Cotton prices in Pakistan’s local market have hit a ten year high as local demand and supply show a shortfall of around 7 million bales. Increased prices in international markets turn imports expensive which can potentially hit the profitability of the textile industry; the single largest export earning sector of the country.
“The prices are at a ten year high now,” said Chairman Karachi Cotton Brokers Forum Naseem Usman in a phone interview from Karachi.
“The prices for cotton are at 11,500 per mound currently, mainly due to the supply and demand gap. Local market have seem similar trend in 2010 and 2011 when local prices reached 14,000 per mound levels. As the exports are expensive the prices may also surpass the ten year high record going forward,” he added.
Pakistan is facing a shortfall of around 9 million cotton bales against a demand of 14 million bales. This will have a negative impact on the growth of the country’s textile sector.
“Pakistan’s current cotton production is 5.5 million bales, while demand is 14 million bales,” said Chairman Pakistan Cotton Ginners Association (PCGA) Dr Jassu Mal.
A meeting chaired by Federal Minister for National Food Security and Research Syed Fakhar Imam in Islamabad, on Wednesday, discussed the ways and means to enhance cotton production in the country.
The meeting also discussed the revival of the Pakistan Central Cotton Committee.
Speaking on the occasion, Syed Fakhar Imam said that cotton is an important crop as 7% of the edible oil in Pakistan is produced by cotton.
During the meeting, it was suggested that the use of biotechnology and genetic engineering is necessary, while the importance of research in the revival of cotton was also emphasised.
Currently, the federal government is not involved with the cotton or yarn import in the country, although the private sector is allowed to import cotton and yard without import duty.
The first victim of cotton import is expected to be the textile sector. Reliance on cotton imports and the upward trend of prices in international markets are expected to limit the potential growth of Pakistan’s textile exports and profitability during the current year.
The total cost of imports could reach up to 6 billion dollars, cotton traders have said.
“Prices are touching ¢83 per pound in international markets now,” Mr Usman said. Further increase in prices in the international market will leave little room for the textile sector to fill the supply and demand gap through imports. Textile exports during the first half of the fiscal year 2021 increased by 7.8%, compared to 5% growth in total exports during same period the previous year.
According to PCGA, Pakistan was the fourth largest producer of cotton in the world; however cotton production in the country has now declined to its lowest. The cultivation area has witnessed over 33% decline during the last few years, and the cotton crop has come down to its lowest level in the last three decades—reaching 0.5 million bales from 1.5 million cotton bales.