Tracking Cotton Demand Can Be Complicated

While much of the market’s attention is focused on the sharp drop in 2007 U.S. cotton acreage and a widely expected decline in 2008, we must not forget there is another side of the equation that determines prices. Ultimately, one can argue that demand is the more important side of the equation. There must be a demand for cotton. Otherwise, there would be no need to plant and produce the fiber. Stronger or weaker demand will send price signals to producers and induce either more or less production. That’s simple marketplace economics at work.

Accurately gauging cotton demand, however, is easier said than done. There are a number of uncertainties that come into play at different levels of the market. Without fully examining all of the links of the chain, we can look at the textile mills which buy the raw fiber to process into yarn and the consumer who buys the finished product at local department stores. At the risk of getting too far into the weeds, it is important to look at recent demand trends and explore what the future may hold.

The encouraging news is that global demand for cotton is growing. For the three marketing years between August 1, 2004, and July 31, 2007, world mill demand grew at an average annual pace of 7.6% – the strongest growth for any 3-year period in the last 50 years. That translates into an additional 25 million bales of mill demand. However, the recent growth also has been accompanied by greater concentration. Bear in mind that mill demand for 131 countries is reported by USDA, but appreciable growth over the three-year period was limited to fewer than 20 countries. Significantly, the “Big Three” of China, India and Pakistan now account for two-thirds of total mill use. An unfortunate aspect of the relocation in mill demand is the continuing pressure on the U.S. textile industry. The United States now accounts for less than 5% of global mill demand.

However, textile mills’ demand is just one step towards supplying the type of products that consumers are willing to purchase. Cotton demand has a much different look at the consumer level with U.S. retail purchases leading the way. At 37 pounds-per-person, U.S. consumers are purchasing the equivalent of one of every five cotton textile and apparel products produced in the world. The U.S. accounts for less than 5% of world population but 20% of cotton retail demand. The challenge is to foster that type of demand in other countries, such as China and India, where the average consumer annually buys between 5 and 8 pounds of cotton products. Admittedly, their income levels prohibit them from approaching U.S. consumers’ level, but each additional pound of consumption across the combined population of the two countries results in another 5 million bales in demand. One question that is worth trying to find an answer to: Why the average consumer in Western Europe, who has income levels similar to the U.S. consumer, buys only half that of U.S. consumers?

One of the big questions facing the U.S. cotton industry is whether or not these trends will continue. There are some trends we would like continued and others changed. The recent growth in excess of 7% is a positive, but will it continue in the face of stronger cotton prices? As cotton prices increase relative to yarn values and polyester prices, one could expect these growth rates to slow. However, as long as global economies expand and incomes increase, demand should continue to move higher. The U.S. cotton industry’s challenge is to encourage that same level of demand growth in the 95% of the world’s population not in the U.S.

Caption:

Gary Adams, National Cotton Council

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

OA Cleveland
Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

OA Cleveland
Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Around The Gin
Product News

Ratting Out Copper Theft

June 10, 2015

A simple alarm technology is helping to stop copper thieves who target irrigation systems.

Product News

EPA Approves New Premix for 2016 for Cotton, Soybean Weed Control

May 29, 2015

Cotton and soybean growers will have a new weed control option in 2016 with Warrant Ultra Herbicide, a premix of acetochlor and fomesafen.

Product News

Deltapine NPE Program Begins Eighth Year of On-Farm Variety Evaluation

April 28, 2015

Nearly 200 farmers will be part of the Deltapine New Product Evaluator program this year to help evaluate cotton variety candidates for the Deltapine Class of 16.

Product News

EPA Approves Enlist Duo Herbicide for Use in Additional States

April 2, 2015

The EPA has approved Enlist Duo herbicide for use in nine additional states, including four in the Cotton Belt.

Product News

New 2015 CROPLAN Cotton Varieties Feature Bollgard II XtendFlex Technology

March 19, 2015

WinField is adding Monsanto’s new Bollgard II XtendFlex cotton trait to two new CROPLAN cotton varieties for 2015.

Precision Technology

New Features for TeeJet Aeros 9040 Field Computer

March 18, 2015

TeeJet has added new features to its Aeros 9040 Field Computer for 2015.

Precision Technology

TeeJet Launches New DynaJet Flex Nozzle Control System

March 17, 2015

The new DynaJet Flex 7120 nozzle control system from TeeJet Technologies helps growers manage spray quality across a variety of operating speeds and application rates.

Product News

New Cheminova Chemistry to Help Control Herbicide Resistant Weeds

February 23, 2015

Cheminova plans to register pethoxamid, a new herbicide active ingredient, to help growers manage herbicide-resistant weeds.

Latest News
Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Market Analysis

Mother Nature Now Controls the Market

June 1, 2015

Mother Nature has taken control of the market, thanks to weather-related acreage losses in the U.S., India and China.

Market Analysis

Shurley on Cotton: Prices Steady, But Tempting Downside Support

May 27, 2015

Amid the volatility and unknowns of the cotton market, this much we know – cotton production in 2015 will require patience, a clear understanding of the risks and careful evaluation of marketing tools and choices.

Market Analysis

Weather Worries Put Cotton Market on the Defensive

May 26, 2015

The cotton market found itself on the defensive this past week, as weather issues in all cotton-producing countries helped drive the dollar higher and prices lower.

Market Analysis

Plexus: Look for Tight, Long-Term Trading Range

May 22, 2015

The market has encountered both strong support and resistance to keep prices confined to narrow trading ranges for both July and December cotton.

Market Analysis

Despite Bearish Reports, Cotton Continues to Hold the Higher Ground

May 16, 2015

The cotton market continues to defy the onslaught of bearish shots across its bow.

Market Analysis

Shurley on Cotton: No Surprises in May USDA Numbers, Sideways Market Continues

May 13, 2015

USDA’s May WASDE report contains the first U.S. and World estimates for the 2015 crop year, and the numbers are about as expected – some better than expected.

Market Analysis

Market Up and Down, But Not Down and Out

May 11, 2015

With some exceptions, cotton prices spent time backing and filling the entire week. Yet the market is still attempting to flex its arms and muscles a bit to the top side.

Market Analysis

Is the Cotton Market Showing Longer Legs?

May 1, 2015

The stars seemed to align for the cotton market this past week, as prices moved to highs not seen in almost nine months.