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Saturday November 27, 2021

Cotton prices surge most in 11 years amid thin trade

June 06, 2021

KARACHI: Local cotton prices during the outgoing week increased to 11-year high of Rs14,000 per maund (40kg) amid thin trade, primarily owing to shortage of the natural fibre, traders said.

Cotton arrival from the new crop has started in the market. First lots were sold at Rs12,500 per maund. Later, cotton from Sindh received a price of Rs12,000 to Rs12,200 per maund. The prices suddenly rose to Rs13,000 to Rs13,000 per maund by the mid of the week, while one lot of 200 bales from Burewala was sold for Rs14,000 per maund on Saturday, the highest in 11 years.

Along with cotton, rates of seed-cotton (phutti) also increased to Rs5,800 to Rs6,300 per 40-kg, whereas cottonseed (banola) was sold at Rs2,300 to Rs2,500 per maund.

Around 2,000 bales from the new crop have been delivered in Sindh. In addition to it, deals of around 1,000 bales to 1,200 bales have been settled in advance.

Sources in the industry said several ginners were not trading the new crop openly, as the new season officially starts from July 1 in Pakistan and ends at June 30. Karachi Cotton Association does not record spot rates of the new cotton before July 1.

Cotton from the old crop has almost ended in Sindh, while Punjab is left with around 30,000 bales and ginners are demanding 12,500 to Rs13,000 per maund. The trade volume is very low.

Karachi Cotton Association kept the official spot rate unchanged at Rs12,300 per maund.

Traders said due to shortage of cotton in the country, large textile groups have started import contracts for the new season and around deals for 250,000 bales have been signed. The import is likely to increase because of higher prices in the local market. Imports of around 6.0 million bales are expected.

Prices in the local market are higher by around Rs3,000 per maund, as cost of imported cotton remains between Rs11,000 per maund to Rs11,500 per maund. Thus, big groups are showing interest in imports while small mills are running out of the stocks and are purchasing from the local market and prices seem to remain stable-to-higher in the local market.

Federal Agriculture Committee has estimated the cotton crop to be around 10.5 million bales in the country. Of which, 6.0 million bales would be achieved from 4.0 million acres in Punjab, while Sindh is expected to produce 3.0 to 3.5 million bales at 1.7 million acres.

Contrary to the government estimates cotton acreage in the country is declining at an alarming rate. Cotton sowing in Punjab is expected to remain at around 3.3 million acres. It is also expected to remain lower in Sindh at 1.5 million acres as growers are switching to other crops.

Private sector estimates around 8.0 to 8.5 bales if weather remains favorable. However, if area under cultivation remains lower and crop comes under pest attack, production may fall further. Water shortage this season is also weighing on the cotton crop.

A majority of growers preferred corn over cotton. Besides, it does not require extreme pesticides as are needed for the cotton crop.

Naseem Usman, chairman Karachi Cotton Brokers Association (KCBA), told The News that price was also seen rising in the international cotton market.

New York Cotton Market futures closed at 85 cents per pound. According to USDA weekly export report, exports from the US increased six percent during the week. Pakistan remained the biggest buyer with 72,900 bales, followed by India with 42,300 bales.

Prices remained stable in Brazil, Central Asia, Sudan and Argentina, where new crop has started arriving. A large increase in the prices was also witnessed in India. Usman said higher prices in the local market had a negative impact on trade.