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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

02 December 2012

USDA GAIN: Pakistan Cotton and Products  - November 2012USDA GAIN: Pakistan Cotton and Products - November 2012

USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Report Highlights:

Pakistan’s MY 2012/13(August-September) cotton production is revised downward to 9.4 million bales (480 lbs), 15 percent lower from the previous estimate of 11 million bales and six percent lower than the 2011/12 crop. Consequently, imports are forecasted to increase by 120 percent to 2.9 million bales and exports to decrease by 20 percent to 800,000 bales. Ending stocks are now estimated at 3 million bales. MY 2011/12 cotton consumption is forecast at 11.5 million bales, as Pakistan’s textile sector is anticipating enhanced trade after the European Union (EU) approved concessions effective January 2013.

Executive Summary:

Post’s forecast of MY 2012/13 cotton production is reduced by 1.6 million bales to 9.4 million bales, a 15 percent decrease from the previous estimate of 11 million bales and six percent lower than last year’s crop estimate of 10 million bales. The decrease in production is due to a six percent reduction in yields from 726 kg/ha to 682 kg/ha from the previous estimate, and a nine percent decrease in cultivated area from MY 2011/12 to 3 million hectares.

The decrease in production is a result of a combination of adverse factors principally late water availability, shortages of electricity, weather, and disease. Tight water supplies were a consequence of reduced water flow due to slow glacier melt, which was exacerbated as severe power shortages limited the ability of electric pumps to draw sufficient well water. The issue was further compounded as high temperatures prevailed during the month of June 2012 – the peak cotton sowing/germination season– reducing the seeds’ viability, and stressing the plants to the point where they were more-susceptiblethan- usual to attacks of Cotton Leaf Curl Virus (CLCV) which manifested itself in greater numbers than last year. Finally, torrential rains and floods during September affected the cotton growing areas of Punjab, damaging close to 80,000 hectares of standing cotton. FAS Islamabad estimates that approximately 1.0 million bales suffered considerable quality damage in the affected areas. There are growing concerns that the low quality cotton will be mixed with the rest of the crop, therefore reducing the overall quality of this year’s cotton supply.

In MY 2012/13 imports are revised upwards from 1.3 to 2.9 million bales to make-up for the shortfall in production, meanwhile exports have been revised downward by 20 percent to 800,000 bales due to tighter exportable supplies.

In MY 2012/13, despite a significant reduction in production and a prevailing energy crisis, Pakistan’s textile consumption is estimated at 11.5 million bales. Pakistan’s textile sector is anticipating increased trade after the EU Parliament approved concessions on customs duties for 75 items, mostly textile related. The concessions were granted to allow Pakistan’s economy recover from the devastating 2010 floods, and will be effective January 2013 for a period of one year. The EU is Pakistan's largest trading partner, receiving almost 30 percent of its textile exports - worth 3 billion Euros ($3.9 billion) – which accounts for more than 70 percent of its total exports to the EU. According to trade sources, the concessions would increase textile exports by $150 to $200 million during the aforementioned period. Based on this development, Post expects a 10 - 15 percent increase of U.S. Pima and upland cotton exports in MY 2012/13. According to the All Pakistan Textile Mills Association (APTMA), Pakistani millers prefer U.S. cotton because it is cleaner and meets the quality characteristics for Pakistani cloth and textile products. Millers will pay up to $0.03/lb more for U.S. cotton vs. Indian cotton due to quality. Current low prices for U.S. cotton will mean increased purchases according to APTMA, how much will depend largely on actual sales of textile products to the EU.

Trade sources have also stated that although the EU package carries some immediate financial benefits, the big picture could be a turning point for a long-term preferential market access agreement. EU officials currently believe that Pakistan can use this temporary concession as a bridge to receive Generalized System of Preferences (GSP) Plus status in 2014. Cotton trade stakeholders, especially APTMA, have initiated a preemptive move by hiring trade and legal experts to look into the requirements and provide the appropriate guidance to the Pakistani government in order to capitalize on this opportunity.

MY 2012/2013, Pakistan’s stocks will remain unchanged at 3 million bales, although the stock to use ratio will decline from 29 percent in MY 2011/2012 to 24 percent in MY 2012/13 due to greater consumption.

Production, Supply and Demand Data Statistics
Commodity, Cotton

Units of Measure: ‘000s hectares; ‘000s 480 lb. bales; yield is kg./ha

December 2012

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