Who is responsible for cotton's woes in Pakistan? It is really a chicken and egg question. The long-term trend indicates that cultivation of most valuable major kharif season crop is on the decline, with competing theories for its early demise.
From an average share of 42 percent in area under major kharif crops cultivation, cotton's share has declined to less than one-third in recent years. By FY17, it had also lost its status of crop with largest area under cultivation to rice, which seems to keep its position despite increase in cotton demand.
Cotton's regression from farmer's preferred choice came after the collapse of international cotton prices post FY11, when prices had risen by more than 100 percent in international market, ironically, in response to flooding of culturable land in Pakistan.
Turned out that the global commodity markets had overreacted to the floods, leading to return of prices to equilibrium levels in the following season. Domestic cotton production also recorded a boom in the following years, before peaking at 2.3 million tons by FY15. Except, by that time demand for domestically grown cotton had also bottomed out, as value-added sector increasingly switched to imported yarn.
Yet, during the same period, a new kind has arrived on the bloc, slowly gaining share in domestic kharif output, seemingly impervious to the tailwinds of pricing. Domestic production of maize has maintained a steady growth of 7 percent CAGR during the last decade, growing from a little over 3 million tons to over 6 million tons by FY17. At the same time, cotton's output has remained virtually unchanged at average 2 million tons per annum, a psychological barrier first broken in year 1992.
It appears that neither cricket nor cotton have achieved little since that year. One reason for cotton's predicament is global prices, which have remained largely stable, giving little incentive to farmers to increase cultivation dramatically.
But notice that price of maize in the international commodity market has also declined to nearly half since FY13 when it had peaked at $311 per ton. Yet, Pakistan's maize output growth has come on the back of steady improvement in yield, which has allowed the underdog cereal crop to maintain momentum with little to no support, and weak forward linkages unlike cotton.
Pakistan's cotton crop may never see a turnaround, especially since measures such as indicative pricing could drive value added sector further towards imported intermediate goods, and thus be counterproductive. However, it may also be argued that countries such as Bangladesh have established a world competitive textile sector with little to no domestic cotton production, and thus, improving cotton production is not a prerequisite for increasing textile exports.
However, if Pakistan is to ever see a cotton turnaround, it will never happen without a corn moment.