facebook_pixel

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: Cotton Makes a Hard Landing

September 15, 2017

Following USDA’s September numbers, December cotton seems to have landed back in the 69-cent, pre-Harvey area.

Market Analysis

USDA Spins Market with Record Supply-to-Use Ratio

September 15, 2017

Hurricanes were but a mere hiccup for the world and U.S. crops. Instead, USDA spun some record-setting numbers that left the market dizzy.

Market Analysis

Shurley: Storms and Other Unknowns for September

September 1, 2017

September could be interesting. Loss evaluation from Harvey will still be underway, and all eyes are watching Irma. How will it all impact USDA’s September report…if at all?

Market Analysis

Hurricane Harvey Leaves Several Market Scenarios

September 1, 2017

Following Hurricane Harvey’s rampage through East and Coastal Texas, cotton growers face several possible outcomes based on the level of damage to their fields.

Market Analysis

Market Watching for Harvey’s Impact on U.S. Crop

August 25, 2017

Hurricane Harvey blew prices to triple digit gains on the week. Now, the market will assess crop damage to see if the storm blew up crop projections as well.

Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

don shurley
Market Analysis

Shurley: So Much for 18 Million Bales and Higher Prices

August 14, 2017

If USDA’s September numbers still validate a 20+ million bale crop, prices could slide. If not, the 68-70 cent level – or better – should hold.

Around The Gin
Product News

Americot Adds Three to Regional Sales Force

September 20, 2017

Americot, Inc. has added three new regional representatives to the company’s sales force.

Product News

Enlist One Herbicide Added to Enlist System

September 13, 2017

Dow AgroSciences adds a straight-goods 2,4-D choline herbicide for additional tank-mix flexibility in Enlist crops.

Product News

Elevore Herbicide Registered for Burndown Use

August 30, 2017

Dow AgroSciences’ Elevore herbicide has received federal registration for use in fall and spring burndown programs for cotton, soybeans and corn.

Product News

Stoneville Legacy Club Honors Charter Members

August 24, 2017

The new Stoneville Legacy Club honored 129 growers who recorded average yields of 1,794 lbs/A or higher on at least 20 acres with Stoneville cotton varieties.

Product News

Improved Bollworm Management Expected in 2018

August 23, 2017

Southeast Texas cotton farmers should have new tools available in 2018 to better manage bollworms and other potentially damaging pests.

Product News

Maximizer Club Honors Top FiberMax Dryland Growers

August 17, 2017

The FiberMax Maximizer Club honored 121 growers who yielded at least 1,000 lb/A on dryland acres with FiberMax varieties in 2016.

Product News

Monsanto, Valent Expand Roundup Ready PLUS Partnership

August 7, 2017

Monsanto and Valent U.S.A. are expanding their crop protection partnership for the 2018 Roundup Ready PLUS Crop Management Solutions platform.

Product News

New Broadleaf Burndown Option Coming from Dow AgroSciences

July 31, 2017

A new burndown option for tough broadleaf weeds has shown excellent promise in trials across the Mid-South and Midwest.

Latest News
Market Analysis

USDA Spins Market with Record Supply-to-Use Ratio

September 15, 2017

Hurricanes were but a mere hiccup for the world and U.S. crops. Instead, USDA spun some record-setting numbers that left the market dizzy.

Market Analysis

Shurley: Cotton Makes a Hard Landing

September 15, 2017

Following USDA’s September numbers, December cotton seems to have landed back in the 69-cent, pre-Harvey area.

Market Analysis

Higher Prices Holding as Winds Keep Blowing

September 10, 2017

An ill wind is blowing amidst the chaotic cotton trading wrought by back to back hurricanes slamming into two of the country’s major cotton producing regions. But which way does the wind blow?

Market Analysis

Post Harvey, 75 Cents Back in Cotton’s Sights

September 2, 2017

It remains to be seen if the greater loss from Harvey will be to cotton quantity or quality. But it likely means a wider trading range, with 75 cents now possible.

Market Analysis

Shurley: Storms and Other Unknowns for September

September 1, 2017

September could be interesting. Loss evaluation from Harvey will still be underway, and all eyes are watching Irma. How will it all impact USDA’s September report…if at all?

Market Analysis

Hurricane Harvey Leaves Several Market Scenarios

September 1, 2017

Following Hurricane Harvey’s rampage through East and Coastal Texas, cotton growers face several possible outcomes based on the level of damage to their fields.

Market Analysis

Market Watching for Harvey’s Impact on U.S. Crop

August 25, 2017

Hurricane Harvey blew prices to triple digit gains on the week. Now, the market will assess crop damage to see if the storm blew up crop projections as well.

Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

Market Analysis

Shurley: So Much for 18 Million Bales and Higher Prices

August 14, 2017

If USDA’s September numbers still validate a 20+ million bale crop, prices could slide. If not, the 68-70 cent level – or better – should hold.

Market Analysis

USDA Report Stuns Market. Now, Wait for Reality.

August 14, 2017

USDA stunned the market with its August estimate of U.S. cotton production. But remember – history has shown consistent deviation between mid-summer estimates and final harvest realities.

Market Analysis

Production, Weather Woes Boosting Market

August 4, 2017

Mother Nature’s recent Texas outburst was rough on cotton fields. But it was enough to boost prices back into the 70s.

Market Analysis

Technically Speaking, Pay Attention to Fundamentals

July 28, 2017

With prices holding in a three-cent range, it’s likely time to pay attention to what the market fundamentals and technicals are telling us.

Market Analysis

December Futures Prices? Ask Mother Nature.

July 23, 2017

Opinions differ on where December futures prices may go. But there’s no doubt that Mother Nature holds the key to forthcoming price activity.

Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.