KARACHI: Demand to resume hedge trading in cotton is growing on the belief that it would ensure price stability and safeguard the interest of stakeholders in the cotton economy.
The Karachi Cotton Association had been managing hedge trading in cotton before it was suspended in 1976 in the wake of the nationalisation of export trade and ginning factories.
Different governments have resumed hedge trading on different occasions, but only on paper.
Chairman of Karachi Cotton Brokers’ Forum Naseem Usman told Dawn that hedging trading would ensure price stability as well as delivery of contracted cotton deals.
He said that allowing Pakistan Mercantile Exchange Ltd (PMEX) to introduce futures trading in cotton did not serve the purpose.
Contesting the claims that the PMEX futures will provide hedging facility for all those who are engaged in the cotton value chain he said the platform itself admits in its paper that trading is not based on the local cotton. Mr Usman found it to be an apparent anomaly.
The stakeholders have also expressed concern over falling cotton production and the government’s failure to come up with a policy in this regard.
The Federal Cotton Committee has fixed cotton production target at 14.04 million bales for 2017-18.
However, Pakistan Cotton Ginners Association Chairman Dr Jassumal said that fixing high production estimates would not help boost cotton production.
He asked the government to announce support price for growers who have been shifting to other crops such as sugar cane and maize for secured returns.
Former chairman of All Pakistan Textile Mills Association (Aptma) Yasin Siddiq said that there had been a long-outstanding demand of the textile industry to re-launch hedge trading in cotton. In fact, the federal government in 2005 accorded approval in this regard.
He said that former chairman of Securities and Exchange Commission of Pakistan Razi Ur Rehman in his meeting with Aptma members on Feb 28, 2008, in Lahore assured the association that hedge trading in cotton would be resumed in a couple of days. However, all such commitments and assurances have yet to be fulfilled, he said.
Published in Dawn, April 16th, 2017