The firm trend persists in the cotton market – Markets
KARACHI: The local cotton market on Saturday remained sluggish. Market sources indicated that the trade volume remained very low.
Cotton market analyst Naseem Usman told Business Recorder that ICE cotton futures hit their highest level in more than a month on Friday, en route to a third consecutive weekly gain, amid concerns increasing levels of precipitation in and around Texas.
The cotton contract for July rose 2.16 cents, or 2.55%, to 86.80 cents a pound at 12:29 p.m. EDT (4:29 p.m. GMT), a high since March 15. It traded in a range of 84.6 to 86.94 cents per pound.
“There is definitely a bullish environment right now. Consumption is pretty good, there is a lot of anxiety about the new crops and the drought in Texas, ”said Jordan Lea, senior trader at DECA Global. Cotton prices have risen nearly 4% so far for the week.
“The situation in West Texas remains dire as there is still no rain forecast. Farmers are also facing much higher input costs this season as energy and fertilizer prices have risen sharply, ”said Peter Egli, director of risk management at UK merchant Plexus Cotton, in a note dated April 22.
Naseem said that according to media reports in his statement, Pakistan Central Cotton Committee Vice Chairman Dr Muhammad Ali Talpur announced a Rs 10 billion package for cotton farmers. According to the package, a subsidy will be given to farmers in four provinces on fertilizers, seeds and pesticides.
Mean While, Prime Minister’s trade advisor on trade and investment Abdul Razak Dawood, in his Friday tweet said: “Happy to announce that the Ministry of Commerce has released rupees. 1,154 million for the non-textile sector, and 1,346 million rupees for the textile sector, for a total of rupees. 2,500 million under DLTL schemes. I hope this will solve the liquidity problems of our exporters and allow them to improve exports ”.
Cotton market analyst Naseem Usman told Business Recorder that, according to media reports, the World Bank has forecast a decline of around 34% in cotton production in Pakistan and estimated at 8.9 million bales for 2020. -2021, against 13.2 million balls in 2019-2020.
The bank in its latest report, “Commodity Markets Outlook,” said global cotton production is expected to fall 8 percent this season, mainly due to declines in the United States, India and Pakistan, mainly due to reduction of seedlings.
Cotton prices are expected to increase on average by 23% in 2021 compared to 2020, followed by a slight increase in 2022.
Cotton prices jumped 16% in the first quarter of 2021 after rising sharply in the fourth quarter of 2020. Although prices fell in April, they are still 40% higher than their April 2020 low. overall price reflects upward revisions to the outlook for global consumption, which is expected to average 24.5 mmt in the current season, almost 8% higher than 2019-2020, he said. added.
The bank projected Pakistan’s cotton import at 11.03 million bales for 2020-2021, up from 5.55 million bales in 2019-20.
Pakistan, one of the world’s largest cotton producers, is finding it increasingly difficult to meet its own needs, a problem that could push up import bills and further hurt its fragile economy, reported Bloomberg.
Years of bad weather, pest outbreaks and better margins on other crops have affected the quality and quantity of the harvest. And the scale of the damage is accelerating: output for the current fiscal year is expected to drop to the lowest level in about three decades.
As a result, the country is spending billions of dollars importing record amounts of cotton to feed its textile industry, which it cannot afford to do. Its current account – which posted a rare surplus between July and December – recently returned to deficit amid rising imports. The move also threatens to push up cotton prices, which have already hit a seven-year high.
Cotton is one of Pakistan’s most important cash crops and commonly referred to as “white gold” by the 1.5 million farmers who depend on it for a living. It is used as a raw material for the textile industry, which employs 40% of the working population and generates more than half of foreign exchange earnings.
Low cotton production has forced more than 60% of ginners to shut down their factories completely over the past three years, leaving hundreds of thousands of farmers and textile workers out of work, according to Jassu Mal, president of the Association. of cotton ginners from Pakistan, a group. representing approximately 1,300 mills.
“The cotton harvest has shrunk to an alarming level, but we don’t see the government taking serious steps to restart production,” said Mal, who is also general manager of Sindh Agro Industries and operates the largest factory in ginning from Pakistan to Hyderabad.
In the last season, Mal had to close at least three of its seven factories and operate others at 50% capacity due to lack of cotton. The number of ginning workers at the company has dropped to 100 from 400 about five years ago.
Pakistan’s cotton production is expected to drop to less than 6 million bales in 2020-2021, the lowest since at least 1992, according to Nasim Usman, president of the Karachi Cotton Brokers Forum. At its peak, production was over 14 million bales in 2004-05.
The government has set a target of 10.5 million bales for fiscal year 2022. This is hardly a consolation as the forecasts for the previous year were at the same level and production is well below estimates. Pakistan’s fiscal year runs from July to June.
In addition, the textile industry is booming. Manufacturers are operating at full capacity and are on track to accelerate their exports, thanks to the resumption of economic activity as coronavirus cases eased in June.
This caught the attention of Prime Minister Imran Khan, who said earlier this month that the textile industry was under manpower. Cotton imports have skyrocketed to make up for the production shortfall, nearly doubling to 3.68 million bales in the nine months ending March from a year ago, official data showed.
During this period, textile exports increased from $ 940 million to about $ 11 billion. However, this amount was almost offset by the increase of $ 870 million in textile imports, which consisted mainly of raw materials, during the same period.
The country is paying dearly for cotton from overseas and is expected to import an additional 3 to 4 million bales by June, said Khaqan Najeeb, former adviser to Pakistan’s finance ministry.
Higher purchases could further raise world cotton prices and widen Pakistan’s trade deficit, which increased by more than 120% to $ 3.3 billion in March as Khan’s government struggles to bring the trade under control. ‘inflation. A weaker rupee drives up the prices of basic necessities in the country when the country’s balance of payments situation deteriorates.
Pakistan’s longstanding tensions with neighboring India could exacerbate the cotton shortage. Last month, the government initially approved the import of cotton yarn from India, lifting a nearly two-year ban, but Khan’s cabinet then rejected the proposal in a dramatic turnaround, saying the trade could not resume until some political issues were resolved.
To boost production, the government plans to offer subsidies for cottonseeds and pesticides and may unveil a minimum price for the first time to support farmers, Pakistan’s food security minister Fakhar Imam said in February. “The cotton production crisis is worsening in Pakistan. We will have to prevent farmers who switch from cotton to other crops, ”he said.
For now, the measures do not appear to allay the concerns of farmers. Noor Muhammad, 56, has decided not to plant cotton this year on the seven acres of land he manages in Matiari after experiencing disappointments in the past.
“I borrowed 100,000 rupees ($ 652) to buy inputs for the harvest, but a bad harvest never allowed me to pay it back,” Muhammad said, sweat streaming down his forehead as he carried a bundle of wheat, another important crop for Pakistan. with a threshing machine.
Naseem Usman also told Business Recorder that a delegation from the Federation of Pakistan Chambers of Commerce and Industry will meet with Prime Minister Imran Khan next week. Former FPCCI President Mian Anjum Nisar told the regional head of the Cotton and Textile Committee Malik Talat Sohail in a meeting that a strategy for increasing cotton production would be on top of the agenda. of the day.
Meanwhile, the president of the Multan Chamber of Commerce and Industry, Khawja Salahuddin, wrote a letter to the Governor State Bank of Pakistan to guarantee the provision of crop insurance to cotton farmers.
Hanif Lakhany, Vice President of FPCCI and Senior Vice President of Pakistan Yarn Merchants Association and Vice President Farhan Ashrafi and Organizer of FPPCCI Central Standing Committee on Yarn Trade, while urging the Prime Minister Imran Khan to formulate sustainable and stable economic policies to get the country out of the crisis economy
The spot rate remained unchanged at Rs 11,300 per maund. Polyester fiber was available at Rs 205 per kg.
Corporate Copyright Recorder, 2021