CATEGORY
Cotton
Cotton is a natural fiber whose major consumption is for mill use where it is ginned, spun and woven for the various downstream industries of textiles, garments and apparel. The global cotton yield for 2022/23 is estimated at 787 Kg/Ha with China being the world’s largest cotton producer and the US being the world’s top exporter.
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Cotton Global Market Outlook
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Rising concerns of global economic downtrend are weighing on cotton consumption prospects, which is seen to raise the market surplus for 2022/23 despite a contraction in production volumes from major regions, such as the US and China, owing to adverse weather reducing yields
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While Improving prospects of the US crop is seen to raise harvest volumes for 2022/23 and keep the global market well supplied – with the USDA upward revising its estimate of US cotton output for 2022/23 by 440,000 bales in its Jan report
Cotton Demand Market Outlook
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Global cotton consumption is projected to decline by 5.7 percent for 2022/23, pressurized by rising concerns of suppressed demand from the major downstream segments, on the account of the prevailing global macroeconomic downturn and cost of living crisis in key consuming regions.
Global Supply–Demand Analysis : Cotton
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Asian countries such as China, India, Pakistan, Bangladesh and Vietnam are the leading cotton consuming countries where it is used as a feedstock in mills to manufacture apparel, garments and textiles which are exported as finished products. Approx. 75 percent of the global cotton consumption is from these countries
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The majority of cotton is utilized in textile mills where the cotton is ginned into fiber which is subsequently spun, woven and further processed to various end-use applications
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The Apparel segment accounts for the major downstream application which is ~63 percent; followed by home textiles accounting for ~29 percent; while the other industrial, pharmaceutical, and nonwovens constitute the remainder of end-use applications for cotton
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Asian countries such as China, India, Pakistan, Bangladesh and Vietnam are the leading cotton consuming countries where it is used as a feedstock in mills to manufacture apparel, garments and textiles which are exported as finished products. Approx. 75 percent of the global cotton consumption is from these countries
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US domestic cotton consumption is represents only 2 percent of the global market share, and its exports are highest in the world accounting for ~32 percent of global cotton exports
Cotton Industry Cost Structure Analysis
Key drivers in production cost of Cotton in the US involves plant protection inputs (like fertilizer, manure, pesticides) and post production process. While in developing countries like India and China, cost involved in labor dominates the cost structure owing to intensive labor activities and less mechanization. Higher agricultural input cost inflation exacerbated by the Russia-Ukraine war is seen to raise costs of fertilizers, energy and labor, thus raising the production costs of cotton over 2022/23
Asia
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With cotton cultivation and harvesting being a labor intensive process in Asian countries such as China and India, labor costs dominate the overall cost structure
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While the input costs such as fertilizers, pesticides and other chemicals used in crop development are seen to contribute a significant proportion to the cost of cotton production
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Minimum support price of cotton for farmers must be tracked to understand the price movements of cotton and better negotiate with suppliers in Asia
US
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Cotton cultivation in North America is highly mechanized with minimal cost attributed to labor
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Fixed costs incurred on machinery such as mechanized harvesters contribute the highest proportion to overall costs
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While plant protection inputs and post production costs such as the cleaning, ginning, packaging and transportation from farmers to textile mills are an important cost driver of cotton cultivation
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