Category Archives: cotton

Cotton is Produced in the U.S. for the Purpose of Export

The export market is key to demand for U.S. cotton.

With the significant decline in cotton use by U.S. mills since the late 1990s, exports now account for about 75 percent of the demand for U.S. cotton, making global market developments key to the outlook for U.S. producers. The source of demand for U.S. cotton shifted with the elimination of textile and apparel import quotas that existed under the international Multifiber Arrangement—a process completed in 2005—leading to increased U.S. imports of textiles and apparel and reduced U.S. demand for raw cotton.

Since 2005, there has been significant variability in the volume of U.S. exports and in world prices, much of it attributed to developments in China, the largest global and U.S. market for cotton. Large Chinese purchases contributed to the spike in world prices in 2010/11 (August/July), while large stocks and reduced buying by China are key factors in the outlook for reduced global and U.S. exports in 2013/14.

Mill use of cotton in China has now declined for four consecutive seasons in response to government policies, with more consumption shifting to countries such as India, Pakistan, and Vietnam, who are exporting growing volumes of cotton yarn and other intermediate products to China and other markets.

source: usda

How are our Agricultural Exports Doing?

I have been a fan of the fine job that Daryll E. Ray and Harwood D. Schaffer do in analysis and writing over at the Agricultural Policy Analysis Center, University of Tennessee, in Knoxville. This fall they have been writing about the changing role that U.S. agricultural exports are playing in the increasingly competitive global market. Below, I’ve republished their entire writing about corn, followed by links to their articles about the export situations for soybeans, wheat, cotton, and rice.

Corn exports: A case of unrealized expectations and farm policies that did not deliver

Corn is, without a doubt, the most important crop grown by US farmers and yet for the 2012 crop year US corn exports are projected to be a paltry 715 million bushels, the lowest level since 1970. In addition, for the first time since 1970, wheat exports exceeded corn exports.

The short explanation for this situation lays blame on a severe drought in the major corn production areas in the US. The longer explanation is a bit more complicated than that. The drought is just part of a larger story that has played out over the last half-century.

In 1960, US corn production was just under 4 billion bushels, nearly the same as non-US corn production (all years are harmonized to a standard crop year that that begins in what closely corresponds to the US fall harvest in the named year and ends at the beginning of the next crop year). By 2010, US corn production had tripled to 12.5 billion bushels before falling to 10.8 billion bushels in 2012. During that same period, non-US corn production increased to 20.3 billion bushels.

While both US and non-US yields nearly tripled between 1960 and 2010, US harvested acres increased by 14 percent. At the same time, non-US corn harvested acres increased by 79 percent, accounting for the lion’s share of the gain in production, relative to the US.

World corn exports as a percent of domestic consumption was 7.2 percent in 1960. By 1975 world exports had jumped to over 16 percent of domestic consumption and remained above that level until 1982 when it fell to 14 percent. In the years since 1982, corn exports relative to domestic consumption have remained below 16 percent, falling to 10.7 percent in 2012.

At 275 million bushels in 1960, US exports were an almost half of world corn exports. In 1972 US corn exports jumped to 77.9 percent of world corn exports and remained above 70 percent for sixteen of the next twenty-three years. In five of those years, the US share of world corn exports exceeded 80 percent, including 1995. With the drought in 2012, it was the non-US exports that stood at 80 percent, a level unseen in the preceding 52 years.

The 1970s was a time of unprecedented growth in US corn exports. Growth continued into in the early 1980s, but fell sharply in the mid-1980s. While the US share of world corn exports was relatively high off-and-on over part of the period after the mid-1980s, there has been no upward trend in US corn exports during the last 28 years.

Non-US corn exports on the other hand have expanded greatly, reaching 1 billion bushels in 1999 and hitting 3 billion bushels in both 2011 and 2012. In 2012, for the first time, the US was not the world’s largest exporter of corn, falling to third behind Brazil and Argentina. As recently as 1998, Brazil exported just 315 thousand bushels, compared to 965 million bushels in 2012.

Clearly, corn production and exports are subject to long-term trends. For production, the trend has been decidedly upward in the US and elsewhere in the world. Increases in technology and the rate of adoption of new technologies have the potential to keep this trend going.

So what does all this tell us?

Beginning with the 1985 Farm Bill, the US has pursued policies thought to be consistent with getting grain exports—corn exports specifically—back on an upward trend similar to the 1970s. Those efforts have been doomed to failure in large measure by the steady increase in corn acreage in the rest of the world. Furthermore, additional future increases in worldwide corn acreages will be coming from places like Brazil, not the US. Also, the rate of increase in non-US corn yields may well accelerate in the future.

The US will continue to be an important player in the corn export market. But declarations and farm policies predicated on the expectation that corn exports will be the primary driver for a prosperous US agriculture are no more likely to deliver in the future than they have over the last nearly three decades.

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Soybeans: US export trend is up, share of world exports is down

In contrast to corn where US exports have generally been flat since hitting a peak between 1979 and 1981, US soybean exports have generally trended upward over time. The US exported 5.8 MMT (million metric tons) of soybeans in 1964, passed the 10 MMT threshold in 1969, the 20 MMT threshold in 1978 falling below that level in 7 of the next 27 years before passing the 30 MMT level in 2006 and the 40 MMT level three years later in 2009. With a drought reduced crop, 2012 US soybean exports were 35.8 MMT….

US wheat exports down by nearly half from 1981 peak while non-US wheat exports have doubled

US wheat production stood at 1.4 billion bushels in 1960, dropping to 1.1 billion bushels before taking off as the export boom of the 1970s began to surge. By 1981 and 1982, US wheat production had reached 2.8 billion bushels, double its level just 20 years earlier. And farmers and politicians alike thought that ever-expanding exports had solved the “farm problem.” Since then US wheat production has leveled off remaining in the 2.0 to 2.5 billion-bushel range as producers sought more profitable alternatives….

Most US cotton production traditionally went to domestic mills, now it goes abroad

During the last half century, cotton production has had its share of ups and downs; though this year’s cotton production is expected to be near what it was fifty-plus years ago. Cotton demand has also been variable, but what is most striking is the shift in where the cotton is utilized, that is, processed. Traditionally domestic demand in the form of purchases by US cotton mills dominated US cotton demand, but in recent years export demand has become as dominate as domestic demand used to be….

US is the 4th largest rice exporter; each of the 3 largest rice exporters export more than US produces

US production and consumption of rice have increased markedly over the last half-century, but compared to Asian countries, the US plays a bit-role in world rice production. Most of the rice consumed in the US is domestically grown, though less now than years ago….

China Leads Global Cotton Consumption and Production

  • The latest (August 2011) USDA estimates for 2011/12 project global cotton consumption at approximately 115.2 million bales.
  • After August reductions in both 2010/11 and 2011/12, cotton consumption for the current season is now forecast to grow about 1 percent after a decline of nearly 4 percent in 2010/11.
  • The top four cotton-spinning countries—China, India, Pakistan, and Turkey—are forecast to account for nearly 72 percent of global cotton consumption in 2011/12, slightly below 2010/11 but equal to the average for the 2007-09 seasons.
  • For China—the leading cotton spinner—the share of global consumption is forecast at 40 percent this season.
  • Meanwhile, India—the second leading spinner—has seen its forecast share rise to 18 percent.

U.S. cotton production is down this year due to drought conditions in Texas. Other regions globally have increased production, however, which means that record global cotton production is anticipated for 2011/12.

source: usda

Brazil is Pulling Ahead in Cotton Production


Cotton yields in Brazil have risen the fastest of major world producers in recent years. Brazil and India had similar yields in 1992, both below the United States and the world average.

With the adoption of modern, large-scale farming and improved access to inputs—and due to the extremely favorable climate in Brazil’s new production regions—Brazil’s cotton yields have surged to more than double the world average. Today, Brazil’s average yields are second only to those in Australia and Israel, where production is almost entirely irrigated. Brazil’s 2009/10 cotton yield is estimated at 1,498 kilograms per hectare, only 14 percent below yields in Australia and Israel (USDA, FAS, 2010). (source)

Cotton Demand, Prices, and Supply


photo source: usda
  • Cotton is one of the most important textile fibers in the world, accounting for around 35 percent of total world fiber use.
  • While some 80 countries from around the globe produce cotton, the United States, China, and India together provide two-thirds of the world’s cotton.
  • The United States, which ranks third in production behind China and India, is the leading exporter, accounting for over one-third of global trade in raw cotton.
  • The U.S. cotton industry accounts for more than $25 billion in products and services annually, generating about 200,000 jobs in the industry sectors from farm to textile mill.
  • While demand for U.S. cotton has increased considerably over the last several years, the United States has become an export-dominated market as the domestic textile industry has declined significantly.

From the April 11, 2011 WASDE report:

This month’s U.S. cotton forecasts for 2010/11 show lower production, higher domestic mill use, and lower ending stocks. The production estimate is reduced 215,000 bales from last month based on USDA’s final Cotton Ginnings report released March 25, 2011. Domestic mill use is raised 100,000 bales, reflecting recent activity. The export estimate is unchanged. Ending stocks are reduced 300,000 bales to a record low 1.6 million, the equivalent of 8 percent of total use. The forecast range for the marketing-year average price received by producers of 81 to 84 cents per pound is raised 1 cent on each end of the range.

The world cotton forecasts for 2010/11 include lower production and higher consumption, resulting in a 2-percent reduction in ending stocks. World production is reduced about 400,000 bales, based on decreases for the United States, the African Franc Zone, Turkey, and Pakistan, partially offset by an increase for Brazil. World consumption is raised, reflecting increases for Pakistan, the United States, and others, partially offset by a decrease for Brazil. Revisions to world trade include lower exports by Brazil and the African Franc Zone and lower imports by China and Pakistan. Forecast ending stocks of 41.6 million bales are 36 percent of world consumption, which is the smallest stocks-to-consumption ratio since 1993/94.

U.S. cotton producers are likely to face increased competition in future years as technologies first adopted in the U.S. – genetically engineered (GE) cotton and other agricultural technologies – spread to other countries. India, for example, has adopted GE cotton and managed to expand its cotton area and acieve significant growth in yields. Production rose 70 % in 5 years, and India, once one of the world’s largest importers of cotton, is now one of the largest U.S. competitors.

For the past month, the cotton bale price has hovered near 200 cents per pound. A bale weighs 480 pounds, or 218 kilograms. One 480-pound bale is enough for 215 pairs of jeans. At $2 per pound, this would make the average cost of cotton for each pair of jeans approximately $4.46.


5-year Cotton Price – source:finviz

The U.S. is expected to regain the status as the world’s largest cotton exporter and supplier to China this year, but has hit a low stocks-to-use ratio of 8%. Cotton is included in our government’s direct payment policy and its production this year may be even more lucrative than the high priced grain markets. U.S. exports have been surging in 2011 to China, Turkey, and Bangladesh.

Cotton demand has something in common with meat demand. That is, as the large populations in the developing nations become more prosperous, especially in China and India, the demand for textiles increases.


While ready-to-wear clothes are available, many Indian women pick cloth they
like and have garments custom made by a local darzi, or tailor.
source: flickr

China, the world’s major cotton importer, has announced that they are once again building a cotton reserve. This will encourage cotton production within China by supporting prices.


The expectation is that cotton prices will fall next season, but limitations on seed and equipment limit farmers’ ability to ramp up sowing in some places to cash in on the strong market. This is why production is only expected to increase by around 11%, even though prices have doubled over the past year. Cotton rose to $2.197 on March 7, the highest in 140 years of trading in New York. Cotton surged 92% in 2010, the biggest annual gain since 1973. The price advanced 157% in the past 12 months on the S&P GSCI Commodity Index, surpassing silver and coffee gains, which also more than doubled.

Synthetics have grown in use to help even out high cotton prices. Since it takes six months from cotton in the fields to turn-around clothing, today’s clothing was made with cotton at half the price of the current market. Polyester is roughly twice as cheap compared with cotton as it was five years ago. Hanes company is starting to use Flax as an added fiber to reduce its cotton expense.

Cotton’s stocks-to-use ratio globally may rise to 40-44% next season, though that is well below its 10-year average of 50%. That would be up nicely from this past season’s ratio of 37%.


The International Cotton Advisory Committee, a Washington-based 43-member country group, predicts that cotton’s share of the global textile market will shrink to about 30 percent by 2020 from about 37 percent as mills switch to synthetics. However, Jagdish Parihar, managing director of the cotton division at Olam, a Singapore-based trader of farm commodities, predicts that a sustained annual demand growth of 3-4% is a possibility.
K. McDonald