The World Of Cotton
18 December 2008 The world of cotton is currently facing some big issues.
In the US, oversupply is leading to depressed prices on the New York Board of Trade, the parent company of the New York Cotton Exchange. One big reason for the oversupply of US cotton is the lessened import demand from China this year, due to China’s record crop this season. According to Joe Nicosia, CEO of Allenberg Cotton Co., Memphis, Tennessee, the US shipped 9 million bales of cotton to China last season, but now, with only five months remaining in the cotton year, has shipped only 1 million bales. China’s total cotton imports are expected to be down to less than 13 million bales, compared to over 19 million last season — and most of those will come from India, China’s largest cotton supplier. With the loss of Step 2, the US market share of China’s cotton imports has plunged from 69% in August 2006 — the last month under Step 2 — to 16% in December 2006.
A Changing Industry
A second cause of US oversupply is increased crop yield, a factor repeated in other countries that are starting to embrace Bacillus thuringiensis (Bt) and other genetically modified (GM) cotton. India will produce more cotton than the US in 2007 and increase exports; Australia and Brazil are expected to report yield increases as well (depending upon the weather and on water availability in Australia), while China foresees output similar to this year. With production increases, countries such as China will use locally grown crops and rely less on imports.
Although GM crops are improving yield, cotton acreage re-used for ethanol crops has begun to shrink world cotton area. With corn and soybean returns — both biofuel crops – much higher than cotton, many countries are switching to corn and beans. Brazil will lose 500,000 acres and the US is cutting 2.8 million cotton acres next season, but China will remain stable and India is actually increasing acreage. Still, cotton area worldwide is expected to decline by 2.3 million acres for the 2007/08 season, and it is unlikely that stocks will be able to keep up with demand. World cotton consumption continues to rise, with domestic use in India and China increasing as the middle class improves its standard of living. In 2007/08, Nicosia says, world consumption is estimated at 125 million bales, surpassing the world supply of roughly 117 million. The US, China, India, and Brazil had large crops last season, but demand continues to grow. Any slight increase in demand, combined with any weather-related or other damage to cotton crops, will result in a worldwide shortage.
With modern spinning technology, the cotton business requires high quality fiber. Fiber quality is a big issue, with classing offices grading crops and comparing the quality to previous years and other crop yields. While everyone wants to grow the best quality product, having to worry about yield at the same time as meeting cotton standards and comparisons for fiber length, strength, uniformity, color, trash content, stickiness, micronaire, and more can be a lot on which a grower must focus.
Will It Last?
Additionally, in today’s environmentally-focused and energy-conscious world, the question of sustainability arises. The current demand for cotton outweighs the supply, even though the industry seems to always find more cotton than expected at the end of each season. Still, with demand growing every year, the question remains — will the industry be able to keep up? And how long can it last?
The answer seems to be, for a long time. Environmentally, cotton is a natural, biodegradeable alternative to petroleum-based chemical fibers. Organic cotton is a growing program, although tough standards, long-term investment, and higher costs have kept acreage low so far.
Cotton growers’ land should not dry up anytime soon, though: As a drought-and heat-tolerant plant, cotton can use acreage other crops won’t grow on, or land that requires irrigation for other crops. Newer varieties, such as insect-resistant cotton, help to improve the amount of cotton that can be grown on a plot of land, as does conservation tillage. As technology and farming practices continue to improve, so will cotton yields; therefore, even if the amount of acreage doesn’t increase as much as the market demands, the industry should be able to keep up with the market, unless there’s a sudden, massive population growth or other demand for cotton fiber.
The WTO trade liberalization was a major catalyst to world demand for cotton. The export advantages cotton-producing countries enjoyed have slowed, particularly as the US Farm Bill is being rewritten. The Farm Bill will not only address budget considerations, WTO compliance, a restructuring of the Marketing Loan and DCP program, and other items directly affecting cotton, but also will address concerns such as conservation and wildlife programs that will carry implications for the cotton industry, and impact even the global market.
With both cotton demands and cotton yields on an upward trend, the 2007 season looks promising. The future isn’t altogether clear, with variables such as ethanol and the US Farm Bill in the picture, but as long as cotton quality remains strong, the crop should be sustainable, keeping cotton growers in business for some time to come.
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