July 06, 2020

Weekly Cotton Review Market remains bullish.

The cotton market remained bullish. Proper rainfall will have a positive effect on the current crop. 

TThe department is actively working for the eradication of Locust, White Fly and Pink Ballworm. It is estimated that 75 lac cotton bales will be produced in Punjab. 5 perception sales tax on Banola Khal abolished. The huge amount of sales tax refunds, customs duty and duty drawback of the textile sector is stuck with the government. If this amount is not paid immediately, the industries are in danger of closing down.


In the local cotton market during the last week the increasing trend in the prices of cotton witnessed because of the delivery of Phutti in limited amount as well as due to the buying by the international cotton firm.


In Sindh 15 ginning factories have started their operations partially while the supply of Phutti is very limited. When the rate of the Phutti rises these factories stopped their operation. Same is the situation in Punjab. Phutti in Punjab is going from Sindh. However, Phutti has started arriving from some areas of Punjab but the ginners were hesitant to buy because it is costly.


Moreover, ginners of Sindh has oversold their cotton due to which the current trend of rising cotton and Phutti prices is expected to continue. If the cotton prices increases in the local market then big mills will start signing agreements for the import of cotton from abroad particularly from Brazil and Argentina where cotton is available on 60 cent locally which is equal to Rs 8000 to Rs 8200. In case of increasing in the price of dollar the rate may increase.


Many groups have signed agreements in limited number for the import of cotton from Brazil and Argentina. As the big groups have the facility of DTRE due to which they are exempted from paying duty on the import of cotton so they can import cotton through out the year without paying duty. The duty has been imposed on the import of cotton from June 30, but it is expected that government give relaxation due to coronavirus pandemic.


The rate of cotton in Sindh is in between Rs 8400 to Rs 8500 per maund. The rate of Phutti is in between Rs 4200 to Rs 4300 per 40 kg. The rate of Banola is in between Rs 1900 to Rs 2000 per maund. The rate of cotton in Punjab is in between Rs 8800 to Rs 8900 per maund.


Currently, ginning factories of Punjab are buying Phutti from Sindh but the Phutti in Punjab has started arriving partially. The demand of Phutti is increasing day by day in Sindh and Punjab because ginning factories have started their operations. The businesses not remained affordable because so many factories have started their operations.


The Spot Rate Committee of Karachi Cotton Association has issued the new spot rate for the crop of new season of 2020-21 from July 1 which closes at Rs 8400 per maund.


Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all bullish trend was witnessed in international cotton market. The increasing trend was witnessed in Rate of Promise (Waday Ka Bhao) of New York cotton. One reason is that due to the less rains in the America's cotton growing state Texas cotton sowing has decreased. Secondly, due to the easing of lockdown businesses has started opening up and there is a significant increase in number of jobs.


Increase in the prices of cotton witnessed in China while the rate of cotton remained stable in Brazil and Argentina. Over all bearish trend was seen in the prices of cotton in India.


The increasing tension on border between India and China has a negative impact on the import and export of goods between the two countries. The ginners were in a panic like situation because of the increase in the stock of cotton. Cotton Corporation of India is buying cotton from ginners by giving concessions. The prospects for China to import cotton and cotton yarn from Pakistan are brightening.


The meeting of Cotton Crop Committee was held in Multan under the chair of agriculture minister Malik Noman Ahmad Langrial. The minister stressed on the need for all stakeholders to play an active role in better management of cotton and increase in yield per acre. While expressing his views on this occasion the minister said that government is utilising all its resources to achieve the target of production of 75 lac cotton bales from Punjab. He also directed relevant formation of the Department of Agriculture to monitor and provide training in spraying to the farmers and to maintain the quality of fertilizers and pesticides in the market.


As per the directions of Minister for Agriculture and Secretary Agriculture Punjab Wasif Khurshid, the recommendations formulated by the Technical Advisory Committee are being conveyed to the farmers in a timely manner. The cotton crop is also being sprayed to protect it from the attack of insects and locusts.


In addition, the Punjab Minister of Agriculture and the Secretary Agriculture Punjab are visiting the areas on emergency basis to review field activities and are also getting acquainted with the problems of farmers.


Chairman Pakistan Cotton Ginners Association Mian Muhammad Javed Sohail Rehmani during a press conference in Multan termed the abolishing of 5 percent sales tax on Banola Khal as Victory of cotton and defeat of mafia. Rehmani thanked parliamentarians of all the political parties for playing their role in abolishing the sales tax on Banola Khal. He also said government should play its role for recovering Rs 20 billion from the textile sector. He said government should also play its role for providing quality seeds of high germination quality to the farmers.


Federal minister for National Food Security and Research Syed Fakhar Imam in a press conference said that cotton ginning declined by 4.61 percent Locust attack had damaged cotton crop in some parts of Sindh and Punjab. He showed his apprehension that Locusts may attack Pakistan in July. They can come from Afghanistan, Iran, Africa, Oman, and from India. The government of Pakistan is taking steps to save the crop from the attack of Locusts. In this regard National Disaster Management Authority has arranged 11 aero planes for spraying in the fields. He also said that China is also helping us in controlling the Locust attack.


Moreover, textile exporters are fearing that government in FY 2020-21 would not be in a position to refund of 17 percent tax to exporters as well as custom rebate, duty draw back as a huge amount of worth billions of rupees of exporters is still stuck up with the government which has not been released. Hence, the textile exporters are deliberating whether to operate industries or close down.


Local textile mills are in turmoil as imported cotton is coming in, while due to the low demand of cotton yarn its stock is increasing. This has led to a severe financial crisis and difficulties in making payments.


Monsoon rains have started. If there is adequate rainfall, it will be beneficial for the crop while in case of heavy rains quality of crop will be affected.