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

Fluctuations and Cancellations Create Interesting Week

May 22, 2017

Despite price fluctuations and export sales cancellations over the past week, the cotton market hangs tough as U.S. planting continues.

Market Analysis

Market Holding, but Lock in Prices Now

May 15, 2017

Cotton’s recent price surge is likely not done yet. But, growers who have not priced their 2017 crop should do so soon before the market softens.

Market Analysis

High Quality Cotton Bumps Export Demand and Prices

May 2, 2017

The 2016 U.S. cotton crop produced high yields and high-quality fiber, triggering a spike in export demand and higher market prices.

Market Analysis

Cleveland: Prices Holding in Face of Softening Exports

May 1, 2017

The bulls continue to push for higher prices, but the softening of exports are starting to lay the foundation for price slippage.

white ripe cotton field ready for harvest
Market Analysis

Strong Market Support Pushes Prices Higher

April 21, 2017

Cotton prices made a run higher this past week, as export sales and inquiries continue to provide support to the market.

Market Analysis

Shurley on Cotton: Exports Continue Upward Trend

April 12, 2017

USDA’s April supply and demand estimates increased U.S. cotton exports for the 2016 crop year to 14 million bales – a surprising upward jump, but one that is certainly justified.

Market Analysis

Cleveland: Strong Exports Driving World Stocks Lower

April 10, 2017

Strong export sales and brisk shipments of U.S. cotton should continue for at least 2-4 more months, helping to lower world cotton stocks and maintain prices in the 70s.

Around The Gin
Product News

Transform Earns Section 18 Exemptions for Cotton, Sorghum

May 4, 2017

Transform WG insecticide has received Section 18 emergency use exemptions for use in cotton and sorghum in select states for the 2017 production season.

Product News

EPA Approves Monsanto’s NemaStrike Technology

May 2, 2017

The EPA has issued registration for tioxazafen, a new nematicide from Monsanto that will be branded as NemaStrike Technology for nematode control and yield protection in cotton, corn and soybeans.

Product News

Indigo Partners Launched for In-Field Technology Testing

April 25, 2017

Indigo is launching Indigo Partners, a collaboration of 25 U.S. growers and agronomic experts to test agricultural technologies – including Indigo’s microbial seed treatments – during 2017.

Product News

UPI Adds New Herbicide Products

April 14, 2017

UPI has added two new herbicides to its portfolio of high quality crop protection products for the U.S.

Product News

FiberMax One Ton Club Membership Tops 1,000

April 14, 2017

A record number of growers qualified for the FiberMax One Ton Club in 2016 with four-bale and higher yields with FiberMax varieties.

Product News

Deltapine NPE Program Kicks off Tenth Year

April 10, 2017

Nearly 200 growers will participate in the tenth season of the Deltapine New Product Evaluator (NPE) Program.

Product News

BASF Expands Dicamba Manufacturing Facility

March 22, 2017

BASF has completed a $270 million expansion of its Beaumont, TX, facility – the largest agricultural products facility investment in company history.

Product News

Topguard Terra Label Amendments for Cotton Root Rot in Texas

March 7, 2017

Texas growers now have additional preplant and post planting options for using Topguard Terra to control cotton root rot.

Latest News
Market Analysis

Fluctuations and Cancellations Create Interesting Week

May 22, 2017

Despite price fluctuations and export sales cancellations over the past week, the cotton market hangs tough as U.S. planting continues.

Market Analysis

Shurley: Is This the Wake-Up Call We’ve Been Expecting?

May 15, 2017

Market movement in the past few weeks may be the wake-up call the industry has been expecting.

Market Analysis

Market Holding, but Lock in Prices Now

May 15, 2017

Cotton’s recent price surge is likely not done yet. But, growers who have not priced their 2017 crop should do so soon before the market softens.

Market Analysis

Cleveland: Is 80 Cents Within Reach?

May 5, 2017

The expiring May contract established a new high on the week, potentially setting the stage for July contracts to trickle higher.

Market Analysis

High Quality Cotton Bumps Export Demand and Prices

May 2, 2017

The 2016 U.S. cotton crop produced high yields and high-quality fiber, triggering a spike in export demand and higher market prices.

Market Analysis

Cleveland: Prices Holding in Face of Softening Exports

May 1, 2017

The bulls continue to push for higher prices, but the softening of exports are starting to lay the foundation for price slippage.

Market Analysis

Strong Market Support Pushes Prices Higher

April 21, 2017

Cotton prices made a run higher this past week, as export sales and inquiries continue to provide support to the market.

Market Analysis

Shurley on Cotton: Exports Continue Upward Trend

April 12, 2017

USDA’s April supply and demand estimates increased U.S. cotton exports for the 2016 crop year to 14 million bales – a surprising upward jump, but one that is certainly justified.

Market Analysis

Cleveland: Strong Exports Driving World Stocks Lower

April 10, 2017

Strong export sales and brisk shipments of U.S. cotton should continue for at least 2-4 more months, helping to lower world cotton stocks and maintain prices in the 70s.

Market Analysis

Shurley on Cotton: How Do Increased Acres Impact Prices?

April 3, 2017

The market anticipated an acreage increase for cotton, and USDA says the number is roughly 350,000 acres more than most expected. How does this impact the market and why?

Market Analysis

No Surprises When It Comes to Acreage or Exports

March 31, 2017

U.S. cotton acreage predictions in USDA’s 2017 Prospective Plantings report were not surprising. Neither were the export sale and delivery numbers that the U.S. continues to enjoy.

Market Analysis

Cleveland: Market Still Looking for Its Top

March 26, 2017

The market is now showing a tendency to sell off and lose daily gains as the trading day ends. It’s really doing nothing more than still trying to pick its top.

Market Analysis

Cotton Prices Reach Upper Third of Historical Range

March 17, 2017

The cotton bull made another impressive stand on the past week, as cotton prices continue to hold in the upper one-third of its historical price range.

Market Analysis

Shurley on Cotton: New Crop Strength and Outlook

March 13, 2017

Four factors are driving the new crop strength and outlook for cotton in 2017.

Market Analysis

It Bears Repeating – Price New Crop Now!

March 13, 2017

Two things to keep in mind: If you like the price enough to plant cotton, then like the price enough to sell some of it. And, December futures are expected to move 10-15 cents lower.