According to the world bank, cotton prices are now at the highest level in the last nine years. The consumption of cotton is already on the rise since the start of the COVID-19 pandemic. However, its production has dropped significantly, such as a 25% reduction in cotton cultivation land in Brazil and the USA. The difference between demand and supply is creating an upsurge in the global market.
The global cotton prices were $2.00/kg, $2.08/kg, and $2.15/kg for May, June, and July 2021. The trend clearly shows a continuous increase in cotton prices. At the start of 2021, the factories are open, and the demand for cotton has increased. The trend is no different in Pakistan. The Karachi Cotton Association quoted Rs13,580 per maund as the spot rate for the white lint, while the seed cotton rates prevailed between Rs5,200 and Rs6,200 per maund on August 11, 2021.
Naseem Usman, the Forum chairperson of Karachi Cotton Brokers, said that these were the highest rates since 2010-11 when the prices had crossed the Rs14,000 per maund mark. Production loss due to declining cotton acreage and yield, an unexpected shortage in the local market because of delays in import delivery, rising freight charges, negative crop outlook reports from neighboring countries, mounting dollar-rupee disparity are considered significant factors behind the bullish trend in the local cotton market.
Recently the US government has put pressure on the purchase of cotton from the Xinjiang district China. At the same time, this may benefit competing for yarn and garment-producing regions such as Vietnam, Bangladesh, Turkey, and Pakistan. Pakistan should cash this opportunity, and the Government should make proper arrangements on a priority basis. Even as world demand touches its highest level, tradable cotton is short in supply, even with no shortage of willing buyers at ever-higher prices.
