The cotton market is grappling with significant challenges as production in Pakistan continues to decline sharply. Recent forecasts indicate that cotton production for the current season may only reach 6-7 million bales, which is drastically below the textile sector's demand of 16 million bales. This alarming shortfall has raised concerns among textile industrialists, including Khawaja Muhammad Usman, who emphasizes the urgent need for increased cotton supply to support the economy and sustain the textile industry.
The December cotton contract has recently fallen below the 70-cent level, settling at 67.99 cents. Textile mills have been aggressive with price fixations, believing that demand will be there at lower prices. Speculative short positions could lead to a temporary short covering rally. If the December contract fails to find support at the current level, the next significant price support is at the 62-63 cent level. Despite poor weekly export sales and cancellations from major customers like China and Vietnam, a limited number of mills are showing interest in increasing yarn inventory in hopes of potential sales. However, the world consumer, particularly in the western world, is no longer actively purchasing cotton apparel.
Dr. Yusuf Zafar from the Pakistan Central Cotton Committee attributes the decline in production to several factors, including reduced cultivation area, extreme heatwaves, and pest infestations, particularly by the pink bollworm, which have devastated cotton fields. Production has plummeted from over 14 million bales to a low of 4.5 million bales in 2022. Rising costs of inputs such as fertilizers, pesticides, electricity, and quality seeds have further exacerbated the situation, making cotton cultivation less profitable.
The decline in cotton production poses serious implications for Pakistan's economy, including reduced income and increased poverty levels among cotton farmers, as well as negative effects on the textile industry. In response, the government is taking steps to improve cotton production and protect farmers' interests. New technologies, such as CRISPR/Cas9, are being explored to develop resilient cotton varieties. Addressing the decline requires improved pest management practices, investment in agricultural research and development, financial support to farmers, and favorable policies and support programs. Sustainable cotton production is vital for the economy and the livelihoods of millions of Pakistanis.
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