Cotton imports cut benefits of record textile exports

KARACHI: Benefits of higher textile exports have been eaten up by poor cotton growth as the textile sector had to import lint and other related accessories (excluding textile machinery) up to $1.5 billion in the first five months of the current fiscal year.

Textile exports increased by 7.8 per cent in the first six months of the current fiscal year to reach at $7.442bn. In dollar terms, the increase was of $538 million.

However, the textile sector had to spend $321m to import raw cotton in the first five months of the same fiscal year.

Cotton and textile experts predict that the import of cotton could cross $1bn by the end of the third quarter of FY21.

Imports of textile group included raw cotton, synthetic fibre, synthetic and artificial silk yarn, worn clothing and other textile items costing a total $1.545bn. The import of textile group has increased by 50pc during the five months of this fiscal.

In its recently issued first quarterly report for FY21, the State Bank said prospects of higher cotton production were slim from the outset, given that the area dedicated to the crop — recorded at 2.2 million hectares — is the lowest since FY82. Specifically, the area under cotton in FY82 was 2,214.1 thousand hectares, marginally lower than the 2,217.9 thousand hectares registered in FY21.

The area under cotton has witnessed a spectacular decline in the past decade: it averaged 2.7m hectares during FY12 to FY21, compared to nearly 3m hectares between FY92 to FY11.

“The crop has lost its competitiveness relative to other major crops, in particular sugarcane,” said a State Bank report.

Being a tradable commodity, there is higher competition in the cotton market which effectively puts a ceiling on its price growth. Meanwhile, sugarcane is generally non-tradable and the market structure does not allow it to be traded across borders. Moreover, the minimum support price for sugarcane also gives comfort to growers.

“The pricing dynamics have tended to give sugarcane an edge over cotton, which has manifested in the switching of area away from the cotton in favor of sugarcane,” the report said.

In the second half of 2020, heavy rains badly damaged cotton crop. The SBP said that as a result, the provisional cotton yield was estimated to be 47.3pc short of the FY21 target in Sindh, and 9.4pc shy of the annual target for Punjab.

Cotton and textile industry reported that seed germination will be a major problem to maintain plant population as field tests show the range of 40-60pc germination against the normal requirement of more than 80pc. Under the current situation, farmers must use double the seed to maintain plant population.

Cotton production fell for the third consecutive year as area under production declined while yields failed to reach targeted levels.

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