Pakistan to profit from Indian ban on cotton export
By Imran Rana
Published: March 7, 2012
Domestic cotton prices are likely to rise as India has banned cotton exports, which will attract international buyers to Pakistan as the country has a good harvest this year, say market experts.
This has provided a ray of hope to the farmers who were earlier hurt by a sharp fall in cotton prices from previous year’s levels. However, while the farmers are upbeat, textile millers have started voicing concern.
Traders and exporters expect cotton prices to go up in coming days mainly because of an increase in demand in the international market following the export ban by India, the world’s second-largest producer.
In the domestic market, cotton was being sold at Rs5,350 per 40 kg, which was around 60 per cent lower than last year’s peak of Rs14,000.
According to traders, in this season prices are one-third of what were last year, but demand is still weak due to energy shortage and expectations of a further fall in prices.
A bumper harvest has also played its part in keeping prices low. So far, 14.38 million bales have reached the market, which are 25 per cent higher compared to 11.50 million bales at the same time last year.
“Industry has the capacity to consume the entire crop provided the government ensures uninterrupted gas supply to the textile chain from spinning to processing mills,” said Imran Maqbool, Chief Executive Officer of Crescent Fabrics. He also sought protection for the industry by banning cotton exports, like India.
“Spinners were not heavily buying on hopes of a further decline in cotton prices. However, the sudden decision of India has taken them by surprise,” Maqbool said, adding the industry had so far been consuming last year’s stocks.
Traders said cotton exports would bring additional foreign exchange and farmers would also benefit from an increase in prices in the international market.
“China – the main buyer of the fibre in the region – will switch to Pakistan market after the India ban,” said Ashraf Gandhi, a yarn trader.
Spinners said the export of cotton was not a viable solution to the problem of low prices in the domestic market. The best way would be to provide gas to the entire textile industry seven days a week to encourage it to start purchasing the crop, they suggested.
“Once spinners began the process, prices will automatically rise. This will serve the interests of both farmers and spinners,” a spinner said.
Published in The Express Tribune, March 7th, 2012.