Fourfold rise in cotton imports likely

Lower farmer income, delayed planting lead to decrease in local harvest

KARACHI:

Pakistan is projected to increase imports of cotton by almost four times to $1.9 billion in the current fiscal year 2024-25 as poor planning and production at local fields is set to weigh on the country's foreign exchange reserves.

Arif Habib Limited (AHL) said in a short commentary this week, "For FY25, local production is anticipated to reach six million bales, creating a demand for 5.4 million bales via imports. The cotton import bill is expected to reach $1.9 billion, 3.9 times higher than last year's imports of 1.2 million bales (205,000 tons) worth $448 million."

According to the Pakistan Cotton Ginners' Association, cotton harvest contracted 37% to just 4.29 million bales in the first four months (Jul-Oct) of the current financial year compared to 6.79 million bales in the same period of last year.

AHL pointed out that the decrease in cotton arrivals (at ginning factories) had been attributed to poor farmer economics and delayed planting of the crop.

Traditionally, the demand for cotton from Pakistan's textile companies to produce yarn and subsequently manufacture finished products including readymade garments and apparels for exports has remained in the range of 15 to 16 million bales.

However, high inflation across the world has significantly reduced the export demand for finished textile articles, leading to a decrease in local cotton consumption to around 12 million bales.

In the previous season, wheat prices fell markedly because of abrupt changes in Punjab's policy as the province did not procure the staple crop. The development badly hit the income of farmers, which resulted in limited resources with small growers for the purchase of seeds, fertilisers and insecticides for cotton sowing in the current season.

Karachi Cotton Association's (KCA) former chairman Naseem Usman, in a statement, said on Saturday that the import of cotton and yarn was on the rise amid a drop in quality cotton production and its prices in Pakistan.

Moreover, textile mills are delaying payments to farmers, impacting their capability to plant crops in the outgoing season.

Cotton prices have dipped Rs1,000-1,500 over the past one week, reaching Rs16,700-18,200 per 40 kg – depending on crop quality, compared to prices prevailing a week earlier.

Usman, who is also the chairman of Karachi Cotton Brokers Forum, pointed out that in stark contrast to the local market, cotton prices had increased in the international market. Cotton futures were sold in the range of 69.50 to 70 cents per pound in the New York market.

Citing the US Department of Agriculture's weekly report, he said Pakistan was the largest buyer of cotton in the global market, purchasing 72,200 bales out of the total of 229,000 bales sold to world buyers in FY25.

Vietnam emerged as the second-largest cotton buyer with purchases of 71,800 bales. China came at the third place with buying of 37,500 bales.

Usman was of the view that the Multan-based Central Cotton Research Institute had rightly demanded the constitution of an apex committee to take care of cotton production and increase its yield nationwide. The committee should be tasked with policymaking to multiply cotton output, transfer the right technology to farmers and enable them to produce exportable surplus in the medium to long run.