Karachi: Local and international cotton prices have seen a notable recovery, with local prices increasing by 8% following a significant low in July 2024. This price adjustment comes in response to anticipated reductions in crop output globally, affecting markets from Pakistan to the United States.

According to JS Global, the U.S. Department of Agriculture (USDA) has recently adjusted its global cotton production forecasts downward by 1% to 116.4 million bales, due to expected declines in harvested areas in key producing countries such as Pakistan, India, Mali, and Tanzania. Despite a decrease in crop expectations in the USA because of hurricane impacts, increases in Chinese production are expected to balance the global supply.

Domestically, the cotton output in Pakistan is projected to fall significantly short of the government’s target of 10.8 million bales for the fiscal year 2025, landing between 6.5 million and 7 million bales. This stark reduction is attributed to a decline in the area under cultivation and adverse weather conditions, contrasting with a government-anticipated 32% year-on-year increase in cultivation area. Current season reports indicate cotton arrivals down by 64% year-over-year to 1.4 million bales in the first two and a half months, pointing to a severe drop in production.

The global stability in cotton prices is expected to be maintained, despite a 0.4% drop in global demand, as the reduced supply keeps prices from falling further. Meanwhile, the narrowing price gap between domestic and international markets has prompted local industry players to increase their raw cotton imports by 8% year-over-year in the first two months of FY25, leveraging the lower international prices, which have decreased by 13% year-over-year.