How the Floods Effected the Cotton Crop
Pakistan is one of the countries that has been deeply affected by climate change such as devastating floods, which have damaged thousands of acres of land and displaced millions of people whilst taking many lives.
These widespread floods have killed more than a thousand people in Pakistan and have destroyed its cotton crops which have added to the country’s plummeting state by reducing revenues from exports through the textile and cotton industry in Pakistan.
Pakistan being the 5th largest producer of cotton means that global repercussions of the flooding in the country will be experienced and will in return strangulate the cotton supply in the coming weeks as well as increase the price of cotton.
According to estimates, the monetary losses to the agriculture sector have surpassed Rs 500 billion in Sindh alone, posing a serious threat to Pakistan’s food security and livelihoods.
While it is not easy to estimate the exact extent of damage to the cotton crops due to the flooding and rains this year, it is believed that 45% of cotton has been flooded which has sparked a serious concern amongst the local textile and cotton industry, global clothing brands, and retailers.
Cotton had been sown in over 16% more area in Pakistan this year as compared to the last season, however, the floods have impacted 6% of the cotton crop which has reduced the expectation of more cotton production this year. This can lead to a drastic reduction in cotton production in Pakistan and further increase the price of cotton and textile raw materials in the local and international markets.
The Pakistani government at the beginning of the season estimated the cotton crop to be 11 million bales of 170 kg but with the current damage, production is likely to go down. And if it drops the textile industry in Pakistan will need to import more cotton. The global market is already facing the heat of lower supply due to lower crops in the US, Brazil, China, and other countries this year.
Flooding impact on Pakistan textile exports and imports
Pakistan has cemented its place as the fifth-largest producer of cotton in the world. Pakistan's cotton industry has the third-largest cotton spinning capacity in Asia right behind China and India, with thousands of ginning and spinning units producing textile products from cotton. Currently, Pakistan has become the third-largest producer of Better Cotton globally.
Pakistan is the 5th largest cotton producer globally and most of that cotton is exported to the main garment-producing hubs such as Bangladesh and China, which combined make up about 50% of the total market. Pakistan's textile exports contribute greatly to the country’s economy especially since it exports cotton yarn to China and Bangladesh and cotton fabrics to the EU and Bangladesh. In 2021, the US made up 5% of Pakistan’s raw cotton exports and 3.8% of cotton fabric exports.
Recently, Pakistan emerged as a major player that supplied finished garments to the US and has even managed to overtake Honduras and Mexico to become the 7th biggest finished garment supplier to the US.
The textile and cotton industry in Pakistan is an attractive option for buyers around the world since it can provide the fabrics needed by the garment industry at competitive prices. Since the textile and cotton industry is local, there are minimal shipping costs even with a global logistics crisis, there have not been added lead times.
The textile and cotton industry in Pakistan often imports just over four million bales to meet the requirements of the industry but with the current devastation and shortage, it is entirely possible that Pakistan will end up having to import double that amount. The spot rates of cotton have also been on a continuous rise both in the local and international markets.
Pakistan’s cotton imports increased from 7.50 lakh bales in 2020 to 8.19 lakh bales in 2021. Pakistan already imported 2.16 lakh bales in the first quarter of this year and if the damage to the cotton crop is as extensive as it is predicted to be, the cotton imports by Pakistan will soar this year.
Since cotton is an agricultural product, the catastrophic flooding will probably lead to incredible financial loss to Pakistan’s cotton production and exports. The flooding will add to the cotton shortage problem being faced globally this year, unfortunately resulting in the cotton rates increasing and maintaining a historical high in the coming months ahead.
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