The cotton crash
The pile-on of bad economic news continues, with new data showing that cotton production has crashed by about 34 per cent this year. Total output was just 4.9 million bales — the lowest in over 40 years — and leaves the country requiring up to 10 million bales to meet expected domestic demand. However, because of the economic spiral, cotton mill consumption was also at a 20-year low of just 8.8 million bales. While lower mill consumption was blamed on the unpopular import financing restrictions imposed over the past year, domestic cotton production was mostly impacted by last year’s floods and heavy monsoon rains.
The country’s cotton productivity has fallen to the lowest level in the region, and demand from the textile industry is going to cause an inevitable foreign exchange crunch if we hope to keep the textile industry alive. The government will have to make some sort of carve-out for export-oriented industries, especially the textile industry, because even though it is difficult to pay for raw material imports right now, failure to support them will lead to a further decrease in exports and even more pressure on the economy.
While experts have long been touting climate adaptation policies to increase yields, or at least get closer to the all-time record of over 14 million bales in 2005, these solutions are all costly and will take years to generate returns on investment. As things stand, a stopgap import-based approach may be the only way to stabilise the textile sector.
However, there is also a need to rationalise cotton prices. Growers have long been complaining that the textile industry is unwilling to pay them the same prices they are willing to pay for equivalent grades of imported cotton. This has been a factor in the reduction in area under cultivation for cotton and the tendency for some growers to focus on exporting their crop, despite the ostensibly high local demand. It also has a noticeable knock-on impact on mill owners and manufacturers.
Published in The Express Tribune, April 19th, 2023.
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