Report Highlights: 

MY 2013/14 and MY 2014/15 production levels are projected at 115,000 and 120,000 bales on good weather and increased hybrid seed usage. MY 2013/14 and MY 2014/15 raw cotton imports are projected to increase by 8.3 and 7.6 percent to 3.9 and 4.2 million bales on strong demand by the export-oriented ready-made garment (RMG) sector.

Executive Summary: 

MY 2013/14 and MY 2014/15 production levels are projected at 115,000 and 120,000 bales on good weather and increased hybrid seed usage. MY 2013/14 and MY 2014/15 raw cotton imports are projected to increase by 8.3 and 7.6 percent to 3.9 and 4.2 million bales on strong demand by the export-oriented ready-made garment (RMG) sector. In MY 2012/13, India and Uzbekistan had a 35 and 25 percent export market share, while the U.S. had a 5 percent share. Bangladesh is almost entirely dependent on raw cotton imports for the export market. More than 40 percent of imported raw cotton and 80 percent of imported yarn and fabrics are used by spinning mills and the RMG sector to meet export demand. Bangladesh instituted biotechnology regulations that require approval from the National Committee on Biosafety (located in the Ministry of Environment and Forest) before a genetically engineered product can be legally exported to Bangladesh. 

SITUATION AND OUTLOOK 

Production: 

MY 2013/14 and MY 2014/15 cotton acreage is forecast at 42,000 and 43,000 hectares (ha) on expectations of relatively higher profit margins over other competing crops. MY 2013/14 and MY 2014/15 production levels are projected at 115,000 and 120,000 bales on good weather and increased hybrid seed usage (currently estimated at 18 to 20 percent of total cotton acreage). The Cotton Development Board (CDB) supports cotton production by researching and testing new technologies, such as imported hybrid seeds, conducting extension services, and supplying quality seeds. Reportedly, the CDB is exploring the possibility of importing Bacillus thuringiensis (Bt) cotton seeds. 

Value Added Cotton: 

MY 2014/15 yarn and fabric production levels are projected to increase 3 and 4.5 percent to 748,000 tons and 4.6 billion meters on higher domestic demand due to population growth and strong export demand for value-added textile products. Likewise, MY 2013/14 yarn and fabric production levels are estimated at 726,750 tons and 4.4 billion meters, up by 5.5 and 4.8 percent on higher domestic and export demand. According to the Bangladesh Handloom Board, in MY 2013/14 the small-scale handloom industry produced approximately 830 million meters of fabric. 

Bangladesh currently has 392 spinning mills, 782 textile weaving mills, 240 dyeing and finishing mills, and around 4,500 garment factories. Approximately 4,000 garment factories employ 3.6 million workers, of which 80 percent are women. According to the Bangladesh Textile Mills Association (BTMA), because of high export demand for value-added textile products, over the last ten years fabric demand from the ready-made garment (RMG) sector has exceeded domestic supplies, which are 50 percent cotton based and 25 percent non-cotton based.

Consumption: 

MY 2013/14 and MY 2014/15 raw cotton consumption levels are estimated at 4 and 4.3 million bales, up 11 and 7.5 percent on strong export demand for value-added products and higher domestic textile demand due to population growth. Likewise, MY 2013/14 and 2014/15 yarn consumption levels are estimated to increase 5.8 and 4 percent to 1.02 and 1.06 million tons on increased export demand for value-added products and population growth. MY 2013/14 and MY 2014/15 fabric consumption levels are estimated to increase 10 and 7.2 percent to 7.1 and 7.6 billion meters on higher export demand for value-added products made by the RMG sector. 

Trade: 

MY 2013/14 and MY 2014/15 raw cotton imports are projected to increase by 8.3 and 7.6 percent to 3.9 and 4.2 million bales on strong export demand for value-added products, particularly by the RMG sector. In August 2013, during a ministerial level discussion in New Delhi, the Government of India agreed to export up to 200,000 tons of raw cotton to Bangladesh. Both governments are currently negotiating details in a memorandum of understanding (MOU). Reportedly, the government of Bangladesh (GOB) is also close to finalizing a MOU with Uzbekistan, which allegedly has agreed to export 200,000 tons of raw cotton to Bangladesh on an annual basis. In MY 2012/13, India and Uzbekistan had a 35 and 25 percent export market share, while the U.S. had a 5 percent share due to low price competiveness. 

Value Added Cotton: 

According to textile industry sources, calendar year (CY) 2013 and 2014 yarn imports are projected at 280,000 and 300,000 tons on competitive international prices and high export demand for value-added products. Indian and Chinese yarn generally is 2 to 3 percent less expensive than Bangladeshi yarn. For CY 2013, Bangladesh imported 69 percent of its yarn from India. 

According to RMG industry sources, CY 2013 and CY 2014 fabric imports are projected to increase by 8 and 7.6 percent to 2.6 and 2.8 billion meters, respectively, on high export demand for products made by the RMG sector. For CY 2013, Bangladesh imported 64 percent of its fabric from China. 

FY 2012/13 RMG export earnings were about $22.4 billion, up 11 percent. According to the Bangladesh Bank (Central Bank of Bangladesh), since 2008 the GOB has provided a cash incentive of 5 percent of the FOB export value to export-oriented RMG factories. In the last six years, sources believe this cash incentive has helped Bangladesh RMG exports become price competitive in new markets such as Russia, India, China, Japan, Turkey, Brazil, Malaysia, South Africa, South Korea, Saudi Arabia, Australia and New Zealand. 

Policy: 

Bangladesh has no import duties for polyester, viscose, acrylic, synthetic and modacrylic staple fiber. The duty for textile chemical dyes is 5 percent. Export-oriented RMG factories can import yarn and fabric under a duty draw back incentive, which reimburses all customs duties paid on imported yarn and fabrics (but not taxes such as the VAT and Advanced Income tax). Imports of all textile raw materials, including fabrics, have no quotas. Bangladesh instituted biotechnology regulations that require approval from the National Committee on Biosafety (located in the Ministry of Environment and Forest) before a genetically engineered product can be legally exported to Bangladesh. 

The BTMA represents Bangladeshi traders and manufacturers of yarn, fabrics, and textiles. Since the Bangladesh textile industry is largely dependent on exports, the BTMA has asked the GOB to increase the cash incentive rate to at least 10 percent, provide export subsidies, and withdraw import duties on capital machinery and spare-parts. 

Because of the recent tragedy at Rana Plaza and other incidents involving poor infrastructure and working conditions, the Government of Bangladesh has entered into dialogue with multiple stakeholders on how to address these safety and labor challenges. On June 27, 2013, the United States suspended Generalized Systems of Preferences (GSP) trade benefits for Bangladesh. At the time of the announcement, the USG provided the GOB an action plan which, if implemented, could provide a basis for the reinstatement of GSP trade benefits. 

Marketing: 

Bangladesh is almost entirely dependent on raw cotton imports for the export market. More than 40 percent of imported raw cotton and 80 percent of imported yarn and fabrics are used by spinning mills and the RMG sector to meet export demand