June 03, 2024

Weekly Cotton Review Prices decline after initial surge.

Cotton prices showed an initial surge, followed by a decline. The market witnessed a significant drop of Rs 1000 to 1500 per maund. Phutti prices also went decreased.

Phutti prices also went decreased. The arrival of Phutti; however, has increased. The intense heat has affected cotton sowing. In Punjab, the sowing target has not been fully achieved yet.


Several ginning factories are preparing for Phutti processing. Some seven ginning factories have partially started operations. More factories are expected to start running after the Eid.


The imposition of taxes by the Federal Board of Revenue has caused unrest among ginners. The issue of cotton waste adulteration is under discussion. Federal Minister for Trade Jam Kamal Khan has assured All Pakistan Textile Mills Association (APTMA) of resolving textile industry’s issues.


The local cotton market witnessed the partial arrival of new season Phutti during the last week, with a daily increase in supplies. Initially, the market showed a bullish trend, but later it was affected by the New York cotton market’s significant drop of 4-5 American cents per pound, resulting in a notable decline of Rs 1000-1500 per maund in local cotton prices.


The cotton price has reached Rs 19,500 to 20,500 per maund, although only 2,000 bales of new season cotton have been prepared so far. The Phutti price has also decreased by Rs 700 to 800 per 40 kg, reaching a low level of Rs 8,800 to 9,800 per 40 kg.


Textile spinners say that the current price is suitable for their needs, but overall, it is too high and unreasonable for spinners, and there is room for more reduction. Ginners should work, cautiously in this situation.


The intense heat in various cotton-growing areas of Sindh province may lead to a rapid increase in Phutti arrivals. So far, five ginning factories in Sindh have partially started working, while two ginning factories in Punjab, located in Burewala and Khanewal, have also begun partial ginning. However, unusual heat in several cotton-producing areas of Punjab is causing difficulties in cotton sowing. If this situation persists, there is a fear of the sowing being affected. Nevertheless, sowing is expected to continue for a few more weeks.


At the beginning of the new season, news of the FBR’s increase in taxes on ginning factories has caused unrest among ginners. Several ginners are pressing the Pakistan Cotton Ginners Association officials to take immediate action against the FBR’s unjustified tax increase, warning that if not addressed promptly, the situation will become more complicated.


Some ginners are advising starting negotiations with the FBR from the beginning of the season to resolve the issue, saying if the issues are not resolved, ginning operations will be halted as a protest.


Moreover, ginners are demanding a boycott of those responsible for cotton waste adulteration, and are urging action against the mixing of waste in cotton.


Meanwhile, the start of the season has raised concerns about the cotton crop due to extreme heat and predicted heavy rains, attributed to climate change. Currently, the Phutti price is ranging from Rs 8,800 to 9,800 per 40 kg, while the cotton price is between Rs 19,000 to 20,500 per maund. However, cotton production is currently very low, and it is hoped that business will pick up after Eid.


The Karachi Cotton Association’s Spot Rate Committee has kept the spot rate unchanged at Rs 19,700 per maund.


The Chairman of the Karachi Cotton Brokers Forum, Naseem Usman, stated that there are fluctuations in the international cotton market, and the New York cotton futures price has settled at 76.15 US cents per pound


According to the USDA’s weekly export and sales report, for the year 2023-24, approximately two lac and twenty two thousand and six hundred bales were sold. China purchased one lac and ninety one thousand and nine hundred bales and ranked first. Vietnam bought 8,500 bales, securing second place. Bangladesh purchased 5,900 bales and secured third position. For the year 2024-25, 78,100 bales were sold. Turkey was on number one after buying 26,400 bales. El Salvador was on second number after purchasing 20,900 bales. Thailand was third with 8,800 bales.


Secretary of Agriculture for Southern Punjab Saqib Ali Ateel Thursday said that cotton was holding extraordinary importance in our national economy as significant contributor to national GDP and agricultural product manufacturing. This year, the target for cotton cultivation in Punjab is set at 4 million acres, with a production target of 6.5 million bales. Nearly half of the cotton cultivation and production occurs in the Bahawalpur division, he said while addressing a mega cotton seminar organised in collaboration with the Department of Agriculture and a private fertiliser company.


He stated that all possible resources and means were being utilised to achieve the cotton cultivation and production targets while ensuring the availability of quality agricultural inputs to increase production. He further emphasised that the Department of Agriculture would remain committed to assisting farmers throughout the cotton season, similar to the previous year. Farmers will receive complete guidance on all stages of cotton cultivation, from planting to harvesting, he said.


He also added that the present government had provided a historic package of 400 billion rupees in a short time to address the issues faced by farmers. He further stated that farmers would be provided with 300 billion rupees in interest-free agricultural loans through the Kisan Card, enabling them to purchase fertilisers and seeds on time. Under the Transforming Punjab Agriculture Plan, farmers will be provided with modern agricultural machinery and equipment at subsidised rates, he said and added, this plan includes the provision of 3,000 laser land levellers to farmers for 4 billion rupees.


Separately, between July 2023 and April 2024, Pakistan’s textile and apparel exports decreased to $13.683 billion. The sector faced challenges, contributing 54.13% to total exports, which is lower than the 59.17% share as compared to previous year. There was a decline in knitwear and non-knit garment exports, while yarn exports increased. Imports of synthetic fibber and silk yarn also increased.


However, Federal Commerce Minister Jam Kamal Khan has assured APTMA of facilitating the textile industry in export diversification, saying that measures are being devised to promote export-oriented industries in the country.


Speaking to the export-oriented textile industrialists during his visit to APTMA Lahore office, he highlighted the government’s determination to bring institutional and structural reforms, resolve energy and tariff issues, enhance regional connectivity, and diversify exports to ensure sustainable growth and stabilise the economy.


Federal Minister also appreciated the APTMA’s idea of modern industrial zones with plug and play facility, saying that it would be helpful in attracting Chinese investment ahead.


Speaking on the occasion, Patron-in-Chief APTMA Dr Gohar Ejaz stressed on bringing the interest rate and electricity tariff down to ensure level playing field for the industry.


He said the APTMA have proposed establishment of modern industrial zones dedicated to garment manufacturing offering state of the art infrastructure with plug & play facilities ensuring highest standards in security, amenities, hospitality, housing, etc., in the country.


He said garment manufacturing is less energy intensive and will pose no additional burden to grid.


According to him, the Punjab government has already conceptually approved this project and formed a committee headed by Provincial Minister for Industries. APTMA is in close liaison of this committee.


Chairman APTMA North Kamran Arshad made a detailed presentation on the state of affairs in the textile industry.


He urged the federal minister to bring power tariffs for industrial consumers to regionally competitive level of 9 cents/kWh by removing cross subsidy/stranded costs.


Also, he stressed on allowing B2B power contracts with Use of System/ Wheeling Charge of 1-1.5 cents/kWh, excluding cross subsidies and stranded costs. He further proposed to increase cap on solar net-metering for industrial consumers from 1MW to 5MW.


He also stressed on restoration of zero rating, saying that more than two third of textile production is exported. Present system of collecting sales tax at multiple stages like ginning, spinning, weaving, processing etc., causes tremendous financial liquidity and promotes fraudulent refunds through fake/flying invoices. Refunds claimed are much higher than actual collection of sales tax.