Cotton Prices Surge Amid Supply and Climate Concerns

Cotton producers across Pakistan’s progressively contracting cotton belt are currently securing elevated advance prices well ahead of the harvesting season. Reports from key cultivation districts in Sindh, including Badin and Sanghar, indicate that forward transactions have reached unprecedented levels.

The first reported transaction of the season involved a trader from Tando Bago entering into an agreement with a ginning facility in Khanewal at a rate of Rs10,000 per maund for multiple consignments scheduled for delivery by the end of May. Concurrently, market rates in Sanghar have reportedly escalated to as high as Rs20,000 per maund.

Market participants attribute the sharp increase in forward pricing to a combination of external and domestic pressures. A primary factor has been the disruption of international trade routes, which has significantly curtailed Pakistan’s cotton imports, particularly from the United States—a key supplier to the domestic textile sector. Reports indicate that import flows have largely stalled in recent months due to regional disruptions involving Iran, thereby constraining supply.

While initial expectations suggested that domestic production would offset the shortfall, the seasonal characteristics of cotton cultivation have limited immediate availability. Cotton, a Kharif crop, is typically sown between late April and early June, with peak sowing in May, and harvested from August through December. However, early sowing practices in parts of Sindh—commencing as early as February—have enabled limited harvesting in May, which traders have increasingly relied upon to bridge supply gaps.

Nevertheless, adverse climatic conditions, particularly excessive rainfall during March, have introduced uncertainty regarding crop yields. This has prompted traders and ginners to secure advance procurement agreements at elevated rates to hedge against potential supply shortages. In some instances, buyers have publicly committed to purchasing unlimited quantities at fixed rates, reflecting expectations of constrained output.

It is noted that these transactions were executed prior to the announcement of a ceasefire involving Iran and Pakistan on April 8. Despite this development, market participants remain cautious, maintaining elevated pricing until the normalization of critical trade corridors, including the Strait of Hormuz, is confirmed.

Additionally, global supply dynamics have contributed to upward price pressures. Forecasts from international agricultural assessments indicate declining global production alongside increasing consumption, thereby reinforcing expectations of sustained price escalation.

The prevailing situation underscores the prolonged structural decline of Pakistan’s cotton sector. Over the past two decades, the crop has experienced a significant reduction in both output and competitiveness. Production has decreased by approximately 65%, declining from 14 million bales in 2005 to approximately 5 million bales in the most recent year.

Simultaneously, the area under cotton cultivation has contracted substantially. While cotton was cultivated on approximately 6.6 million acres in 1991, expanding to 7.9 million acres by 2005, the cultivated area has since declined markedly, reflecting a sustained downward trend. This contraction has occurred in contrast to competing producer nations, which have expanded their cotton cultivation footprint.

Recent performance indicators further highlight sectoral challenges, with Pakistan failing to meet cotton sowing targets in the previous year. By June 2025, national targets were missed by approximately 11%, with Sindh and Balochistan recording shortfalls of around 35%, despite ongoing policy initiatives aimed at revitalizing the sector.