Weekly Cotton Review: Prices dip further as spot rate falls by Rs500 per maund

Business Recorder

16-06-2025

KARACHI: The downward trend in cotton prices persists, with the spot rate declining by Rs 500 per maund. Several ginning factories in Sindh and Punjab have partially resumed operations, with approximately 8,000 to 10,000 bales of cotton lint reaching ginning factories so far. However, the government has not announced any incentives for ginning factories in the budget, instead imposing an 18% sales tax on yarn imports—a move that has left ginners deeply disappointed.
Ihsan-ul-Haq, Chairman of the Cotton Ginners Forum, stated that this decision is detrimental to the industry.
Similarly, the Pakistan Cotton Ginners Association (PCGA) has also rejected the budget, calling it 'poisonous' for farmers and the ginning industry. According to Dr. Jesumal, Chairman of PCGA, the government has failed to take concrete steps to address the challenges facing the cotton sector.
In Sindh, cotton is currently selling between Rs 16,000 to Rs. 16,500 per maund, while in Punjab, prices range from Rs 16,500 to Rs. 17,000 per maund. Phutti prices have been recorded between Rs. 7,800 to Rs. 8,800 per 40 kg.
The federal budget lacks a clear strategy to boost cotton production. Sohail Talat, Chairman of the South Punjab Pakistan Business Forum, emphasized that the government must take effective measures to increase cotton output. He stated that a cohesive agricultural policy and financial support for research are essential for the sector's growth.
Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood echoed these concerns, asserting that agricultural development is impossible without proper policy and research investments.
In the local cotton market, several ginning factories in the provinces of Sindh and Punjab have partially resumed operations after the extended holidays of Eid-ul-Adha last week, while more factories are preparing to start. The supply of cotton has also been gradually increasing.
In the budget, the Textile Sector and the Ginning Sector will see the elimination of the Export Facilitation Scheme (EFS) on the import of cotton and fabric, while ginners were hopeful that several taxes imposed on ginning would be abolished in the budget. However, the budget has only imposed an 18% sales tax on the import of yarn, although APTMA has appreciated these measures.
Overall, the ginners have been greatly disappointed, as several taxes imposed on them remain unchanged. This disappointment among ginners will also have a negative impact on cotton growers, who are equally disheartened.
The EFS facility is available for the import of cotton and fabric, which will have negative effects on local cotton because an 18% sales tax is imposed on local cotton. As a result, the cotton market will not be able to gain momentum, and this will impact cotton growers. If the price of cotton decreases, the price of cottonseed will also drop. Additionally, if the input costs for cotton growers remain high, there is a risk of reduced cotton cultivation.
This year, large groups of mills have already signed a significant number of import contracts for cotton, which will result in relatively lower purchases of local cotton. As a consequence, ginners and cotton farmers will see reduced demand for cottonseed and lint, and they will also not receive fair prices.
In the provinces of Sindh and Punjab, the price of cotton currently ranges between 16,000 to 17,000 rupees per maund, while Phutti (40 kg) is being traded at 7,800 to 8,800 rupees.
The Spot Rate Committee of the Karachi Cotton Association reduced the spot rate by 500 rupees per maund and closed the spot rate at 16,200 rupees per maund.
Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, said that international cotton prices remained bearish. New York cotton futures closed at 65.30 to 69.06 cents per pound. According to the USDA's weekly export and sales report, sales for the 2024-25 season reached 60,200 bales. Vietnam topped the list by purchasing 28,000 bales. India ranked second with purchases of 18,600 bales, while Pakistan came in third with 6,600 bales.
For the 2025-26 season, 36,100 bales were sold. Vietnam again led with 25,100 bales, followed by Turkey in second place with 7,500 bales, and Bangladesh in third with 2,200 bales.
Meanwhile, cotton ginning and oil mill industries across Pakistan are experiencing deep disappointment and concern following the federal budget's failure to eliminate the sales tax on cotton and its by-products and to withdraw the exemption on sales tax for imported cotton. This decision comes despite strong recommendations from two committees established by Prime Minister Shehbaz Sharif, raising fears of further factory closures, a significant decline in cotton cultivation, and a sharp drop in cotton prices. Reports indicate a staggering reduction of Rs 1,000 per maund in cotton prices after the budget.
Ginners argue that a 'flawed' Export Facilitation Scheme (EFS), introduced several years ago, allowed the duty-free import of cotton, cotton yarn, and grey fabric, while an 18% sales tax was imposed on domestic purchases of these items.
Ehsanul Haq, Chairman of the Cotton Ginners Forum, stated, 'This scheme led to the import of millions of cotton bales and cotton yarn, severely damaging the country's foreign exchange reserves.'
'Simultaneously, textile mills stopped purchasing cotton locally, causing a massive drop in the prices of cotton and phutti (seed cotton). As a result, Pakistan's total cotton production for 2024-25 plummeted to a historic low of only 5.5 million bales, with an additional 200,000 bales remaining unsold.'
The decline in cotton cultivation has also forced Pakistan to import billions of dollars' worth of edible oil, lamented Junaid Iqbal, another ginner from Punjab. He stated that the EFS has plunged the cotton ginning sector into its worst economic crisis, resulting in the closure of over 800 ginning units and hundreds of oil mills across the country.
Haq noted that the exclusion of these recommendations has led to a record drop of Rs. 1,000 per maund in cotton prices within just two days, bringing them down to Rs. 16,000–16,200 per maund, with fears of further declines.
Additionally, the Pakistan Cotton Ginners Association has rejected the budget, calling it 'deadly poison' for farmers and the ginning industry.
During a telephone conversation with Pakistan's renowned cotton analyst Naseem Usman, Sajid Mahmood, the head of the Transfer of Technology department at the Central Cotton Research Institute Multan, stated that the country's agricultural sector is currently going through a critical phase, where having a clear direction and strategy for sustainable development is absolutely essential.
He mentioned that the continuous rise in production costs is becoming a major challenge for farmers, as they neither receive fair prices for their crops nor are provided with easy access to markets. According to Sajid Mahmood, due to the lack of consistent investment in agricultural research and modern technology, most farmers are still forced to rely on traditional farming methods, which directly affects per-acre yield.
Sajid Mahmood said that cotton, which was once a strong pillar of Pakistan's economy, textile industry, and rural economy, is now facing a severe crisis. Coordinated efforts and a clear action plan are crucial for its revival. He added that the irrigation system has not kept pace with modern requirements, while the availability of quality seeds, fertilizers, and other agricultural inputs at reasonable prices remains a persistent issue for farmers.
He emphasized that the Pakistan Central Cotton Committee (PCCC) is the key institution for cotton research and development in the country. However, unfortunately, billions of rupees in cotton cess dues are still pending from the textile industry. He demanded that these dues be released immediately so that cotton-related research can be strengthened and the scope of advanced research can be expanded further.
Sajid Mahmood further stated that the 18% General Sales Tax (GST) on local cotton and its by-products is an unnecessary burden on farmers and the ginning industry, which should be immediately abolished or reduced. These measures would lead to a significant reduction in production costs and promote value addition at the local level.
In conclusion, he said that for the development of a crucial sector like agriculture, a comprehensive, long-term, and ground-reality-based policy is indispensable. If experienced agricultural experts and those familiar with ground realities are included in the policymaking process, not only can farmers' difficulties be reduced, but the national economy can also benefit more from this vital sector.
Copyright Business Recorder, 2025