Cotton imports are active in recent two years, but there are risks on exchange settlement later

In 2022/23 season, Pakistan is active to purchase imported cotton, and import volumes increase steadily. Meanwhile, Pakistan has signed many U.S. cotton contracts in 2021/22 season, and by Feb 2, 2023, the purchases of 2022/23 U.S. cotton have reached 420kt, to be the second largest U.S. cotton export destinations, with a proportion of 19%. Export shipments to Pakistan also keep high, with a total of 156kt, but the outstanding contracts take a high share of 63%. Later, if the foreign exchange reserves shortage maintains and has no effective solutions, the exchange settlement on cotton imports will face risks. After communications with Pakistani spinners and cotton yarn traders recently, they state that imports may have some problems, as there is no available foreign exchange on settlement and exports have no problem temporarily. Recently, Pakistani cotton prices are steady, and even edge lower. In medium to short term, spinners could maintain production by consuming cotton inventory or imported cotton that is arrived previously, but later, if the foreign exchange reserves fail to improve, the forward shipments of imported cotton may face certain risks.