Price decline ruffling cotton sector

Industry-related officials express concern.

KARACHI:

Sharp decline in cotton prices has created a catastrophic situation in the sector, affecting everyone in the value chain, said industry officials.

After a long period of stability, cotton prices in the local market have witnessed a sharp decline in the past two months which is a cause of concern not only for growers but also ginners and finished good makers.

Cotton prices at the Karachi Cotton Exchange declined from Rs6,800 to Rs5,350 per mound, down 27% in two months from mid-June to mid-August 2014.

It is true that everyone has been hit by the situation, whether he is a grower, ginner or manufacturer,” said Karachi Brokers Forum Chairman Naseem Usman. “There is currently a chaotic situation in the textile chain due to the sharp slum in cotton prices.”

Commenting on the reasons behind the decline, he said that international cotton prices in the New York market have also dropped dramatically. Except Pakistan, the cotton production of all three big international cotton producers (US, China and India) has been excellent in recent season. The supply is more than the demand, which is why there is a fall in the international prices.

Sindh Abadkar Board President Abdul Majid Nizamani thinks that the sharp drop in cotton prices comes as a big shock to the cotton growers. Himself a farmer in Badin, Sindh, he thinks the slump will badly affect the cotton production in the current year.

The government has fixed the cotton production target at 15.1 million bales for the current fiscal year 2014-15. Last year, the target was 14.1 million bales before being revised but the country eventually produced around 13 million.

South Punjab – one of the best lands for cotton production – is facing numerous challenges like lack of water and the supply of pesticides to keep the cotton crop safe from viruses that adversely affect its per-acre production. A lot of farmers are also turning towards maize due to water shortage and problems of different cotton diseases.

Published in The Express Tribune, August 17^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.