Pakistan’s cotton production to remain low in FY22

June 9, 2021 (MLN): Pakistan’s cotton production is expected to reach 5.3 million bales during the upcoming FY2021-22 from 4.5m* bales in the FY2020-21 despite balanced risks to the textile crop, says Fitch Solutions in its commodity outlook.

Last week, cotton prices hit 11-year high at Rs14,000 per bale amid fears of poor output in the upcoming season as initial estimates suggest area under cotton production fell 20% during the sowing season.

Preliminary accounts indicate that area under cotton production has declined by more than 20% in the major sowing areas of the country especially Sindh and Punjab, says Pakistan Cotton Ginners’ Association Chairman Dr. Jassu Mal. He said that growers will be unable to meet the 10.5m-bale production target set for FY22 as the area under cultivation in Punjab dropped to 3.2m acres and to 1.2m acres in Sindh.

The country’s cotton crop witnessed one of its worst seasons during FY21 as output fell to a three-decade low at 5.6m bales much below the official target of 10.6m bales hurting the country’s textile production and raising input costs as millers imported cotton to meet local demand.

Cotton consumers, in order to meet demand, have so far in the ongoing FY21 imported cotton worth $1.2 billion, and the bill is expected to grow further in the FY22 as global demand returns in the post-vaccine days and prices are already at multi-year highs.

Meanwhile, sharing the global cotton statistics, Fitch Solutions said that “bad weather in the US and low prices at the time of plantings will lead to a 4.9% decline in global cotton production in 2020/21.”

While sharing the future outlook, the research arm of the New-York based rating agency said that “we made significant downward revisions to our country production forecasts for 2020/21 last November 2020 and March 2021, and are maintaining our outlook in this quarterly update. However, the outlook for the 2021/22 season has somewhat deteriorated in several markets recently, and we now expect global production to grow by 4.7% (5.3% previously). We revised down slightly our production forecasts for China and India.”

On the other hand, Fitch pointed out that cotton consumption declined by a sharp 13.4% in 2020 due to the Covid-led economic recession and lockdowns, which greatly disrupted retail activities. However, it expects consumption to rebound in 2021, by 12.7% y-o-y while absolute consumption to fully recover by 2022.

“The strong ongoing economic recovery in 2021 means that the textile industry will replenish their stocks this year, boding well for cotton demand. The pick-up in consumption will carry on but slow down into 2022 (+5.0%), when we see it reaching pre-pandemic levels in absolute terms,” it said.

Commenting on prices, the report said that “we …. expect prices to average at an elevated USc87.0/lb in 2021, compared with the year-to-date average of USc85.2/lb. This forecast suggests that prices would average at their highest level since 2011.”

“We see prices remaining elevated in the coming quarters as supply is tight amid the robust Covid-19 economic recovery and a strong pick-up in demand in 2021. We see prices trading in the USc80-100/lb range in the coming months. We see strong resistance at the USc100/lb level, last reached in February 2021,” it added.

*It is pertinent to mention here that Pakistan’s official estimates show cotton production in FY21 reached 5.645m bales.

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Posted on: 2021-06-09T10:39:00+05:00

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