History Lessons

By Jim.Robinson|March 16, 2009

Few would disagree that 2008 will be remembered as a period of gloom for the global cotton industry, as a year in which some of the big players of the international cotton trade received fatal blows in the cotton futures which, in turn, raised serious doubts on the undisputable ability of futures trading in combatting price volatility. This anomaly, although short lived, was a significant deterrant for other players engaging themselves in long term hedging ventures. No comforting precautions have so far been developed by the respective regulatory authorities to prevent the repetition of this unfortunate development. It can be confidently argued that no previous such upsurge and downfall in New York cotton futures could possibly be cited.

The other unpleasant development was the financial crises, which first cropped up in the U.S. in mid-2008 and displayed a tendency of global growth. This has hit the cotton industry badly. Although the detrimental effects of these financial crises to the global cotton textile and clothing value chain have not yet been fully assessed, it can be argued that job losses, especially in textile and clothing manufacturing, will be imminent. This will certainly negatively affect the mill consumption of cotton, hence the global cotton trade as a whole.

The idea of turning this difficult period into opportunity and advantage is certainly very appealing, but to reduce the likely negative impacts of these global crises might also be an attractive proposition. For the economic viability of the global cotton industry, it is perhaps extremely appropriate to call for careful consideration by the respective governments of the cotton producing countries.

Turning from the global perspective to the local picture, in Turkey we can say our situation parallels the global trend. Turkey is also experiencing significant drops in cotton production and cotton consumption, as well as in cotton trade, particularly in imports. In the current season, the total cotton production is estimated to be no more than 500,000 tons, with maximum consumption just below 1.1 million tons and cotton imports at around 600,000 tons. In view of the challenges being faced by the textile export sector of Turkey, it should certainly be regarded as a successful outcome if the export figures of textiles and clothing products in 2009 are exceded by even a small margin or remain at the same levels as 2008.