Overview of the World Cotton Industry
Cotton is one of the most important and widely producedagricultural and industrial crops in the world. Cotton is grown in more than 80countries on about 2% of the worlds arable land, making it one of the most significantin terms of land use after food grains and soybeans. Cotton is also a heavilytraded agricultural commodity, with over 100 countries involved in exports orimports of cotton.
More than 100 million family units are engaged directly incotton production. When family labor, hired-on farm labor and workers inancillary services such as transportation, ginning, baling and storage areconsidered, total involvement in the cotton sector reaches an estimated 300million people. It also provides employment to additional millions in alliedindustries such as agricultural inputs, machinery and equipment, cottonseed crushingand textile manufacturing. Cotton cultivation contributes to food security andimproved life expectancy in rural areas of developing countries in Africa, Asiaand Latin America. Cotton played an important role in industrial developmentstarting in the 17th century and continues to play an important roletoday as a major source of revenue. The value of world cotton production isestimated at more than $30 billion.
Until the current economic recession, the world cottonindustry had been experiencing robust demand growth and rising yields, makingit one of the best-performing commodity industries in the world during thefirst part of this decade. The world cotton industry has experienced dramaticchanges over the last six decades as production nearly quadrupled, rising from7 million tons in 1950/51 to 27 million tons four years ago, before falling to23 million in 2008/09. The average annual rate of growth in world productionover the last six decades has been about 2.5% per year.
New technologies, more extensive use of existingtechnologies, and new areas dedicated to cotton are resulting in dramatic gainsin production. Since the mid-1990s, the world yield has risen from less than600 kilograms per hectare to nearly 800. Conventional cotton varietydevelopment, biotechnology, improved management of irrigation, targetedapplications of pesticides, improved use of fertilizers, and improvements in cropmanagement are leading to increased yields and lower production costs.
A survey by the Secretariat of costs of production usingdata 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 alsoexcluded, the resulting marginal cash costs of production averaged between$0.40 and $0.45 per pound. These data indicate that the average land owner, producingcotton at average cost and gaining average yields, assuming no changes inprices of competing crops, will tend to maintain or expand production when farmprices exceed 40 to 45 U.S. cents per pound of lint, translating into CIFprices reflected in the Cotlook A Index of between 50 cents and 60 cents per pound.
World demand for cotton has increased at an impressive pacesince 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 decadesaw extraordinary rates of growth in cotton use. During the period from 1970/71through 1998/99, world cotton use rose at an annual rate of 1.5%, but between1998/99 and 2006/07, cotton use rose by 4.5% per year.
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Thisarticle consists of the remarks prepared for delivery during The MultilateralTrading System: a US-Africa dialogue on cotton, Carnegie Endowment forInternational Peace, Washington, DC on 20th July 2009, organized bythe IDEAS Centre, Geneva.
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