Cotton prices down despite anticipated wide shortfall

KARACHI: Textile buyers are reluctant to build on lint inventory despite resurgence in export orders following the first wave of coronavirus lockdown as they fear a shutdown relapse, sending cotton prices down despite an expected wide shortfall this year, industry people said on Saturday.

Prices of lint dropped in the range of Rs100 to Rs400 per maund (approximately 37 kilograms) during the outgoing week. Cotton prices in Sindh remained at Rs8,800 to Rs9,700 per maund. Punjab’s lint was sold at Rs9,400 to Rs9,700 per maund while Balochistan’s cotton fetched price of Rs9,200 to Rs9,400 per maund.

Spot rate committee of Karachi Cotton Association reduced the spot rate by Rs400 per maund to Rs9,600 per maund.

Naseem Usman, chairman of Karachi Cotton Brokers Association, said international market witnessed a mixed trend during the week. New York Cotton futures fluctuated due to dollar rates, cyclone and presidential elections in the US. Prices in Brazil, Argentina and China remained stable while rates in India increased during the week. Trade activity in the cotton market declined during the week, as new wave of COVID-19 put the sellers as well as buyers on alert, traders said.

Although textile industry has seen export orders rebound after the lifting of lockdown globally and resilience in the market, there is fear of the second wave and subsequent lockdown with the UK – a main market for Pakistani textiles – re-imposing it for a month till December 2, they said.

Textile exports increased 3 percent during the first quarter of the current fiscal year as compared to the corresponding period of last year. Textile exports amounted to $3.5 billion in July-September as against $3.4 billion a year earlier, according to the latest data of Pakistan Bureau of Statistics.

Pakistan’s cotton arrivals in the factories have dropped 43.4 percent to 3.45 million bales with total production estimated at 6 million bales this year, meaning at least the quantity of the same level needs to be imported to meet the local requirements.

Agriculture experts stressed need of revisiting the mechanism for cotton production estimates, as current mechanism is not providing the realistic estimates. There is need of the new survey of lands, as a large portion of cotton land is used for the cultivation of sugarcane now, they said.

Pakistan’s cotton production has been static since 1990/91. In the last three decades, the only two better outputs of nearly 14 million bales were recorded in 2004/05 and 2014/15.

There has been a constant decline in yield in the country due to multiple factors and no serious effort has so far been seen to revive production.

Pakistan is among the top five largest producers of cotton in the world. About 1.3 million farmers cultivate cotton in the country. Cotton and cotton products account for nearly half of the foreign exchange earnings of the country and are the main input of the key textile industry.

The experts said cotton production declines due to substandard seeds and bad weather especially heavy monsoon rains, which affected the quantity and quality of the crop. Due to unavailability of standard seed and pesticides, growers are discouraged of cotton cultivation and are moving towards other crops.