Pakistan’s Production Is Gradually Declining, And Cotton Exports May Far Exceed Expectations

Since November, the weather conditions in various cotton areas of Pakistan have been good, and most cotton fields have been harvested. The total cotton production for 2023/24 has also been largely determined. Although the recent progress of seed cotton listing has significantly slowed down compared to the previous period, the number of listings still exceeds last year’s total by more than 50%. Private institutions have stable expectations for the total production of new cotton at 1.28-13.2 million tons (the gap between the upper and lower levels has significantly narrowed); According to the latest USDA report, the total cotton production in Pakistan for the year 2023/24 was approximately 1.415 million tons, with imports and exports of 914000 tons and 17000 tons respectively.

Several cotton companies in Punjab, Sindh and other provinces have stated that based on seed cotton purchases, processing progress, and feedback from farmers, it is almost certain that Pakistan’s cotton production will exceed 1.3 million tons in 2023/24. However, there is little hope of exceeding 1.4 million tons, as floods in Lahore and other areas from July to August, as well as droughts and insect infestations in some cotton areas, will still have a certain impact on cotton yield.

The USDA November report predicts that Pakistan’s cotton exports for the 23/24 fiscal year will only be 17000 tons. Some trading companies and Pakistani cotton exporters do not agree, and it is estimated that the actual annual export volume will exceed 30000 or even 50000 tons. The USDA report is somewhat conservative. The reasons can be summarized as follows:

One is that Pakistan’s cotton exports to China, Bangladesh, Vietnam, and other countries continued to accelerate in 2023/24. From the survey, it can be seen that since October, the arrival volume of Pakistani cotton from major ports such as Qingdao and Zhangjiagang in China has been continuously increasing in 2023/24. The resources are mainly M 1-1/16 (strong 28GPT) and M1-3/32 (strong 28GPT). Due to their price advantage, coupled with the continuous appreciation of the RMB against the US dollar, textile enterprises dominated by medium and low count cotton yarn and OE yarn have gradually increased their attention to Pakistani cotton.

The second issue is that Pakistan’s foreign exchange reserves are constantly in crisis, and it is necessary to expand the export of cotton, cotton yarn and other products to earn foreign exchange and avoid national bankruptcy. According to the National Bank of Pakistan (PBOC) disclosure on November 16th, as of November 10th, the PBOC’s foreign exchange reserves decreased by $114.8 million to $7.3967 billion due to repayment of external debt. The net foreign exchange reserves held by Commercial Bank of Pakistan are 5.1388 billion US dollars. On November 15th, the IMF disclosed that it had conducted its first review of Pakistan’s $3 billion loan plan and reached a staff level agreement.

Thirdly, Pakistan’s cotton mills have encountered significant resistance in production and sales, with more production cuts and shutdowns. The outlook for cotton consumption in 2023/24 is not optimistic, and processing enterprises and traders hope to expand cotton exports and alleviate supply pressure. Due to a significant shortage of new orders, significant profit compression from yarn mills, and tight liquidity, Pakistani cotton textile enterprises have reduced production and had a high shutdown rate. According to recent statistics released by the All Pakistan Textile Mills Association (APTMA), textile exports in September 2023 decreased by 12% year-on-year (to 1.35 billion US dollars). In the first quarter of this fiscal year (July to September), textile and clothing exports decreased from 4.58 billion US dollars in the same period last year to 4.12 billion US dollars, a year-on-year decrease of 9.95%.

Post time: Dec-02-2023