Weekly Cotton Review: Bullish trend prevails in markets

KARACHI: Bullish trend prevails in national and international cotton markets. No strategy was evolved up till now to increase the production of cotton in the country. Pakistan Hosiery Manufacturers Association, Towel Manufacturers Association and Federal B Area Association of trade and industry called for removal of all taxes and duties imposed on the import of cotton as well as ban on export of yarn.

In the local cotton market during the last week buying remained continued by textile and spinning sector while ginners were involved in selling cotton because they were getting reasonable rates. The business remained stable. Due to the alarming decline in cotton production the cotton season is squeezed and it will end soon. The cotton production will be around 60 lac bales. The rate of cotton is increasing because of the alarmingly low production. The main reason behind increasing prices of cotton is that textile sector is working on full capacity. The demand from foreign countries is increasing day by day due to which the increasing trend in the prices remained continued.

The rate of cotton in Sindh is in between Rs 10,000 to Rs 10,700 per maund. The rate of Phutti which is decreasing day by day is in between Rs 4000 to Rs 5000 per 40 kg while the increasing trend in the rate of Banola and Khal remained continued. The rate of cotton in Punjab is in between Rs 10200 to Rs 11000 per maund while the rate of Balochi cotton is Rs 11500 per maund. The rate of Phutti is in between Rs 4000 to Rs 5500 per 40 kg. The rate of cotton in Balochistan is Rs 10500 per maund while the rate of Phutti which is only available in district Dal Badin is in between Rs 5600 to Rs 5700 per 40 kg.

The Spot Rate Committee of the Karachi Cotton Association has increased the rate by Rs 100 per maund and closed it at Rs 10600 per maund.

Chairman Karachi Cotton Brokers Forum Association Naseem Usman told that bullish trend remained continued in international cotton market. The fluctuation was witnessed in the rate of New York Cotton Market. The Rate of Promise (Waday Ka Bhao) reached at 82 cent per pound after increasing but after stabling the rate remained around 80 cent per pound.

Bearish trend was witnessed in New York Cotton Market despite of the fact that USDA World wide demand & supply report was negative. The reason behind bearish trend was political tension between America and China due to Sinkyang province and bullish trend in dollar index. Secondly, due to the profit taking because of increase in the Rate of Promise (Waday Ka Bhao) of New York Cotton by 14 cent per pound from 68 American cent per pound to 82 cent per pound.

According to the weekly USDA export report issued on Thursday Night the exports of cotton witnessed an increase of 113 % as compared to last week. This time too India was the biggest importer after importing one lac fifty two thousand bales. Pakistan was on number second after importing 56600 bales. The Rate of Promise (Waday Ka Bhao) of New York Cotton was increased due to satisfactory exports.

Bullish trend was witnessed in the rate of cotton in Brazil, Argentina and Central Asian states while bullish trend remained continued in India. The rate of cotton in India per candy (356 kg) reached at 43400 from 38000.

According to the sources related to cotton business in India cotton production may reach between 3 crore 65 lac to 70 lac bales. Indian government is giving incentives to farmers and ginners. More over Cotton Cooperation of India after buying Phutti on the fixed rate ginned cotton themselves and bought cotton from the ginners as well. In India support price of cotton is fixed as well as they had done zoning of the cotton crop which proved to be beneficial according to the weather conditions.

Our purpose in writing all this was simply to show that our neighbour, who at one time imported cotton from us, has become the world’s second largest producer of cotton. Few years back after producing 4 crore bales India became the biggest producer of cotton in the world. However, our situation is that cotton production has been steadily declining for the last several years, which this year, according to the State Bank of Pakistan report, is the alarmingly low since 1980-81 as only 60 lac bales produced this year.

Few days back Pakistan Cotton Ginners Association has appealed to the government through an advertisement that cotton production in the country has reduced from one crore 50 lac bales to only 55 lac bales. PCGA has appealed to the government to establish Cotton Board; support price of cotton should be fixed as well as zoning should be done. According to the PCGA country has faced a loss of 36 billion dollars due to the decline in cotton production.

Pakistan Hosiery Manufacturers Association has appealed to the government to abolish regulatory duty and custom duty on the import of cotton from abroad. The government has abolished regulatory duty but not the customs duty for which PHMA is appealing.

Moreover, Towel Manufacturers Association has appealed to the government to put ban on the export of cotton yarn due to its shortage while Federal B Area Association of trade and industry called for removal of import and custom duty on the import of yarn. On the other hand textile spinners are of the view that rate of yarn increased due to alarming decline in cotton production, massive increase in the rate of cotton worldwide as well as huge export orders.

Textile and spinning mills are running on full capacity due to which cotton was imported in huge quantity from abroad and due to which yarn was available in huge quantity in the country. Sources in the textile and spinning mills are claiming that more than 30 % yarn of country’s need is prepared indigenously then why textile manufacturers are demanding removal of import and custom duty on the import of cotton and imposition of ban on export of cotton yarn.

According to cotton analyst Syed Mudabbar Shah it is difficult that 60 lac bales will be produced in the country but despite that 4 lac new spindles were installed while more than 3 lac spindles has started their operation. Small scale Auto Coro and MVS spinning machines were installed. Despite low cotton production installation of spindles in such a huge quantity is a question mark. This means that in the future we will be moving in the direction of Bangladesh or Vietnam in textiles where cotton is not produced at all. Most of the units installed in Pakistan at present are of polyester, viskos, and tensil instead of cotton.

The future of cotton in Pakistan is not known but the future of textiles is bright. Take a look at Pakistan’s cotton. The rate of cotton is stable but the sale is low and factories are closing. At this time there is a demand of quality cotton. Demand of low quality cotton is not much. The trading volume of khal and Banola is low. After the release of figures on January 18 it will be estimated that rate will go in which direction. The demand of quality Khal will remain there while the buying of low quality Khal will be low.

The selling of cotton seed has started in Basin which is a district of lower Sindh. The sowing in some districts of Sindh will be started in 35 days.

Ginners had all time lowest stock for the month of January which is around 5 lac cotton bales. And most importantly, at this time the selectors of the big textile groups in Pakistan who stopped buying for the season 2020-21 are also involved in sampling. It is difficult for the mills having weak financial position to get cotton. They are getting cotton of low quality.

Efforts for better cotton crop in Pakistan should start from now. Trade with India is closed. India has three to four cotton varieties which can be successful in some parts of Pakistan. Other than cotton the import of cotton west has been started to fulfil the demands of Auto Coro and open ended mills.

As far as the rates are concerned ginners are selling cotton on the reasonable prices of Rs 11000 to Rs 11500 per maund. The stockists of cotton are bearing loss for the last three years that’s why stockists don’t have any stock of cotton.

The figures of January 18, Joe Biden’s assumption of power and Brazil’s crop size will decide the future of the cotton market. It is estimated that market will be bullish or remained stable. There are very low chances that bearish trend will prevail in the cotton market.


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