India, Bangladesh, Vietnam, China accelerate imports as Pakistan predicts bumper crop
Pakistan is set to be self-sufficient in cotton in 2012 for the first time in ten years, as India predicts shortfalls. Pakistani cotton production increased to 15 million bales from last year’s 11.7 million.
The increase was largely due to All Pakistan Textile Mills Association’s (APTMA) advocacy for free market mechanisms during the 2011 price spike, which led to income increases of Rs 400 million for Pakistani cotton farmers. According to APTMA, the farmers were then able to invest those funds into producing higher crop yields. In 2011 Pakistan imported an estimated 900,000 bales.
APTMA is also predicting a bumper crop next year, with 3 million hectares sowed and expected yields of 16 million bales. Annualized cotton consumption in Pakistan is approximately 14.1 million bales, creating the possibility of an export bonanza, particularly if the normalization of trade relations with India continues. Pakistani cotton is generally of either medium or short staple variety.
India is predicting cotton deficits by the end of this year that will need to be made up for with imports. The shortfalls will be largely due to increased lean season demand and a fall in short-staple production. It comes at a bad time, as denim demand continues to rise.
The erosion of the rupee has made importing cotton expensive and exporting cotton lucrative, which increases the vulnerability of the Indian apparel industry and may lead to higher garment costs by the end of the year. Recently, the Indian government sparked market uncertainty by banning the export of cotton, then reversing the ban. The frequent changes in government policy have created uncertainty in the domestic textile industry and have caused price volatility.
Pakistan’s self-sufficiency comes in marked contrast to other regional manufacturing nations. Vietnam is facing raw materials shortages due to supply chain problems (link). Bangladesh imports over 3 million bales of cotton a year, and struggles with obtaining sufficient seed and other inputs for domestic cotton production. The country has also been experiencing contract payment problems which have impeded its ability to ramp up cotton imports, despite strong demand from new generation mills.
Global heavyweight China has also reported cotton imports near record highs for March, partly due to the replenishment of stocks depleted during the 2011 cotton price spike. China imported 3.2 million tons of cotton in the season just ended. It consumed 85% of India’s cotton exports early in the season, but the recent ban caused that number to drop precipitously, as China looked for other suppliers on the world market. Market prices for cotton tend to be lower than Chinese domestic prices, due to government price floors.