rate of cotton yarn in the market due to which the financial crisis is increasing.

Fluctuations have been observed in the rate of cotton in the international cotton markets. An overall decrease has been seen in the Future Trading of New York Cotton rate because reports are coming in that a rainy spell is about to begin in cotton growing areas, especially in Texas.

The rate of cotton in Punjab and Sindh is between Rs 18,000 and Rs 21,000 per maund while the rate of Banola, Banola oil and Khal is stable. The Spot Rate Committee of the Karachi Cotton Association kept the rate stable at Rs 20,500 per maund.

Karachi Cotton Brokers Forum Chairman Naseem Usman said that the rate of cotton has declined in the cotton market from previous rates, especially the rate of Future Trading of New York Cotton has witnessed a decline. The reason for the drop is the onset of a rainy season in cotton-growing areas, particularly in Texas.

According to the USDA export report, more than fifty thousand bales of the year 2021-22 were sold, which is 15% less than last week. India was number one with over nineteen thousand balls; Peru was number two with over ten thousand balls while Guatemala was third with over six thousand balls. For the year 2022-23 more than one lake thirty six thousand bales were sold. Cotton prices in Brazil, Central Asia and Africa remained stable. The price of cotton in India remained stable after some fluctuations.

The textile industry has filed a bid package with Prime Minister Mian Mohammad Shehbaz Sharif for his endorsement, which will help pave the way for textile exports to increase to $26 billion in the next fiscal year and 50 billion over the next 5 years.

In a letter written on April 20, 2022 to the country’s new CEO, APTMA urged him to ensure the continuation of the Competitive Regional Energy Tariff (RCET) to the textile industry with an RLNG price at $6.5/MMBTU and electricity at 7.5 cents/unit, the immediate supply of gas connections to new units coupled with the extension of load for increased capacity and the revival of sick units, and the reaffirmation of the priority of the export sector in gas allocation.

APTMA also called on the Prime Minister to ensure that the support price for cotton for this season is set at Rs 8,000/maund to encourage farmers to grow more cotton, noting that the country is losing every year at least $3 billion/year because of it. low cotton production.

The textile sector has demanded a review of duties on polyester staple fibers and the removal of anti-dumping duties to allow Pakistani export products to compete internationally. He also called on the government to implement a weighted average cost of gas in letter and spirit, allowing for uniform and rational gas or RLNG prices across the country.

In the letter, APTMA drew the Prime Minister’s attention to the success of exports showing a 26% increase over the previous year to a record $23.3 billion, the majority of which were textiles (61%).

He argued that the growth was made possible by the implementation of the Competitive Regional Energy Tariff (RCET), an investment of more than $5 billion in expansion and the creation of 100 new textile units, resulting in a capacity increased export by 500 million dollars per month.

“Reduced acreage and lower productivity reduced cotton production from a high of 14.81 million bales to 7.44 million bales last year. Cotton lost 1 million hectares over the past decade and if this area returned to cotton, the country would produce an additional 5 million bales of cotton, which would add 1.523% to the GDP and directly save the country $5 billion while generating revenue in the country. Pakistan’s rural economy and playing a vital role in poverty alleviation,” APTMA said.

On energy issues, APTMA said the cost to the public purse of regionally competitive energy tariffs has been 2.44% of textile exports, which is a tiny fraction of the cost of potential borrowing. in foreign currencies which the foreign exchange income replaced.

Meanwhile, FPCCI Federation President Irfan Iqbal Sheikh has called ever-decreasing cotton production a direct threat to the country’s economic security, as cotton is one of the most important cash crops. and, above all, it provides indigenous raw materials for the country’s largest category of exportable products, textiles.

In addition, textile exports are expected to cross the $20 billion mark in the next fiscal year. However, cotton production has been reduced to 6-7 million bales per year, he added.

Sheikh said Pakistani textile products could become much more competitive, provided the full amount of raw materials required are produced domestically or at least production resumes from previous levels of 10-12 million bales per year. be assured.

He added that importing one million bales results in the outflow of a billion dollars of valuable foreign currency.

The head of the FPCCI explained that 60% of the production cost of textile products is based on the raw material of cotton. “Therefore, cotton is our lifeline when it comes to the lion’s share of our exports.

“Producing more cotton will also strengthen our foreign exchange reserves, improve the abysmal trade balance and halt the relentless depreciation of the rupee,” he said.

Sheikh noted with deep concern that the total area devoted to cotton cultivation has decreased by one million hectares and, if the government and farmers can collectively recover this area from other crops such as sugar cane, Pakistan could produce an additional 5 million bales per year and save $5 billion. .

Khawaja Muhammad Zubair, chairman of the Karachi Cotton Association, argued that lack of government support and non-availability of certified, high-quality cotton seeds also hamper cotton production in the country.

He added that given the upward trend in export orders and domestic consumption, the country’s total cotton requirement could soar to 17 million bales, and Pakistan simply cannot afford to import 10 million bales of cotton.

Copyright Business Recorder, 2022