Cotton support price: Rhyme or reason?


Cotton business stakeholders headed in to a meeting with government officials on Wednesday to lobby for the imposition of a support price for cotton through the Trading Corporation of Pakistan.

The businessmen, predominantly ginners, argue that falling rates of the commodity in local and international markets are threatening the livelihoods of growers in the country.

Media reports published by Business Recorder cite that ginners have demanded that TCP procure up to ten million bales of cotton and that the rate should be fixed at Rs6300 per maund, significantly above the current market price.

Although the plight of farmers appears to be a moving argument in this regard, it should be noted that majority of this seasons cotton crop has already arrived in markets.

APTMA officials estimate that out of an expected crop of 12.5 million bales; more than 11 million bales have already arrived in domestic markets.

This means that an overwhelming majority of growers have already sold off their crops and any changes in the market price will not bring much relief to them.

Besides independent experts have amply highlighted that any support price for the benefit of cotton growers should be applied to phutti; preferably before the commencement of sowing season.

They argue that a support price for the product of the ginning sector does not guarantee any significant benefits to growers.

For their part, both APTMA and KCA have vociferously opposed any government interference in the cotton market; instead supporting price discovery through the forces of demand and supply.

The government too, can ill afford doling out Rs25 billion or more, that would be needed to finance any commodity operations by TCP to this end.

Still market players appear expectant that the meeting will result in some steps to placate the ginners.

Cotton prices that had remained subdued in recent weeks have rallied to Rs5500 per maund since news of the moot spread.

Cotton brokers say that any further sharp increase in the domestic cotton prices will be a signal that government authorities have given in to the demands of ginners.