Bangladesh's cotton import to rise on bright RMG export prospects: USDA

Despite facing a number of economic challenges, Bangladesh may end up importing more cotton year-on-year in marketing year (MY) 2024-25 to meet increasing global demand for garments.

The nation, the second-largest garment exporter after China, is projected to import 80 lakh bales of raw cotton (1 bale equals 218 kilogrammes), the US Department of Agriculture (USDA) said.

This is a 6.7 percent increase from that in MY 2023-24, which begins in August for cotton, the agency said in its report on the production, import and use of cotton in Bangladesh.

Published earlier this month, the report forecast local spinning mills to use a higher amount of raw cotton due to lower imports of yarn and fabric.

The report by USDA's Foreign Agricultural Service said Bangladesh's garment industry is expecting exports to increase by 7 to 10 percent in 2024, rebounding from a decrease in orders during the global economic slowdown.

It said ready-made garments (RMG) exports during the first two months of 2024 reached $9.47 billion, posting 13.2 percent year-on-year growth, and expected this growth to prevail in MY25, leading to an increase in the import of raw cotton.

"Industry contacts noted that Bangladesh's RMG industry is expecting higher numbers of work orders from the second quarter of 2024 with rebounding global demand for RMG products," said the USDA.

The dwindling forex reserve is another reason that may lead to increased consumption of cotton and a decline in purchases of pricier fabrics.

The US agency said many garment factories in Bangladesh have their own spinning mills and prefer to import raw cotton rather than yarn.

These companies, which earn from exporting garments, can open letters of credit (LCs) as they have their own source of US dollars, it added.

"Companies that solely import yarn and fabric will continue to face forex challenges as they tend to be smaller than the fully integrated cotton spinning mills and have more difficulty opening LCs, leading to a reduction in their imports," it said.

"Industry contacts also anticipate a surge in global RMG demand after April 2024, which could increase cotton demand in Bangladesh."

However, it maintained its projection on Bangladesh's cotton imports at 75 lakh bales in MY24 and domestic consumption at 78 lakh bales.

Citing the National Board of Revenue's data, it said Bangladesh imported 41 lakh bales of raw cotton in the first seven months of MY24.

The report, citing spinning industry insiders, said shortages of gas and electricity hampered their production capacity in the first and second quarters of 2023.

However, since the beginning of MY24, the situation has improved slightly.

The industry estimates higher cotton imports and utilisation based on the increased demand for garments in the remaining months of MY24, according to the report.