Friday, January 1, 2010

International Cotton Market Fashion

Overview of the World Cotton Industry is one of the most important and widely produced agricultural and industrial crops in the world. Cotton is grown in more than 80 countries on about 2% of the worlds arable land, making it one of the most significant in terms of land use after food grains and soybeans. Cotton is also a heavily traded agricultural commodity, with over 100 countries involved in exports or imports of cotton. than 100 million family units are engaged directly in cotton production. When family labor, hired-on farm labor and workers in ancillary services such as transportation, ginning, baling and storage are considered, total involvement in the cotton sector reaches an estimated 300 million people. It also provides employment to additional millions in allied industries such as agricultural inputs, machinery and equipment, cottonseed crushing and textile manufacturing. Cotton cultivation contributes to food security and improved life expectancy in rural areas of developing countries in Africa, Asia and Latin America. Cotton played an important role in industrial development starting in the 17th century and continues to play an important role today as a major source of revenue. The value of world cotton production is estimated at more than $30 billion. Until the current economic recession, the world cotton industry had been experiencing robust demand growth and rising yields, making it one of the best-performing commodity industries in the world during the first part of this decade. The world cotton industry has experienced dramatic changes over the last six decades as production nearly quadrupled, rising from 7 million tons in 1950/51 to 27 million tons four years ago, before falling to 23 million in 2008/09. The average annual rate of growth in world production over the last six decades has been about 2.5% per year.New technologies, more extensive use of existing technologies, and new areas dedicated to cotton are resulting in dramatic gains in production. Since the mid-1990s, the world yield has risen from less than 600 kilograms per hectare to nearly 800. Conventional cotton variety development, biotechnology, improved management of irrigation, targeted applications of pesticides, improved use of fertilizers, and improvements in crop management are leading to increased yields and lower production costs. A survey by the Secretariat of costs of production using data from 2006/07, indicates that the average total cost of production, excluding the cost of land rent and the value of cottonseed sold after harvest, averaged about $0.50 per pound, and if economic and fixed costs are also excluded, the resulting marginal cash costs of production averaged between $0.40 and $0.45 per pound. These data indicate that the average land owner, producing cotton at average cost and gaining average yields, assuming no changes in prices of competing crops, will tend to maintain or expand production when farm prices exceed 40 to 45 U.S. cents per pound of lint, translating into CIF prices reflected in the Cotlook A Index of between 50 cents and 60 cents per pound.

World demand for cotton has increased at an impressive pace since the 1950s, rising from 7 million tons in 1950 to 26 million tons in 2007, for an average annual rate of growth of more than 2%. The first half of this decade saw extraordinary rates of growth in cotton use. During the period from 1970/71 through 1998/99, world cotton use rose at an annual rate of 1.5%, but between 1998/99 and 2006/07, cotton use rose by 4.5% per year.