US likely to replace India as major exporter of cotton to Pakistan

Pakistan in the current fiscal year likely to replace India as the major exporter of cotton by shifting to United States for its cotton imports with after the commodity’s prices of the world’s second biggest producer increased, an industry official said. The US exports are forecast to jump one million bales to 11.5 million bales in 2016/17 as the report expects higher production in the US due to better crop.

Asif Inam, vice chairman at All Pakistan Textile Mills Association said that the country imported 2.5 million bales from India so far this year out of the total imports of three million bales to meet the shortfall. But, now the US is likely to emerge as the leading cotton supplier to Pakistan as its prices are competitive compared to Indian one.

The Indian cotton prices increased 35 percent within the last 15 days due to low sowing reports. The price is eight to ten percent higher as compared to the international market. An official at the Pakistan Agriculture Research said that the local mills haven’t booked any more cotton from India as they have shifted to the US cotton.

Industry officials expect cotton production between 11.2 and 11.8 million bales for the current season subject to improvement in yield and no major pest attacks. The cotton harvest reached only 9.786 million bales during 2015/16 season ended in mid April against the previous year’s 14.863 million bales. The local consumption for the last year stood at over 14 million bales.

The United States Department of Agriculture (USDA) estimated the crop inventory at 2.5 million bales, which will be adequate for the next two and half months.

According to an analyst, local mills will not cancel Indian orders, but there is a possibility that sellers in the neighbouring country might cancel orders by paying the market difference. The US cotton is also affected by the current wave of price flair.

But, still Pakistan ranked as the fourth largest export destination of the US fibre, according to the data on the US export sales for the week ended July 7. Local cotton prices surged at the seasonal high of Rs7,125/maund on Wednesday. The Karachi Cotton Association surged the spot rate to Rs6,650/maund.

The spot rate at the Karachi Cotton Exchange sharply accelerated Rs1,000/maund since the start of the previous week. The rally puts mills on panic as beginning stocks held by ginneries are on the decline due to tight supplies, analyst Naseem Usman at KCA said. The state-owned Trading Corporation of Pakistan has zero stocks.