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It was March 2011. In less than nine months, global cotton prices had shot through a never-before, historic $5 per kg. At 24.9 million tons, global consumption was still marginally less than annual production. Yet prices had run amok. What had happened?

First, Pakistan’s kharif crops were hit by massive monsoon flooding in Jul-Sep 2010. This was a time when Pakistan was closing in on 5-year average annual production of 13 million bales. It did not take long before the shortfall in Pakistan’s crop prompted India into imposing a ban on export of cotton, sending international cotton prices into an upward spiral that took another 18 months before returning below psychological barrier of $2.25 per kg.

Fast forward to 2020, and the world could not look any more different. When the global lockdown began in April 2020, cotton prices crashed to 11-year lower bound of $1.40 per kg, raising fears of a severe supply glut at the beginning of the then upcoming marketing year, Aug-2020 to Jul-2021. Ending stocks to production ratio increased to over 80 percent, which stood at a little under 40 percent back in 2011, the year of floods.

Yet, what was slated to be a year of opportunity for Pakistan’s cotton importers (read spinners) may fast turn into a missed window. Although textile exporters insist that it will be long before major buyer destinations reopen and demand resurges, international cotton prices are already back to pre-lockdown levels of December 2019.

That means Pakistan’s textile sector needs to make some quick decisions. A double-digit month-on-month slowdown in textile exports – both in volume and value terms - between July and August lends credence to the theory that the volatility in export destinations markets shall continue as the northern hemisphere braces for a second wave of Covid cases followed by another round of lockdowns.

Yet, damage to domestic crop last season - amid conflicting reporting by governmental departments leading to several downward revisions of output from 12.5 million bales to eventual 7.5 million bales - has hurt confidence of value adding industry in reliability of local cotton estimates. While Pakistan was saved in nick of time from highest ever cotton import bill due to Covid-19, 2020-21 may prove to be drastically different.

Already, news has emerged that cotton crop over nearly 75 thousand hectares in Sindh province has come under heavy flooding during monsoon rains during August. Although it appears that Pakistan has been able to successfully skirt the locust threat that was anticipated to hit at July end, the menace is far from over. Recall that locust threat had also hit between October to February during last crop season.

Considering that Pakistan has set itself lowest cotton production target in at least three decades, and; that the country has routinely missed its output target by a median of 25 percent for most of last decade, Pakistan’s spinning industry may be looking at an import requirement of more than 4 million bales if domestic output is missed by a wide margin and global textile demand recovers at a faster rate than anticipated.

USDA Cotton for September 2020 outlook predicts that global cotton consumption shall rise by at least 10 percent during 2020-21, as garment hubs such as China and Vietnam come back online full throttle. So far, Pakistan’s spinning industry seems to have benefited from firm but stable international cotton prices due to continued Covid threat in Bangladesh – a major cotton importer.

However, if the world is spared a second Covid-19 before Christmas and new year’s season, textile demand may soon recover, sending international cotton prices (that are already at pre-lockdown levels) in an upward spiral.

Meanwhile, should Pakistan’s spinning industry enter forward contracts for cotton import at current prices or wait-and-see for prices to crash again with the second Covid wave? Betting against world health never looked more interesting.