Cotton is a natural vegetable fiber that comes from small trees and shrubs of a genus belonging to the mallow family, one of which is the common American Upland cotton plant. Cotton has been used in India for at least the last 5,000 years and probably much longer, and was also used by the ancient Chinese, Egyptians, and North and South Americans. Cotton was one of the earliest crops grown by European settlers in the U.S.
Cotton requires a long growing season, plenty of sunshine and water during the growing season, and then dry weather for harvesting. In the United States, the Cotton Belt stretches from northern Florida to North Carolina and westward to California. In the U.S., planting time varies from the beginning of February in Southern Texas to the beginning of June in the northern sections of the Cotton Belt. The flower bud of the plant blossoms and develops into an oval boll that splits open at maturity. At maturity, cotton is most vulnerable to damage from wind and rain. Approximately 95% of the cotton in the U.S. is now harvested mechanically with spindle-type pickers or strippers and then sent off to cotton gins for processing. There it is dried, cleaned, separated, and packed into bales.
Cotton is used in a wide range of products from clothing to home furnishings to medical products. The value of cotton is determined according to the staple, grade, and character of each bale. Staple refers to short, medium, long, or extra-long fiber length, with medium staple accounting for about 70% of all U.S. cotton. Grade refers to the color, brightness, and amount of foreign matter and is established by the U.S. Department of Agriculture. Character refers to the fiber's diameter, strength, body, maturity (ratio of mature to immature fibers), uniformity, and smoothness. Cotton is the fifth leading cash crop in the U.S. and is one of the nation's principal agricultural exports. The weight of cotton is typically measured in terms of a "bale," which is deemed to equal 480 pounds.
Cotton futures and options are traded on ICE Futures U.S. Cotton futures are also traded on the CME Group, Moscow Exchange, Multi Commodity Exchange of India (MCX), National Commodity & Derivatives Exchange (NCDEX), Turkish Derivatives Exchange, and the Zhengzhou Commodity Exchange. The ICE futures contract calls for the delivery of 50,000 pounds net weight (approximately 100 bales) of No. 2 cotton with a quality rating of Strict Low Middling and a staple length of 1-and-2/32 inch. Delivery points include Texas (Galveston and Houston), New Orleans, Memphis, and Greenville/Spartanburg in South Carolina.
Prices - ICE cotton futures prices (Barchart.com symbol CT) pushed upward in Q1-2014 and posted the high for the year in March at 97.35 cents a pound, a 3-year high, after the USDA in its March WASDE report cut its U.S. 2013/14 cotton production estimate to a 4-year low of 12.87 million bales (-25.5% yr/yr). U.S. supplies were also tight after the USDA in April cut its U.S. 2013/14 ending stocks estimate to a 24-year low of 2.5 million bales. Cotton prices then fell sharply from May into September as global supplies remained plentiful and Chinese cotton demand weakened. The USDA in July's WASDE report raised its 2014/15 world cotton ending stocks estimate to a record 105.68 million bales and China Jan-May 2014 cotton imports had plunged -45.1% to 1.175 MMT. Cotton prices fell further in Q3 after China said it would restrict cotton imports in 2015 to encourage textile producers to use domestic supplies after government purchases over the past three years had built China's domestic cotton stockpiles to a record 13.4 MMT. Cotton prices posted the low for the year in November at 57.84 cents per pound on burgeoning global supplies after the USDA raised its 2014/15 global cotton ending stocks estimate to a record 107.36 million bales. Cotton prices finished 2014 down -28.8% at 60.27 cents a pound.
Supply - World cotton production in 2014-15 fell -1.1% yr/yr to 118.978 million bales (480 pounds per bale), below 2011-12 record high of 127.280 million bales. The world's largest cotton producers were China with 25.2% of world production in 2014-15, India with 26.1%, the U.S. with 13.4%, and Pakistan with 8.2%. World beginning stocks in 2013-14 (latest data) rose +21.6% yr/yr to 89.157 million bales, a new record high.
The U.S. cotton crop in 2014-15 rose +24.6% yr/yr to 16.084 million bales, which was well below the 2005-06 record high of 23.890 million bales. U.S. farmers harvested 9.707 million acres of cotton in 2014-15, up +28.7% yr/yr. The U.S. cotton yield in 2014-15 fell -3.2% to 795 pounds per acre, not far behind the 2007-08 record high of 879 pounds per acre. The leading U.S. producing states of Upland cotton are Texas with 37.4% of U.S. production in 2014, Georgia (15.5%), Mississippi (6.4%), Arkansas (5.1%), California (4.7%), Alabama (4.1%), and Missouri (3.5%). U.S. production of cotton cloth has fallen sharply by almost half in the past decade due to the movement of the textile industry out of the U.S. to low-wage foreign countries.
Demand - World consumption of cotton in 2014-15 rose +3.7% yr/yr to 112.500 million bales, but still below the 2006-07 record high of 121.986. Consumption of cotton continues to move toward countries with low wages, where the raw cotton is utilized to produce textiles and other cotton products. The largest consumers of cotton in 2014-15 were China (32.9% of world total), India (21.3%), and Pakistan (9.4%). U.S. consumption of cotton by mills in 2014-15 rose +7.0% yr/yr to 3.800 million bales, and accounted for 27.5% of U.S. production. The remaining 72.5% of U.S. cotton production went for exports.
Trade - World exports of cotton in 2014-15 fell -15.9% yr/yr to 34.288 million bales, which was below the 2005-06 record high of 44.854 million bales. The U.S. is the world's largest cotton exporter by far and accounts for 29.2% of world cotton exports. Key world cotton importers include China with 20.4% of total world imports in 2014-15, Bangladesh with 13.0%, Turkey and Vietnam each with 10.5%, and Indonesia with 9.1%. U.S. cotton exports in 2013-14 (latest data) rose by +21.9% yr/yr to 10.412 million bales. The main destinations for U.S. exports in 2013-14 were China (25.4%), Mexico (9.7%), Indonesia (6.7%), South Korea and Thailand each with (4.4%).
Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.