9MFY23 cotton imports

Pakistan looks all set to record its lowest cotton import volume in three years, based on the 9MFY23 foreign trade report card released by PBS earlier this week. This comes as the country recorded its lowest cotton production in 40 years during the most recent crop season, when freak weather and river-flooding destroyed nearly half of the country’s acreage last monsoon.

If PBS numbers are anything to go by, cotton availability in the domestic market during the ongoing fiscal 2022-23 is lower by one-third, whereas cotton yarn and cotton cloth production has declined by 18 and 10 percent, respectively during the same period. Regular readers of this space would recall that Pakistani spinning segment’s annual cotton consumption is placed anywhere between 11 – 13 million bales (of 170kg), whereas the milling segment would consume approximately 9 million bales (of 170kg) during the ongoing fiscal.

By that measure, Pakistan’s cotton import demand was supposed to climb up to 6 million bales (of 170kg) during 2022-23. Instead, cotton imports are expected to clock in at just a little over 4.2 million bales, going by average monthly import figure during 9MFY23. Although the shortfall is widely attributed to the dollar liquidity crisis, there might be just a tad bit more to the story.

According to USDA’s monthly world cotton market report, global cotton trade is slated to drop to its lowest quantum in six years, signaling a significant slowdown in the world fiber demand. This slowdown seems to have initially been set off by decade high cotton prices, which climbed up to $3.25 per kg during H1-CY22. Since then, cotton prices in the international market have witnessed a consistent slowdown, averaging down to $2.1 per kg in Mar-23 from a peak of $3.61 per kg less than a year ago in May 2022.

World cotton prices may have very well tapered in the near term; however, are still far off from their pre-Covid territory. International market prices had averaged below $1.70 per kg in the months and years leading up to the 2020 pandemic. Little surprise then that as per USDA, larger importing nations such as Bangladesh and China have witnessed a sharper contraction in import during 2022-23 marketing year, with annualized imports declining by 10 and 7.5 percent, respectively on a year-on-year basis.

Pakistan may have witnessed its lowest cotton output in four decades; however, shortfall alone is not sufficient explanation. The price effect may not only be keeping local spinning industry on the sidelines, but as evidence from other importing nations suggest, may also signal a decline in overall world fabric trade. Don’t let pleas of vested interests fool you into thinking that textile export volume would have breached fresh levels if only local cotton output hadn’t been wreaked by natural disasters.