Commodities Buzz: Cotton Crisis Sparks Rallies In Pakistan

Global production of cotton is down due to poor weather in China and the U.S. It has also been hurt as more farmers in the U.S. have switched to crops such as soybeans. China has turned to Pakistan to meet its shortage of yarn. Pakistan yarn producers cut local supply contracts and exported to China, where prices were higher, local textile producers say.
World raw-cotton production is set to fall short of demand in the current crop year that ends July 31. The U.S. Department of Agriculture expects cotton mills to consume 115.9 million cotton bales this year while production will only be 102.9 million bales. This will lead to stockpiles being drawn down and further shortages of cotton and yarn, such as what Pakistan is already suffering.
Thousands of Pakistani textile and garment workers took to the streets Tuesday to call for an immediate ban on yarn and cotton exports, as a global cotton shortage has forced some textile factories into bankruptcy. The industry organizations that called for the rally estimated that 50,000 people protested in Faisalabad, a city in Punjab province, which is the heart of Pakistan's textile industry. In Karachi, a southern port city, 5,000 people rallied. Organizers said they need a two-month government ban on yarn and cotton exports to protect the industry after a poor global harvest of cotton this year led to a shortage for textile and garment makers. A number of Pakistani factories have shut and others are running below capacity after their yarn costs soared by almost 100%, throwing people out of work in a country where poverty levels are already high.
Yarn exports should be immediately banned, said Mohsin Ayub Mirza, a textile manufacturer in Karachi and chairman of the Pakistan Readymade Garments Manufacturers & Exporter's Association. He said 20 to 30 big yarn producers in Pakistan were making huge profits by exporting to China, while the local textile industry was suffering. Zafar Mahmood, Pakistan's commerce secretary, declined to comment on the protests or whether the government plans to meet the protestors' demands.
The textile sector is key for Pakistan's economy: It accounts for 55% of the nation's $20 billion in annual exports and employs 17 million people. In Faisalabad alone, 600,000 people are employed in the textile and garment industry. The country's economy is expected to grow between 2% and 3% this year, but that forecast could be unattainable if the textile sector woes continue, economists say. Earlier this year, Pakistan's government imposed temporary export quotas on yarn. But these have failed to stop the shortage, textile producers say.