In the latest of our series exploring the world’s most important commodities, the IOE&IT Daily Update turns its attention to cotton.
Cotton is one of the most widespread, profitable non-food crops in the world. Its production provides an income for more than 250m people and supports almost 7% of all labour in developing countries.
Despite the development of modern fibres, approximately half of all textiles are still made from cotton because it is moisture-absorbent, durable and comfortable.
Organic cotton has additional benefits, such as temperate UV protection and antibacterial qualities, making it suitable for medical application such as in personal protective equipment.
Cotton fibres come from the seed coat of cotton plants – the outer layer of the plant’s seeds. Before they can be turned into textiles the cotton seeds must first be separated from the plant, and then the fibres from the seeds.
Worldwide production
According to the US Department of Agriculture, an estimated 115.7m bales were produced worldwide in 2022-23.
The Organisation for Economic Co-operation and Development (OECD) predicts that world cotton production is projected to grow 1.5% yearly to reach 28m tons in 2030.
Leading producers China and India increased production slightly on 2022, but flooding in Pakistan means its cotton output is forecast to be 38% lower.
In the US, droughts in cotton producing areas in 2022 lead to the worst harvest in a decade, with Texan farmers in particular abandoning production.
The Cotton Association of India (CAI) has predicted that the country’s production in 2022/23 is set to fall to the lowest level in 14 years and below domestic consumption for the second straight year as yields dropped in producing states.
CAI said that Indian production could fall to 30.3m bales, down 3.2% from the previous estimate, and 2023’s cotton exports are expected to slide sharply to 2.5m bales compared to 4.3m bales last year.
Main producers
China – 6,423,000 tons
India – 6,162,000 tons
US – 3,181,000 tons
Brazil – 2,341,000 tons
Pakistan – 980,000 tons
Trade
Cotton is the world’s 51st most traded product.
In 2021, the top exporters of cotton were (%):
China – 19.6%
India – 16.3%
US – 11.7%
Vietnam – 6.35%
Brazil – 5.85%
In 2021, the top importers were:
China – 15.8%
Bangladesh – 14.4%
Vietnam – 8.08%
Turkey – 6.46%
Pakistan – 3.99%
The distribution of consumption across the globe depends on the location of cotton mills, which are often located in proximity to clothing and apparel industries.
The OECD notes that in recent decades there has been a marked shift in cotton mill activity from the west and former Soviet Union towards Asia, especially towards China.
Rising labour costs have stimulated the development of cotton milling in other Asian countries, notably Vietnam and Bangladesh.
Some countries have struggled with pest problems and water scarcity, but better genetics and the adoption of advanced agricultural practices for sustainable cotton production could bring improvement.
Consumer trends
During the first wave of lockdowns since the start of the Covid-19 pandemic, prices for raw cotton dropped strongly in the spring of 2020 as consumers deserted stores and bought fewer clothes.
After this shock, demand for goods was stronger than initially expected as government policies to protect incomes and the increased savings from the large decrease in spending on services sustained demand for cotton. Consequently, global demand of raw cotton increased in 2020/2021.
World trade of raw cotton fell less than consumption in 2019/2020 and the rebound in world trade in 2020/2021 resulted in the highest trade volumes since the record-high of 2012.
Following a collapse in cotton prices to under $0.50 per pound at the start of the pandemic, cotton prices have gradually stabilised to around $0.80.
Ethical and sustainable
Cotton trade is also being affected by external factors such as the rise of recycling for textiles, which could affect the demand for cotton.
Consumer and government reaction to China’s use of forced labour in its Xinjiang cotton production has also impacted supply chains, particularly following the US ban on cotton from the region, which has in turn affected textile producers looking to export to the US.
The global organic cotton market is projected to grow from $637.1m in 2021 to $6,730.9mby 2028 at a CAGR of 40.0% in forecast period, 2021-2028.