The euphoria over high cotton prices — and the predicted big jump in cotton acreage in the Southeast and throughout the U.S. Cotton Belt in 2011 — isn’t an isolated event. Not by a long stretch.
Of the major cotton producing countries in the world, only China had a reduction in cotton production in 2010. The Chinese, constantly challenged on the issue of fiber versus food, saw a drop in production of 6.25 percent, down to a still world-leading 30 million bales.
While U.S. cotton acreage is expected to jump to near 13 million acres, that’s still more than 2 million acres shy of the record crop in 2006. Similar acreage increases are expected in all the major cotton producing countries, except for China, in 2011.
Continued skyrocketing increases in the middle class in Asia are pushing demand for cotton clothes to new highs. Subsequently, textile production is up around the world, including the U.S. The demand for cotton and cotton products is increasing in China and India, which have two of the fastest rising economic indexes in the world.
High production, increased acreage and soaring demand, combined with record high input costs around the world, creates astounding volatility in the cotton world. However, high prices worldwide, seem to be creating a euphoria over cotton from seed to fabric that has put the threat of low cotton prices to the backseat for the time being.
In 2008, worldwide cotton production was 24.3 million metric tons. Production dropped to 23 million tons in 2009 and rebounded last year to 26.1 million metric tons. However, in all three years the world used more cotton than was produced (24.8 million tons in 2008, 26.8 million tons in both 2009 and 2010).
Jordan Lee, president of the U.S. Cotton Shippers Association says, halfway through the USDA marketing year over 97 percent of the 2010 U.S. cotton crop is already sold.
Back in November there was a 40 cent per pound drop in cotton prices, but no corresponding drop in futures prices. Clearly, demand is driving this market, Lee says.
Cotton stocks dropping
Worldwide cotton stocks have dropped more than 20 percent in two years to 9.3 percent. By comparison corn stocks stood at 13 percent in 2009 and dropped to 5.5 percent last year. Soybean stocks have held steady for two years at unprecedented low levels of around 4 percent worldwide.
Worldwide, cotton is booming down on the farm! The economic news is good from the farmer’s perspective and this optimism is reflected in world production numbers.
Australian cotton growers, for example, are set to harvest a record crop this spring.
The biggest cotton harvest in Australia’s history has started in the northwest of New South Wales — the largest cotton producing state in Australia, says veteran cotton cropping manager Myles Parker.
“With yields up and cotton prices going from strength to strength its great news for the state’s cotton farmers,” Parker adds. “The region has been hard hit by heat, drought, and even flooding over the past couple of years, so a high value, high yielding crop is just what growers here needed,” he says.
Nationwide in Australia, estimates for the 2011 crop, which is harvested in March and April in the Southern Hemisphere, calls for more than 4 million bales. If optimum weather continues in New South Wales and other cotton producing states in eastern and western Australia, the country could produce a whopping 400,000 more bales than their previous record.
Crop value for the 2011 Australian cotton crop is expected to top $2.3 billion in U.S. dollars, nearly $3 billion in Australian dollars.
The resiliency of cotton is reflected in the Australian harvest. Despite heavy planting season rainfall and flooding, much of the late-planted cotton produced record yields. The late planting pushed cotton harvest back 3-4 weeks in eastern Australia.
"While most people will remember the start of this year as flood, cyclone, flood, the season has actually produced very good cotton growing conditions allowing for some recovery of crops that went under water," says Adam Kay, chief executive officer for Cotton Australia.
In addition to the record 2.3 million bales expected to come from New South Wales, another 1.8 million bales, also a record, are expected from Queensland state, south of New South Wales.
Cotton harvest will likely end in Australia by June 1, or about the time the latest cotton is planted in the U.S.
While the 4 million bale Aussie harvest won’t significantly change the makeup of world cotton production, similar and larger increases in India, Pakistan and Brazil will create big number changes in 2011.
The average size of an Indian cotton farm is less than 10 acres and much of their cotton crop is still picked by hand. Despite the obvious obstacles, India is the second largest cotton producing country behind China.
In 2010 India didn’t just break a record for production, they blew it away, producing 26 million bales, more than 12 percent higher than their previous record crop of 23 million bales in 2009.
Speaking at the recent Southern/Southeastern cotton growers and ginners meeting, Hemang Goradia, general manager of Noble Cotton’s India operations, said optimism is high among cotton growers in his country.
Success has been hang-up
“The big hang-up for cotton growers has been their success. Indian cotton mills are booming and the demand for Indian-grown cotton is high. Fearing Indian textile mills will have to import foreign cotton, the Indian government stepped in to regulate cotton production and exports.
The results have been predictable, Goradia said. Despite the uncertainty over government policies, he said optimism is high for the 2011, and he expects another record year for the 2012 crop.
Brazilian cotton farmers made a big comeback in 2010, producing 8.2 million bales in 2010, an increase of more than 50 percent versus 2009. In fact, 2010 production topped the past three years (2007-2009) combined. Previous record production came in 2000, with 3.7 million bales.
Though the 2011 cotton crop is still in its vegetative state of growth (in mid-April), experts are already calling for a record crop, which could push two million tons. Brazilian cotton experts are also predicting a record 630,000 bales to be exported in 2011.
The three biggest importers of Brazilian cotton are Indonesia, South Korea and China with the largest increases in recent years coming from China. In 2003 China imported 17 thousand tons of Brazilian cotton. That increased to 77.5 thousand tons in 2005 and in 2010, they imported 84.5 thousand tons of Brazilian cotton.
Over the last decade, cotton production in Brazil has entered into a new era of more high-tech production and has moved away from the historical planting areas in the southern part of the country. In recent years cotton production has shifted to the west-central region of Brazil.
As is the case in Australia, flooding in some cotton production regions of South America create even more optimism for the 2012 crop. If prices remain high, cotton production is expected to continue to increase for next year’s planting season.