The cotton crunch

As if things werent bad enough as it is, an enormous cotton shortage this year is adding to the miseries of Pakistans textile industry. The outgoing season has brought just over 10 million bales - a decline of more than 34 percent year-on-year. The loss of 5.1 million bales amounts to Rs200 billion, and thousands of farmers in the cotton belt have gone bankrupt, as per a statement made by PCGA two weeks ago.
The reasons for the decline in cotton production are manifold. For the most part, it was inevitable; firstly, abnormal and prolonged rains damaged the crop severely. Secondly, there was delayed sowing due to a prolonged wheat crop. Thirdly, the area under cotton sowing was lower by some 6 percent than the targeted area. Finally, the pink bollworm and whitefly did a lot more damage than usual because of increased susceptibility during rainy season, not to mention the crop still being at an early stage owing to sowing delays. Moreover, investment on the crop was lower because of the prevailing low cotton prices. Hence, farmers this season did not spend on pesticides or other seed varieties.
Domestic cotton usually accounts for over 90 percent of Pakistans consumption, but this season its around 70 percent, as per USDAs cotton report. This enormous shortage will have to be made up for by importing cotton.
Now were at another crossroads; there is a 3 percent import duty on cotton which the ginners would want to maintain but the spinners are lobbying against. In any case, the amount of cotton imports for 9MFY16 has already more than doubled over last year, to the tune of nearly six billion dollars. The USDA expects 2.9 million bales imported this year - the second highest level on record. It thus seems reasonable to want to ask for removal of duty in this time of crisis.
Right now, there are between 3.5 and 4 hundred thousand bales of cotton with the ginners, and high demand has brought the price up to Rs5700.
Ginners still have Rs2 billion that the government owes them, as per an industry source. But it isnt really refunds or protective duties that they need. What they need is better research and superior seed qualities.