Photo: Dr Jack
The structure of the global cotton market will not change significantly in the coming decade, with sub-Saharan Africa as a region remaining the third-largest exporter of raw cotton in 2031, after the US and Brazil.
The global trade in cotton is expected to grow slightly faster than overall consumption, given the demand growth in countries without much domestic cotton production such as Bangladesh and Vietnam, and stagnating domestic mill use in Brazil, where the projected increase in production is destined entirely for export.
After a sharp increase in 2021, cotton prices are expected to remain elevated in 2022, supported by rising consumption and overall higher commodity prices. Over the period up to 2031, however, prices are anticipated to adjust downwards to return to their long-term decreasing trend in real terms, due to productivity gains and continuing competition with synthetic fibres.
Several uncertainties could affect the outlook. The Russia-Ukraine war, the emergence of new COVID-19 variants and subsequent potential supply chain disruptions could alter the projections of the first years. In addition, the extent to which interest rates will increase to contain inflation could alter the cost of borrowing and hence investment plans in the sector.
In general, strong competition from synthetic fibres, notably polyester, is anticipated to continue to adversely affect cotton demand growth over the projection period.
However, given the increased adoption of sustainability standards in supply chains, the growth in consumer preferences for more sustainable products is expected to partly offset the overall downward pressure on cotton demand growth.
Like other crops, cotton production is sensitive to pests, weather conditions and climate change. Changing policy measures and trade tensions are also sources of uncertainty for cotton markets.
Cotton consumption
Cotton consumption refers to the use of cotton fibres by mills to produce yarn. Mill use of cotton depends on the global demand for textiles and on competition from substitutes such as polyester and other synthetic fibres.
Over the past decades, global demand for textile fibres has grown strongly, driven by population and income growth; increasingly, however, most of this demand has been met by synthetic fibres.
Per capita consumption of non-cotton fibres overtook that of cotton in the early 1990s and has continued to grow strongly ever since. In contrast, global per capita consumption of cotton fibres has increased marginally over time and has decreased in recent years.
After the peak of nearly 27t in 2007, global cotton consumption decreased to around 25t per annum in 2019 to 2021, due to its deterioration in competitiveness relative to polyester.
The prospects for global cotton use depend on its evolution in developing and emerging economies. Demand from developing regions with lower absolute levels of consumption but higher income responsiveness is projected to exert upward pressure on global demand for cotton as the incomes and population of these countries increase.
As a result, this outlook expects that global consumption of cotton products will grow at a slightly higher pace than global population in the coming decade. Correspondingly, global mill use is projected to grow by around 1,6% per annum over the next decade.
Cotton production
Cotton is grown in subtropical and seasonally dry tropical areas in both the Northern and Southern hemispheres, although most of the world’s production takes place north of the equator. The main producing countries are India, China, the US, Brazil and Pakistan.
Together, these countries account for more than three-quarters of global production.
Global cotton production is expected to grow by 1,6% per annum to reach 30,6t by 2031, which is 17% higher than in 2022. Most of this production growth in the coming decade is expected to come from the main producing countries, with India accounting for about 25% of the global increase.
At the global level, gains in cotton production are projected to stem mainly from higher yields, which are expected to increase by 14% compared with the base period, reflecting improved genetics and better agricultural practices.
In the last decade, global yields have been stagnant, reflecting static or decreasing yields for some major producers (US, Pakistan, India), declining cotton area in China (where yields are well above average), and expanding cotton area in India (where yields are well below average).
Over the projection period, the area planted to cotton is expected to expand by 3% compared with the base period.
Production in India, the world’s largest cotton grower, is projected to grow by around 1,3% per annum over the outlook period, mainly on account of higher yields rather than area expansion, since cotton already competes for acreage with other crops.
Raw cotton productivity in India has remained stagnant in recent years and is among the lowest globally, as farmers struggle with adverse weather, pests and diseases. In addition, most cotton is grown on small farms, which limits the adoption of intensive farming technologies.
However, growing demand from the domestic apparel industry in India continues to spur investments in the sector and this outlook assumes a growth in yield that reflects increased use of smart mechanisation, varietal development, and pest management practices.
Nonetheless, climate change, with most cotton grown under rainfed conditions, may undermine the yield growth potential.
Chinese cotton producers currently achieve yields more than double the world average. As further improvement may be more difficult, yield growth is projected to slow to 0,6% per annum.
Although in general the area planted to cotton in China has declined over the past two decades, mostly due to changing government policies, this seems to have slowed down since 2016. The cotton area in China is expected to decrease by 0,3% per annum.
In Brazil, cotton is grown in part as a second crop in rotation with soya bean or maize, and output has recently grown strongly in the main growing areas, such as Mato Grosso.
Favourable growing conditions and a high rate of adoption of modern technologies in Brazil have contributed to rising cotton yields and areas over recent years. These factors should support further strong production growth of 6% per annum in the country.
Cotton trade
Cotton is traded mainly in bales of raw cotton fibres. World cotton trade is projected to expand steadily over the next decade and reach 12,4t in 2031, 27% higher than in the base period. The increase mainly reflects the significant growth in mill use in Asian countries, particularly Vietnam and Bangladesh, which source virtually all their cotton from imports.
By 2031, imports into China are projected to be 8% higher than today, and in Bangladesh and Vietnam should increase by 60%, in line with mill consumption growth. These three countries will account for more than half of global cotton imports, with Bangladesh as the world-leading raw cotton importer.
The US will remain the world’s largest exporter throughout the outlook period. Its exports have stabilised in recent years, recovering from the lows of 2016, and its share of world trade is projected at 31% in 2031, compared with 34% in the base period.
Recent trade tensions between the US and China have placed some pressure on cotton shipments between the countries. Under the assumption of better trade relations in the future, the US should regain its share in Chinese cotton imports.
Brazilian exports are expected to grow strongly over the next decade, consolidating its position as the second-largest exporter by 2031. India will follow in third place with shipments projected at 1,3t by 2031.
Cotton is an important export crop for sub-Saharan Africa, which currently accounts for 16% of global exports. Cotton production in the region has increased in the past few years, due to both increased area and improved yields. However, spinning mill consumption remains limited, as many countries export most of their produce.
Sub-Saharan African exports are projected to continue growing at around 1,7% per annum in the coming decade, with South and Southeast Asia the major export destinations. However, the textile and apparel industry is growing in some other countries, especially Ethiopia.
The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.
This is an edited excerpt from a report by the Organisation for Economic Co-operation and Development and the Food and Agriculture Organization of the United Nations titled ‘OECD-FAO Agricultural Outlook 2022-2031’.
