Flash floods ravage Pakistan, triggering worries over global cotton supply

Since mid-Jun, the monsoon rainfall appears in South Asia, and Pakistan begins to suffer much rainfall, higher than the normal level of previous years, triggering flash floods. Pakistan’s National Disaster Management Authority reports the death toll since the monsoon season began earlier than normal this year – in mid- June – reached 1,033 people by Aug 28, and more than 1,500 people injured and the government officially declared a “national emergency” on Aug 25. As the fifth largest cotton producer in the world, four major cotton producing areas of Pakistan are impacted by the flood, especially in Sindh. Some officials and market players estimate that the new cotton crops impacted by this flood may be around 40-50%, and the impact is still continuing. It is still early to assess the damage currently. The detailed damage assessment report may be revealed in the second week of Sep.

1. Weather condition in Pakistan

In terms of the monthly rainfall, it can be obviously seen that the rainfall in Jul increases apparently, to reach 232mm in the major cotton producing areas, 155mm higher than last year. At the same time, though the rainfall data in Aug has not been updated, the condition continues in Aug, triggering the most worst flooding in ten years. The rainfall in Aug may be higher than Jul.

2. Cotton producing areas distribution in Pakistan

According to the cotton production assessment from USDA during 2015 and 2018, the major cotton producing areas of Pakistan are Punjab and Sindh, with a proportion of 66% and 33% respectively.

According to the National Disaster Management Authority, Sindh and Balochistan are the major cotton producing areas damaged. The crops in Balochistan are washed away and most crops in Sindh are in flooding. Flash floods appeared in some areas of Punjab, and though the damage on cotton production may be limited, the quality may be impacted. According to the provincial agricultural departments, the planting areas in Sindh and Balochistan take a share of 28.1% of total planting areas. Combined with the yield, if the new cotton crops are lost in these two areas, the new cotton production damaged may account for 35% in total production, about 450kt. But currently, the flooding impact continues and there is no comprehensive report.

3. Cotton production reduction of Pakistan may trigger concerns over the tight supply

Since 2018, Pakistani cotton production has reduced gradually, while downstream capacities keep expanding, resulting into the larger supply gap. In recent years, cotton imports have risen apparently. According to the Customs, cotton imports of Pakistan increased to 769kt in 2021/22 season, down 7.8% year on year, but up 38.8% from 2019/20 season, and Pakistan has been the top five cotton importers in the world.

It is worth noting that according to the U.S. cotton weekly export sales of USDA, by Aug 11, export sales of 2022/23 U.S. cotton to Pakistan were 266kt, just after China whose data was 397kt. Export sales of 2023/24 U.S. cotton to Pakistan were 106kt, taking the first place. Pakistani buyers are active to purchase on international market. If the new cotton production reduces as estimated, Pakistani buyers are bound to purchase more imported cotton, which may give certain support outside China.

The unprecedented flood in Pakistan is likely to have significant impact on its new cotton production. According to our initial assessment, the production that be damaged may account for 35% of its total production, with a volume of about 450kt. Nevertheless, there are no comprehensive assessments about the damage till now, which shall keep an eye on the report in mid-Sep. At the same time, global cotton demand is hard to see obvious improvement and recovery under the economic recession tendency. Recently, the downstream orders in Southeast Asia also become worse. Therefore, the negative impact from demand on cotton market shall be vigilant.