Last month, this column wrote about the lowered cotton production for 2015-16 (Read "Cotton outlook bleak, Indian yarn in," Published on October 14, 2015). Now, it seems the target has been lowered once again.
Last season, Pakistan enjoyed its highest cotton produce of all time - around 14.9 million bales. As such, the government of Pakistan fixed a highly optimistic target of around 15.5 million bales for 2015-2016. However, this target has been revised down thrice now, with the Cotton Crop Assessment Committee settling on 11.4 million bales as on its latest meeting earlier this month.
There are a myriad of factors that have marred Pakistan's cotton crop this year. Cotton analyst Naseem Usman told BR Research that a late spring, prolonged wheat crop, untimely rains, and floods in Punjab and Sindh significantly damaged the cotton crop this year. While Sindh is somewhat recovering, he added that Punjab has been unable to recoup the losses.
Muhammad Ali of the Karachi Cotton Association told BR Research that the international commodities slump played a huge role this season; most farmers were discouraged from growing cotton due to the low prices being observed. Due to the low prices, pesticides and fertilizers were also not applied properly and mismanagement contributed to damage in the form of Cotton Leaf Curl Virus and pests, he added.
What makes the situation worse is that despite being the fourth-largest producer of cotton (a position that might be challenged soon), Pakistan is a net importer of cotton, with annual imports of over 1.5 million bales. Naseem Usman said that the shortfall this season will now have to be made up for by importing even more, which will significantly burden the national exchequer.
Then theres the TCP which is sitting on the unsold cotton that it procured last year; TCP charges a 10 percent tax on cotton sale through auction, which is why all its tenders are scrapped and no one buys from it. The exact figure for cotton with the TCP is between 80,000-90,000 bales, as per various news sources. The body is currently seeking permission from the ECC for direct sale to the market, which is the need of the hour. A hike in cotton prices might be in the offing in the coming months. Given the shortfall in production, lets just say its a good thing that our textile mills are already running on half the capacity and demand is low. What luck!
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