We are at the advent of cotton season in Pakistan, but sadly there is no cotton crop management policy or then perhaps, no real functional government at a time that holds the key in determining the (textile) sector’s performance over the next twelve months – everyone seems preoccupied with the Panama case instead of dispensing actual governance. Amidst the ongoing high political drama, what we forget is that there is a country to be run! Textile constitutes the largest sector in Pakistan’s exports and the country is faced with a serious current account deficit situation at a time when both our overall exports and textile exports have been declining for more than 3 years now. The irony though is that our finance minister (de-facto prime minister) is just not worried, or even worse, he simply does not care. In his opinion, we in Pakistan unnecessarily worry about textiles by giving it more than its due importance, whereas, there are many other areas that require far more focus and attention. Not surprisingly, our competitors do not share his mindset on a sector that almost everyone regards as any developing economy’s potentially largest exporting and employment-generating engine. India, for example, announces its comprehensive cotton crop policy as early as April every year, which is based on its national vision on targeted crop size, farmers’ security, sector’s raw cotton export targets, manufacturing competitiveness, employment safety, effects on allied industry, and safeguarding of national textile made-ups’ exports while side-by-side endeavouring to enhance value addition. Bangladesh, even though it is not a raw cotton producer/grower, also announces a similar policy framework every year in order to ensure that in the coming year its textile exports remain on track.

Given the rising global competition in textiles, as more and more countries realise (including developed western economies) that this sector holds paramount importance in shoring up employment and exports in an economy at low cost (or low capital deployment), the practice - in almost every textile country - of resorting to advance yearly planning cum policymaking on cotton crop is now taken as a given. This new proactive approach is giving an altogether new meaning on how to support respective national manufacturing competitiveness in ’real time’, in-turn shoring up domestic demand of the home cotton crop to match farm output targets with those of domestic industrial production.

For example, in the United States (US) the incentive-based textile policy framework originally initiated by the Obama government to revive the US textile industry by providing it cheap energy and power and by bringing friendly labour reforms, is now being taken to the next level by the Trump administration where it plans to provide US textile manufacturers with a level of security on crop and industrial protection that hedges them against cheap imports while at the same time helps them in making their products more competitive globally. And this annual cotton management policy’s timing? Answer: The start of the cotton season in the US. In the textile chain, the beginning of the cotton season is always very important. Get your policies and direction right at the very start and the next 12 months will go well. This is exactly what we are seeing in the US today. With prudent governmental policies and support right at the beginning of the current season, US traders and manufacturers are already upbeat for things in the ensuing months. The sentiment and outlook on the US cotton is quite bullish, as both its cotton and made-ups’ exports surge. The US’ textile mills and hedge funds are engaged in a scramble for cotton as a resurgent global economy – where cotton demand is soaring – pulls bales from American warehouses. Benchmark US cotton figures again showed an upward trend last week, rising by the daily exchange limit to the highest incremental level since mid-2014, as latest data showed US cotton exports gaining pace; US being the biggest cotton exporter. Also, already for 2017-18, mills in India and Vietnam have booked increased imports of US cotton by nearly 60 percent. Analysts are confident that this tumult will not be a short-term phenomenon as mills have yet to fix the price of millions of bales they have already booked from the merchants for delivery in August and September. As this heating-up surges, International Exchange has also raised the collateral needed to hold future contracts and widened the allowable bank limit for the previous day’s session – steps that will ensure that this momentum sustains itself over a longer period and does not fade away quickly.

More importantly from our perspective, this activity that we see is by no means US specific. The current feverish trends have ended months of soporific global trading in cotton. Prices in the last twelve months had moved sideways as consumers bought more polyester fabrics and China, the largest cotton spinner, maintained a massive state-owned reserve that had been dampening any earlier rallies.

However, to capitalise on the opportunity, Beijing has now also begun selling off its cotton stocks and according to the International Cotton Advisory Committee (an inter-governmental group in Washington), given the sustained current demand despite China’s off-loading its cotton stocks, it can safely be expected that this year, global cotton consumption will increase by at least 2 percent, taking it to 24.6m tons. In addition, if the world economy continues to strengthen at its current pace, the demand for cotton may actually increase even more. The prevailing scramble for cotton in the global markets reflects a new confidence in the international textile trade and in all this the good news for Pakistan is that the happy days in international textile markets may again be near the corner. The dilemma, however, is that who from the government will guide and spearhead the textile sector in Pakistan to capitalise on this looming opportunity?