Pakistan's Cotton Imports Will Soar In 2016

Market News

Pakistan's Cotton Imports Will Soar In 2016

Pakistan's cotton imports are expected to remain near record-high levels in the year to July 2017, as erratic weather forces farmers to trim area under cotton, industry officials said.

"Cotton area in Pakistan is down around 15%. Despite the government and industry's efforts, farmers in top-producing Punjab have reduced area," said Saleem Saleh, acting secretary general of All Pakistan Textile Mills Association (APTMA). The country's cotton output fell by a third to 9.7 million bales in 2015/16, forcing it to import a record 4 million bales in the year, up from 1.2 million a year ago, according to APTMA. Pakistan annually consumes around 15 million bales of cotton. While the country has set a production target of 14.1 million bales for the new season, industry officials say output will fall short and that rainfall over the next few weeks will be crucial in determining yields.

"Import requirement is rising as local consumption is rising, but production is stagnant. This year imports jumped due to crop failure. Next year also imports would remain around this year's level. Actual number depends on production," Saleh said.

Typically lower output in Pakistan implies an exporting opportunity for neighbouring India. In fact, the latter shipped out about 6.5 million bales this season, with Pakistan taking nearly 2 million. However, India's move to contract 20,000 bales from Pakistan for import this month indicates supply at the top producer is also running thin.

India imports cotton from Pakistan as domestic prices climb. India, the world's biggest cotton producer, has contracted to import 20,000 bales from Pakistan for shipment this month after Indian prices jumped because of limited supply.

"Around 20,000 bales have been imported from Pakistan. Landed cost of imported cotton is lower than local prices," Dhiren Sheth, president of the Cotton Association of India (CAI), informed. Indian cotton prices have risen by 28% since the start of 2015/16 season on October 1, 2015 to Rs 40,800 per 356 kg candy (77.4 cents per lb) as two years of drought took its toll on output. Pakistani supplies are available at about 70 cents per lb on a free-on-board basis, said one Mumbai-based dealer with a global trading firm.

"Supplies are dwindling in both countries. The sharp rally in Indian prices is making imports viable from Pakistan, but it has limited quantity for exports," the dealer said. India has so far imported about 1.2 million bales in 2015/16 and needs another 400,000 bales before the new crop starts arriving from the end of September, Sheth said.

Indian buying has been pushing up prices in Pakistan. The All Pakistan Textile Mills Association has urged the Pakistan government to restrict cotton exports to India in an attempt to provide raw material for domestic textiles production. Indian industry officials, including Sheth of the CAI, said that Pakistan should not restrict exports since it imported cotton when it was in need.