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Lint producers feeling heat from international competitors

As the United States (US) has allocated more than $600 billion for subsidies on agriculture commodities – mostly for cotton growers – lint producers in developing countries are finding it difficult to capitalize on cost and international price competition.

Ghulam Rabbani, a senior member the Pakistan Yarn Merchant Association, said that this was an unfair international trade practice and major cotton producers in the developing countries, especially in Pakistan, were facing hardships due to high input cost and higher bank rates. “Instead the US is demanding other countries to end subsidies on agriculture.”

He stated that the domestic textile and spinning sector had to import around 3 million bales in 2016-17 to meet the shortfall and keep the wheel of the industry moving. The shortfall was mainly related to higher production costs and an uncertain economic environment.

Rana Abdul Sattar, a ginner and former Sindh Assembly member said, “Input cost, uncertified supply of cottonseed and long-awaited demand for futures trading at Karachi Cotton Association are added bottlenecks to growers for acquiring better yield.”

There are not any major increases in acreage, but extreme weather conditions and pest attacks negatively impacted crop yields in 2016-17, Sattar added.

Pakistan is the fourth largest producer of lint in the world (behind China, India and the US) and has the 3rd largest spinning capacity in Asia after China and India.

In 2016-17, the USDA expected US cotton production at 14.9 million bales, India at 28 million bales and Pakistan at 10-plus million bales.

Internationally, cotton is being traded at $76-$78 cents per pound and domestically, lint prices remained firm during 2016-17; cotton was traded at Rs 6,000 per maund to Rs 6,550 per maund depending on quality and trash level.

Rabbani said that the World Trade Organisation had once agreed that export subsidies for agriculture would be abolished. “Developed country members should eliminate their scheduled export subsidy entitlements from the date of adoption of this decision and developing country members should eliminate their export subsidy entitlements by the end of 2018”.

However, silver fibre-related people have questioned whether the decision has been implemented in a full and fair manner or whether the political economy of others is standing in the way of fair play.

Syed, Razi. Lint producers feeling heat from international competitors. Daily Times, February 13, 2017.

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