Looking for solutions: Floods affect cotton prices, send industry spinning

Local market distressed over Punjab’s submersion in water.

FAISALABAD:

Severe floods in the country have caused a price hike in cotton by around 7% in a week’s time, while yarn prices have shot up 20% – depending on different varieties – as lands have completely submerged in water.

This recent trend in high cotton and yarn prices could ultimately render the textile industry redundant in the international market.

Since last week, the price of raw cotton has risen by 7%, peaking to a range of Rs5,300-5,750 per mound (40 kilogrammes). Resultantly, yarn prices have also increased.

Northern, central and southern Punjab has been flooded by massive rain showers, as the water levels can also cause floods to flow towards Sindh, potentially destroying the cotton belt of the area.

Crops worth billions of rupees have been destroyed due to flooding of the Chenab, Jhelum and Ravi rivers.

“If the water doesn’t recede, the current cotton crop may suffer quantity damage,” said Babar Ali, a cotton grower in southern Punjab.

“The remaining fields saved from submerging are vulnerable to pest attacks as well.”

Quoting an example of a cotton city in southern Punjab, which was destroying due to floods, Ali said that pest attacks and downpours can cause large-scale damages.

According to the spinners, raw cotton will be more expensive as day’s progress if the situation remains unsolved. Hence, whenever the price of the raw material (cotton) increases, there is a resultant increase in the processed products (yarn).

An agriculture department official said that the cotton crops have been worst hit by floods but the magnitude of the damage cannot be calculated at this point in time.

“The price of raw cotton has increased from Rs5,300 per maund to Rs5,750,” said Ashraf Ghandi, a cotton dealer and exporter, while talking to The Express Tribune.

“The yarn price fluctuates by two to three per cent every day. However, it has increased by almost 20% over the previous week.”

If the cotton becomes expensive every passing day, it will result into higher production costs of yarn and processing industries would render the country uncompetitive in the international textile market.

Higher cotton production was expected this year, but the recent floods in Punjab have forced analysts to revise their estimates, said Ghandi.

It is because of the damage to crops, Ghandi added, that he feared the cotton prices might reach the high level which can lead to the downfall of the textile industry.

The yarn merchants of the textile city of Pakistan said that a rise in cotton prices have created a crisis-like situation in the yarn market.

Prices can further increase in the coming days as the floods are heading towards Sindh, disturbing cotton fields in many areas. High moisture and sluggish water in the field is likely to hit the quality and quantity of cotton as well.

Published in The Express Tribune, September 14^th, 2014.

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