The cotton market of Asia seems extremely volatile especially the key markets such as China, India and Pakistan. The falling price of raw cotton promotes additional buying from spinners.

US cotton futures declined to 6.33% and when futures fall below 50 cents, there was significant buying from Chinese companies. The fall in prices below 50 cents has prompted many spinners to delay orders in the past weeks and the current arrival of cotton crop from India and Pakistan contributed to more decline in cotton prices.

While Indian and Chinese Governments will support the prices, the fate of raw cotton in Pakistan remains unclear. Cotton farmers of Multan, Dera Ghazi Khan and Bahawalpur divisions are facing crisis like situation at the harvesting stage, as on one hand the cotton prices have slumped internationally due to the global financial crisis, while on the other textile industry is not in a position to buy and stock the commodity due to dried-up credit.

Cotton prices, which were hovering around Rs 4,000 to Rs 4,200 per 37.5 kg in the local market a month ago, have dropped to Rs 3,475, as global cotton rates continue to go down due to turmoil in global financial markets. The cotton farmers' miseries have compounded due to the inability of cash-strapped textile mills to lift around 80% of the entire crop immediately after harvesting. A large number of spinning mills have stopped servicing their past loans that means they do not qualify for fresh funds.

Textile industry is under severe stress. as every year banks provide  credit to the textile industry to buy cotton from farmers. The mills arrange 20% funds while the balance of 80% comes from banks. An average spinning mill of 25,000 spindles stocks 4,000 cotton bales to 5,000 cotton bales annually on bank financing. This requires some Rs 48 million to Rs. 60 million, which is now seemed difficult to obtain under prevailing circumstances.