Cotton Market’s Slight Recovery As Future
Pakistan’s cotton crop has shown a remarkable start this year with a record arrival of 1.42 million bales as of July while the overall production is estimated to rise above 12 million bales.
It will be the first time since 2018-19 that the production will cross the 10 million mark after reducing 65 percent in 2022-23 since the high of 2014-15.
The positive recovery in production has been attributed to a 34 percent increase in sowing and favorable weather conditions that supported the growth instead of harming the crop. But at the same time, the growers and ginners are struggling to get the full benefit of the growth so far because of multiple reasons.
The government announced the support price of Rs. 8,500 per kg for seed cotton (phutti) in March but has failed to ensure compliance for multiple factors that we will get into later. However, last month, cotton spot prices dropped by nearly 20 percent in a matter of weeks while in scattered markets across Punjab and Sindh, it was selling at up to Rs. 2,000 less than the support price.
This is encouraging for the growers as high spot prices of cotton, nearing Rs. 22,000 per maund, during the past two years were the primary reason for farmers returning towards this legacy crop from alternatives like maize and sugarcane. That high demand was spurred by the record activity in the textile sector post-Covid as local industry resumed production earlier than regional competitors and received financial support from the State Bank of Pakistan as well.
The current positive outlook can also be attributed to the IMF stand-by agreement that also resulted in dollar inflows from friendly countries that raised both the stock market and hope of economic revival among the stakeholders.
