What is in this article?:
- Global cotton industry facing slow yield decade
- Regional trends
- World cotton production is expected to grow only modestly through the rest of this decade, a development that could constrain both consumption and the cotton value chain.
- The only scenario that might change the growth rate is the discovery of a new technology – such as Bt cotton – that could trigger a new round of yield hikes.
Changes in regional trends are expected to continue for the remainder of this decade, according to Townsend. Those will include:
- Because of competition with food crops, cotton production in China is expected to trend lower during this decade to about 28 million bales by 2019-20.
- Cotton production in India is expected to grow slowly this decade and reach 30 million bales by 2019-20, compared with the current level of about 28 million bales.
- In the United States, with competition from biofuels boosting grain prices and cotton yields rising slowly, U.S. production in 2019-20 is expected to reach about 18 million bales, compared with the current level of around 16 million bales.
- There is little indication that area or yields in Pakistan will begin rising, and production at the end of the decade will likely be likely be only a little higher than it is now.
- With ample land resources, production in Brazil may trend higher this decade, reaching close to 14 million bales by 2019-20. However, there is little expectation of change in Turkey, and water restrictions will prevent increased cotton production in Australia.
- Production in Central Asia (former Soviet Union) is trending downward because of an emphasis on food production. In the 1980s, yields in the Soviet Union were double the world average yield; today cotton yields in Central Asia are less than the world average, and no change in that trend is likely.
- Like South America, Africa could be an area of cotton production increase this decade. Africa has abundant unused arable land, and because cotton is a relatively high-valued crop, drought tolerant and storable, expansions in cultivation may include cotton. African cotton production could rise from 6 million bales this season to between 7 million and 9 million bales by the end of the decade.
During 2011-12, world mill use is estimated to be 112 million bales. With world production expected to increase slowly this decade to 130 million bales, consumption growth must also be limited to approximately that level.
“For the nine years from 1998-99 to 2007-08, China accounted for 83 percent of the additional mill use worldwide. The Chinese industry is expected to use 44 million bales of cotton this season, up from about 18 million in the 1990s,” Townsend notes.
China to dominate
“Chinese mill use of cotton accounts for 39 percent of global mill use, up from 23 percent in 1998-99. Chinese mill use will continue to account for the largest share of global cotton mill use in the long-term, and mill use of cotton in China is forecast to rise to approximately 50 million bales by 2019-20.”
Mill use in India and Pakistan is also expected to climb this decade, reaching almost 32 million bales in India from 20 million currently, and rising toward 14 million bales in Pakistan, up from 10 million currently.
By 2019-20, mill use in industrial countries is forecast to fall to 3 million bales, including 2 million in the United States.
Townsend says the ICAC Secretariat does not have a statistical model to forecast prices years in advance. (The International Cotton Advisory Committee is an organization of the world’s cotton producing and consuming countries, based in Washington.)
“Based solely on intuition, it would seem possible that prices during this decade could be one-third higher than the average level that prevailed during the 2000s,” he says. “The Cotton Outlook A Index averaged 60 cents per pound between 2000-01 and 2009-10. If the Cotlook A Index averages 80 cents per pound during the decade from 2010-11 to 2019-20, in real terms, prices will still be lower than during the 1990s.
The potential rise in average cotton prices this decade, compared with the average of 60 cents that prevailed during the 2000s, will add to the cost pressures facing the cotton value chain. The likely result will be continuing consolidation among gins, merchants and textile mills.
Using the United States as an example of consolidation among gins, since 1990, the number of operating gins in the United States has fallen from about 1,500 to approximately 700, meaning that the average volume per gin has increased from 10,300 bales per year to 22,500 bales.