Ramkumar: Current geopolitical situation having impact on cotton


The ongoing political crisis in Europe, Sri Lanka and Pakistan is influencing the global cotton and textiles sector, manufacturing, and global economy.

Rise in prices, inflation, and political crisis in some parts of the world are having direct effect on the recent presidential election in France. Worries on the increase in energy cost due to probable embargo on Russian gas and oil by EU countries is genuine among consumers, while making buying decisions on non-essential items. Ripple effects from COVID-19 are seen in different sections of the society, which is more evident in Sri Lanka. With the decrease in foreign tourism, the economy of Sri Lanka has taken a severe hit, which has been in decline due to mismanagement for over a decade and due to heavy foreign debts.
In addition to economic fallouts, political crisis in Pakistan and Europe due to Russian invasion of Ukraine is adding to the pain as well. These instabilities are impacting the global cotton and textile sectors. This is immediately felt in a major textile producing country, say India. The economic and political crisis in some parts of the world should result in favorable conditions for textile manufacturing in India, but this is not the case. Steady increase in cotton price is creating a havoc in the Indian textiles sector resulting in decreased production and reducing work week by a day in textile mills in India. Sri Lanka is a leading garment producer supplying to global brands. Lack of power and the ongoing political crisis is affecting many sectors of the country. In many mills, production has been slashed by 20 percent, resulting in loses. Higher cotton prices are not absorbed by upstream products like yarns.
Cotton prices have doubled in a year and the present situation is worse than 2011 when cotton price was steep. Textile mills in India are demanding Indian government to slash 11% import duty on cotton, which will create a level playing field with competing countries like Bangladesh, Vietnam, and Indonesia. While paradoxical it may be, there is demand for cotton and cotton goods even at high prices, which drives the market. Indian mills are looking into cotton from the United States and Australia due to quality consistency and traceability. Aruppukkottai, India-based Jayalakshmi Textiles is a fine count 100% cotton mill with 72,000 ring spindles and consumes about 9,000 tons of cotton per annum.
As Indian mills lobby for import tariff abolition, imported cotton from the United States will be competitive with domestic cotton and also result in productivity enhancement due to good quality in length and strength. High Plains and United States cotton sector should pay attention to Indian market as it may provide additional opportunities for cotton exports. In this scenario, Australian cotton may be a strong competitor due to the recently signed India-Australia trade agreement, that will give duty free immediate access to Australian cotton, up to 300,000 bales. Cautious stock maintenance, negotiating with the government for adequate support, efficient workflow management and watching the global situations carefully are a few near term solutions for the global textiles sector.

Dr. Seshadri Ramkumar is a professor in the department of environmental toxicology at Texas Tech University.

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