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

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

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Around The Gin
Product News

Protect Cotton Potential from Weeds, Worms and Diseases

July 12, 2017

Southeast cotton producers say latest technologies from PhytoGen help protect yield and quality.

Product News

Monsanto “Troubled” by Arkansas Dicamba Decision

June 26, 2017

Monsanto has weighed in on the Arkansas Plant Board’s proposed ban of dicamba use in the state.

Product News

Drexel Adds Two Regional Sales Reps

June 16, 2017

Kyle Herring and David Davis have joined Drexel Chemical Company as regional sales representatives.

Product News

Dow AgroSciences Launching Enlist Corn in 2018

June 16, 2017

Following the launch of Enlist cotton, Dow AgroSciences will make Enlist corn commercially available for 2018 after receiving Chinese import approvals.

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.

Latest News
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.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Shurley on Cotton: Where Did the Acres Go?

July 6, 2017

Dr. Don Shurley says the recent USDA Planted Acreage report did not deliver as expected, making times a bit confusing for producers looking to manage risk.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Market Analysis

Sleepy Market Watching U.S. Crop Progress

June 3, 2017

The cotton market snoozed all week, watching crop development and holding solid at 72-73 cents for new crop December.

Market Analysis

Shurley: Prices Weaker but Remain Above Support

May 31, 2017

As growers complete planting and move fully into the growing season, evaluating the outlook and making price risk management decisions will be crucial.

Market Analysis

Market Settling In as Old Crop Settles Out

May 31, 2017

On-call sales versus purchases are coming in line. Old crop July is done, and the open interest contract leader is now December.

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.