Weekly Cotton Review: Prices swing wildly

Business Recorder

a day ago

KARACHI: The cotton market experienced unusual price fluctuations last week, with per-maund rates recording dramatic swings of approximately PKR 1,000 to PKR 1,200. Initial prices ranging between PKR 16,200 and PKR 16,300 per maund dropped sharply to PKR 15,500 before rebounding to the previous level of PKR 16,200-16,300. Subsequent-ly, cotton prices in Sindh province settled between PKR 15,900 and PKR 16,000 per maund. Industry analysts attribute the strengthening domestic cotton prices to the discontinuation of the Export Facilitation Scheme (EFS) on imported cotton and the imposition of an 18% sales tax.
Meanwhile, devastating rainfall has severely affected cotton crops, particularly in Bahawalnagar District, causing substantial production losses.
Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood called for adopting the Brazilian agricultural model to revitalize the cotton sector. He also said that this transition requires sustained investment in research and development alongside consistent policy support at the governmental level.
In related developments, women cotton workers have raised their voices demanding fair wages. The abolition of the EFS scheme is being viewed positively within the industry. Ehsan Ul Haq, Chairman of the Ginners Forum, stated, 'The termination of EFS is a commendable step for Pakistan that will ultimately boost the local cotton industry.'
The local cotton market witnessed significant price fluctuations of approximately PKR 1,000 to 1,200 per maund during the past week. Early in the week, market pressure drove cotton prices down by nearly PKR 500 per maund, with quality-specific rates dropping to a low of PKR 15,500 per maund.
A key shift occurred on July 29 when the Federal Board of Revenue (FBR) issued a Statutory Regulatory Order (SRO) accepting the longstanding demand of the All Pakistan Textile Mills Association (APTMA). The SRO imposed sales tax on imported cotton yarn and fabric.
Following the SRO issuance, cotton prices rebounded sharply, rising by PKR 500 to 700 per maund. Industry bodies including APTMA, the Pakistan Cotton Ginners Association (PCGA), the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the Pakistan Businesses Forum (PBF) welcomed the move.
Market analysts anticipate increased domestic cotton procurement by mills amid the new policy. Cotton farmers also expressed support, noting the measure has lifted phutti (seed cotton) prices. This development is expected to boost local cotton purchases.
Meanwhile, the State Bank of Pakistan maintained its monetary policy rate unchanged, disappointing business circles.
The rate of cotton in Sindh is in between Rs 15,800 to Rs 16,000 per maund while the rats of Phutti is in between Rs 6,800 to Rs 7,400 per 40kg.
The rate of cotton in Punjab is in between Rs 15,800 to Rs 16,200 per maund while the rate of Phutti is in between Rs 6,800 to Rs 7,400 per 40kg.
In Balochistan the rate of cotton is in between Rs 16,000 to Rs 16,200 per maund while the rate of Phutti is in between Rs 6,900 to Rs 7,300 per 40kg.
The Spot Rate Committee of the Karachi Cotton Association closed its spot rate at PKR 16,300 per maund.
Karachi Cotton Brokers Forum Chairman Naseem Usman reported fluctuations in international cotton prices, with New York cotton futures trading between 64 and 69 American cents.
According to the USDA's weekly export and sales report, 39,100 bales were sold for the 2024-25 crop year. Vietnam led purchases with 27,100 bales, followed by Turkey with 13,200 bales, and Pakistan ranking third with 5,800 bales.
For the 2025-26 crop year, 71,700 bales were sold. Vietnam again topped buyers with 27,400 bales, Honduras placed second with 13,800 bales, and Pakistan secured third position with 5,900 bales.
Meanwhile, the Federal Board of Revenue (FBR) has excluded cotton yarn, grey cloth and raw cotton from the purview of the Export Facilitation Scheme (EFS) and would now be charged at the standard rate of 18 percent sales tax at the import stage.
Under SRO.1359(I)/2025 issued by the FBR on Tuesday, these three items have been excluded from zero-rating facility under the EFS scheme and therefore cotton yarn, grey cloth and raw cotton now chargeable under standard rate regime of sales tax.
The FBR has issued an SRO 1359(I)/2025 to propose amendments in the Export Facilitation Scheme on Tuesday.
Details revealed that there was a major issue pending between the spinning mills and exporters since last one year. Last year, local supply of 'yarn' was excluded from the EFS facility and sales tax was imposed on local supply of yarn. They argued that the imported yarn was subjected to exemption, but no exemption on local supplies. Resultantly, people switched to imported Yarn which disturbed the working and business of local spinning mills. Local sales of 'Yarn' were also affected due to switching over to imported 'Yarn'. Now, after chargeability of 18 percent sales tax on the import of yarn, grey cloth and raw cotton, the importers would be required to seek sales tax refunds.
There is confusion in the new SRO that whether 'micro fabrics' is subjected to sales tax or not under the revised EFS scheme, sales tax expert added.
According to the SRO.1359(I)/2025, under the revised EFS, the 'insurance guarantee' means a guarantee issued by an insurance company duly notified by the Board, having Pakistan Credit Rating Agency rating of AA++, on such format and conditions as prescribed by the Board.
The revised scheme said that the import of compressor scrap and motor scrap shall be allowed for copper content only. The raw cotton, cotton yarn and grey cloth falling under the respective headings of Pakistan Customs Tariff shall be excluded from the scope of EFS. Provided that import consignments of raw cotton, cotton yarn and grey cloth with bills of lading issued within ten days of the issuance of this notification shall he allowed under this scheme.
'Till the notification of the format of insurance guarantee by the Board, the EFS users shall be required to submit bank guarantee, wherever applicable', SRO 1359(I)/2025 said.
The recent spell of intense and continuous rainfall has pushed Bahawalnagar district into a severe agricultural crisis.
According to an initial report issued by the agriculture department, 42,000 acres of cotton and 7,000 acres of sesame crops have been destroyed. This has not only dealt a major blow to the livelihood of farmers but also posed threats for the upcoming agricultural season and the local economy.
Farmers affected by the rains say that climate change combined with poor drainage infrastructure has broken their backs.
Some affected farmers from Donga Bonga and Bahawalnagar said they had taken loans to invest in seeds, fertilizers, and pesticides throughout the year, only to see their hard work washed away by the rains.
A local farmer, Muhammad Aslam, said he had hoped for a good cotton yield this season, but due to the absence of a proper irrigation and drainage system, his entire crop had rotted in standing water.
The farmers demanded that the government immediately survey the affected areas, provide financial aid, and offer subsidies on seeds, fertilisers, and farming equipment for the next crop.
The agriculture department says it is currently assessing the situation.
More than 90 participants including women cotton workers, trade union leaders, progressive growers, civil society representatives, and officials from the labor, social welfare, health, and environment departments gathered in Hyderabad Thursday to demand justice, fair wages, safe working conditions, and climate resilience for over one million women cotton workers across Sindh.
Organized by the Sindh Community Foundation (SCF) in collaboration with the Commonwealth Foundation, the day-long event featured a powerful Women's Assembly held at Indus Hotel under the theme 'Claiming Safe Working Conditions and Climate Justice.'
The forum served as a vital platform for women agricultural workers and labour advocates to raise concerns about exploitative wages, exclusion from labour protections, and the worsening impacts of climate change on women's health and livelihoods.
Opening the assembly, Javed Hussain, Executive Director of SCF, called for the accelerated implementation of social protection programs for women in agriculture, particularly in light of their disproportionate exposure to both labor injustice and climate shocks. 'Climate change is not just an environmental issue it's a growing threat to the health and dignity of rural women workers,' he said. '
The government must act urgently to recognize and protect them.' Hussain also highlighted the lack of enforcement of the Sindh Women Agricultural Workers Act (2019), which mandates ensure minimum wage healthcare, maternity benefits, and social security, but remains slowly unimplemented in rural districts.
Moreover, Sajid Mahmood, Head of the Technology Transfer Department at the Central Cotton Research Institute, Multan, in a telephonic conversation with renowned cotton analyst Naseem Usman, stated that if Pakistan desires progress and adoption of modern technologies in the cotton sector, then it must ensure investment in research and development along with consistency in policy to adopt the Brazilian model.
He emphasized that the remarkable technological advancement and productivity growth achieved by Brazil's cotton industry over the past two decades is not coincidental. Rather, it is the result of a systematic, well-coordinated, and policy-driven effort. Brazil has transformed its cotton sector into a globally competitive export force through an integrated agricultural strategy, strong collaboration between research institutions and the private sector, and practical steps to align farmers with modern farming practices. In this context, an analysis of Pakistan's cotton scenario clearly shows that we are far behind this model — not only technologically but also institutionally.
Sajid Mahmood pointed out that it is essential to understand that mechanized farming does not merely mean using machines. It entails an integrated, scientific, and profitable link across all stages of the agricultural system — from land preparation, seed, fertilizers, pest and disease management, harvesting, and post-harvest handling. In Brazil, advanced practices such as precision farming, GPS-guided sowing, satellite-based crop monitoring, and especially cotton-picking machines are not just available but actively in use. In contrast, in Pakistan, most farmers still rely on traditional methods, and the institutions responsible for research and innovation suffer from severe financial constraints and policy neglect.
Copyright Business Recorder, 2025