Market Observation: According To The Statistics Of USDA Weekly Export Report, Pakistan'S Cotton Import May Exceed Expectations

According to the statistics of the USDA Export Weekly Report, as of November 21, 2024, 2024/25, the cumulative contracted volume of American cotton in 2024/25 is 1.568 million tons (including Pima cotton), of which the cumulative contracted volume of Pakistan and Vietnam is 344200 tons and 256900 tons, respectively, accounting for 21.95% and 16.38%, ranking first and second respectively. Not only did Pakistan's cotton mills and cotton traders perform strongly in the contracted import of American cotton, but also ginning mills were reluctant to sell high-grade cotton due to the overall quality deviation of Pakistani new cotton in 2024/25. In addition, the domestic cotton price in Pakistan was on the high side, so the inquiry/contracting of cotton using enterprises for Brazilian cotton, African cotton, Australian cotton and other cotton has continued to grow (including shipping) since November.

The latest report of USDA raised Pakistan's cotton import estimate to 871000 tons in 2024/25, higher than 218000 tons in the previous year. According to the judgment of some international cotton merchants and Pakistani cotton enterprises, the actual cotton import volume this year will exceed 1 million tons, and the data reported by USDA, ICAC and other institutions still have room for upward adjustment.

On the one hand, the latest report of the American Agricultural Counsellor shows that Pakistan's cotton production forecast for 2024/25 is adjusted to 5.2 million bales (480 pounds per bale), a 28% decrease compared with 2023/24, and the output is significantly lower than the previous report (6.59 million bales in March, a year-on-year decrease of nearly 4%). The main reason is that the harvest area is reduced by 17%, and the unit yield is reduced by 15%, Among them, the output of Punjab Province declined significantly.

On the other hand, the Pakistani government will abolish the sales tax on imported cotton in 2024/25, making the competitive advantages of American cotton, Brazilian cotton, African cotton and Argentine cotton more prominent. In this year, the federal budget of Pakistan exempted 18% sales tax on imported cotton and yarn (especially the export driven textile sector). The goal of improving the raw material cost of cotton textile clothing enterprises and improving export competitiveness is clear, but cotton purchased in China still needs to pay this tax, which has stimulated cotton using enterprises to focus on inquiry and contract purchase of foreign cotton.

In addition, the industry believes that once the Trump government significantly imposes tariffs on Chinese imports, a certain amount of US/EU cotton textiles and clothing contracts will be transferred to Pakistan, Vietnam, India and other Southeast Asian countries. The product quality and profit situation make the yarn mill have to expand the purchase of medium and high quality foreign cotton and reduce the demand for Pakistani domestic cotton.