LAHORE: Cotton prices in the local market have registered a record increase during the last week, apparently because of a significant and ‘unexpected’ drop in the domestic production and problems in the import of lint from abroad.

Last week, cotton rates went up by Rs1,500 per maund to reach the mark of Rs20,000 per maund, the highest price during the last four and a half months.

Observers expect the rates are set to go further up because of limited availability of quality cotton in the domestic market and a significant fall in the local cotton production against the projections in Punjab.

Karachi Cotton Brokers Forum chairman Naseem Usman says textile mills remained active in the purchase of quality lint in the local cotton market during the first week of the new year that pushed the prices up. He says that trade volume was also better as compared with the last few weeks.

He believes that the cotton production report by the Pakistan Cotton Ginners Association basically played a role in a bullish trend in the market as it confirmed that the crop output by the season end might not cross the 8.5million bales mark against the revised target of 11.15m bales.

The PCGA statistics suggest that the country may need to import 4.0m bales to meet requirements of the local textile industry, which consumes around 15m bales per annum.

Cotton Ginners Forum chairman Ihsanul Haq says domestic cotton prices increased by a record Rs1,500 due to limited availability of the commodity in the market and he expects that the price increase trend will continue in the coming weeks.

He recalls that at the beginning of the ongoing crop year, cotton prices reached Rs23,000 per maund, the highest level in the country’s history, before falling to Rs17,000 per maund due to certain reasons, including lower domestic output against the figures projected by the agriculture authorities.

Haq says that as of Dec 31, 2023 Pakistan produced only 8.17m bales, which has raised concerns that the total production of cotton this year will be less than 8.5m bales. Meanwhile, due to certain global issues, including the attacks on vessels in the Red Sea, there are problems in the import of cotton by sea, he adds.

This has sent the domestic cotton market into bullish mode as the Karachi Cotton Association made a record increase of Rs1,300 per maund in the spot rate of cotton during the last week.

As a record 272 textile mills from Pakistan are participating in the Heimtextil, an international textile fair starting from Tuesday (January 9) in Frankfurt, Germany, it is expected that they will get a good number of export orders for various textile products.

Mr Haq says that this factor, plus the continuing trend of China making lint purchases from the United States, Pakistan will further add to the prices in the domestic cotton market.

He says that cotton growers are happy with the bullish trend as the prices of phutti (raw cotton) in different markets have gone up to Rs9,400 per maund and this may help persuade them to sow the crop next year, hoping good profits.

However, if the present cold wave continues for some more time, it may delay cotton cultivation in areas where the process starts in the second or third week of February, Haq fears.

Published in Dawn, January 8th, 2024