A supply crunch in Pakistan, at a time when back-to-back droughts have taken a toll on output at top producer India, could boost global cotton prices from their current near 11-month highs. The two countries have already taken turns this year to buy from each other to fill shortages at home.
“Cotton area in Pakistan is down around 15 per cent. Despite the government and industry’s efforts, farmers in top-producing Punjab have reduced area,” said Saleem Saleh, acting secretary general of All Pakistan Textile Mills Association (APTMA).
Unpredictable weather, such as floods late last year as well as poor rainfall in recent months, and the resultant uncertainty about yields is putting many farmers off cotton, stymieing Pakistan’s efforts to boost local output.
“Farmers are finding other crops profitable,” said Shahzad Ali Khan, chairman of Pakistan Cotton Ginner’s Association.
The country’s cotton output fell by a third to 9.7 million bales in 2015/16, forcing it to import a record 4 million bales in the year, up from 1.2 million a year ago, according to APTMA. Pakistan annually consumes around 15 million.
Even for the season starting Aug. 1, weather has not been supportive and the crop in Punjab has already been hurt by poor rains in May and June, said Khan. Cotton sowing in Pakistan starts from April and harvesting begins in July.
While the country has set a production target of 14.1 million bales for the new season, industry officials say output will fall short and that rainfall over the next few weeks will be crucial in determining yields.
“Import requirement is rising as local consumption is rising, but production is stagnant. This year imports jumped due to crop failure. Next year also imports would remain around this year’s level. Actual number depends on production,” Saleh said.
Typically lower output in Pakistan implies an exporting opportunity for India. In fact, the latter shipped out about 6.5 million bales this season, with Pakistan taking nearly 2 million.
However, India’s move to contract 20,000 bales from Pakistan for import this month indicates supply at the top producer is also running thin.
