Falling Cotton Prices
In March, the authorities determined the minimum support value of cotton at Rs. 8,500 per 40kg, however, the established benchmark is seldom adhered to in essence in both Punjab and Sindh, and the regional administrations as anticipated are merely providing superficial commitments.
Falling Cotton Prices: Starting from mid-June, the market rates for cotton have experienced a decline exceeding 20 percent, dropping from Rs. 22,222 on the 13th of June to Rs. 17,683 by the 7th of July. The noteworthy reduction occurred while the Eid holidays were in progress, coinciding with the impact of the IMF agreement announcement on the currency exchange rate.
This event resulted in a sharp decrease in the prices of almost all agricultural goods that are brought into the country, such as edible oil, pulses, and cotton.
However, a brief look at the graph indicates that the decline in price has been occurring well in advance of that time. Therefore, is the decrease in the value of the dollar the sole cause or simply a pretext? If you converse with representatives from the All Pakistan Textile Mills Association (APTMA), they will inform you that they are still purchasing cotton at approximately Rs. 17,000, aligning with the support price declared by the government.
On the other hand, farmers are selling their produce at far less than the support price. The recent prices of seed cotton in different cities across the two provinces can be found below
On Wednesday, the Sindh authorities observed the lack of adherence to authorized support prices and instructed the local administrations to diligently enforce the government’s policy.
Upon summoning the Cotton Ginners’ representatives to his office, the Deputy Commissioner issued a resolute directive for conformity and cautioned about potential repercussions. Consequently, the cotton cultivators promptly instructed the ginners to abruptly halt all cotton acquisitions.
As per recent updates from interior Sindh, cotton processing factories in multiple locations are declining to offload cotton, which farmers argue could worsen within 48 hours if left unattended.
The cotton processors attribute the responsibility to the 17 percent sales tax imposed on cotton seed and the subsequent FBR notifications for the market downturn. They claim that the shutdown of oil mills and the overall decline in the market are the consequences.
However, if cotton seed prices have indeed recovered since then, it seems that their justifications are, at best, mere explanations or, at worst, an effort to manipulate prices by resorting to coercive tactics to secure purchases at lower prices.
He stated that they confirm that Cotton will not be traded at a support price determined by the government, particularly with the weakening of the dollar, which has given the traders an opportunity to conceal their activities. Furthermore, the rainy season and the consequent moisture levels have also contributed to the decrease in prices.
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Government entities like the Federal Board of Revenue (FBR) ought to examine and tackle unjust market practices that contribute to the decrease in prices. This might entail scrutinizing tax policies, offering encouragements, and penalizing individuals engaged in market manipulation.
Additionally, it is essential to empower farmers with awareness regarding market dynamics, price patterns, and the importance of collective bargaining. Workshops and training initiatives could be arranged to educate farmers about proficient negotiation tactics and marketing approaches, enabling them to attain improved prices for their agricultural yield.