FY20 trade figures are out, and the USDA stands firm that Pakistan shall import 4.6 million bales* (784 Th tons) of cotton in the 2019-20 season. PBS provisional numbers are a far cry compared to USDA’s sizable estimate; at just 3.15 million bales (536 Th tons), hardly the highest in two years. Is something amiss?

Granted, that USDA estimate is based on marketing year 2019-20 that follows a July to August calendar, so one-month imports are yet to go. But increasingly, it looks as if Pakistan’s largest ever cotton import predictions have turned into USS Enterprise and the Task Force 74 that never came.

Barring a July-miracle, what is clear that the losers in this game of chess have been the importers, whose average import cost has exceeded Cotlook A index prices over the last 12 months. Pakistan’s average import cost during FY20 has come out at $1.64 per kg, against 12-month average Cot A index of $1.58.

Recall that international cotton prices have been trending downwards for the better part of past two years, apart from brief interlude between Sep-2019 to Jan-2020. The wise men of the spinning sector were credited to have made smart bets for entering long contracts way back in Q3 of 2019, which reflected itself in cheaper import price once cotton imports resumed beginning January. (See “Cotton imports: Black Friday prorogued” by BR Research, published on February 14, 2020).

Since then, importers’ position has witnessed a series of bad luck. Between Jan and Apr, international cotton prices dropped to an 11-year low as Covid-19 sent global textile demand on a downward spiral. Textile players were left with a ‘flame bag of forward bookings on fire’, as they were forced to meet import commitments of 1.4 million bales between March to May at a considerably higher 14 percent higher price than prevailing Cotlook A index rate. (See “Cotton importers: at a loss? by BR Research, published on June 18, 2020).

Now that prices seem to have been renegotiated for the contracts entered since lockdown, month on months imports barely inched up in June-2020, suggesting that import season may be drying up. Fresh crop from Sindh has also breathe new life into domestic cotton prices, which have marched forward by five percent since beginning July, after living three months in a bottomless pit between April-June (zero trades of domestic cotton took place during the period as per PCGA). Moreover, USDA believes that domestic crop may perform marginally better than last year, at 8.3 million bales, indicating adequate supply at a time when global demand is diminished.

Minus a locust calamity, cotton’s outlook for the upcoming season does not look half bad. Restrained textile demand means prices may remain firm at current low levels. As supply position may remain balanced despite a shortfall in production compared to ordinary times. (See “Cotton sowing: worst year yet?” by BR Research, published on April 01, 2020).

That means cotton may cede precious ground in policymaking circles, gained last year after Pakistan had its worst ever crop. Good for spinners who might succeed in averaging out their buying. But for farmers? Only time can tell.

*bales of 170kg