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 New York Mercantile Exchange (NYMEX), division of 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 - Cotton futures prices (Barchart.com symbol CT) raced higher in Q1 of 2013 and posted the high for the year in March at 93.93 cents a pound, a 1-3/4 year high, after the USDA in its March WASDE report raised its U.S. 2012/13 cotton export estimate and cut its 2012/13 U.S and global ending stocks estimate. Global supplies remained plentiful, however, after cotton inventories monitored by the ICE Exchange climbed to a 2-1/2 year high in March. Cotton prices traded sideways into September and were underpinned after the USDA in its September WASDE report cut its 2013/14 U.S. cotton production estimate to a 4-year low of 12.9 million bales. However, weakness in cotton demand from China, the world's biggest cotton consumer, undercut cotton prices and prices tumbled into November and posted a 1-year low of 73.79 cents a pound. Chinese demand throughout the year was weak with China 2013 cotton imports down -19.2% y/y to 4.15 MMT. Signs that global supplies were increasing also pressured cotton prices after India, the world's second-largest cotton producer, raised its 2013/14 cotton harvest estimate to a record 38.1 million bales. Cotton prices rebounded sharply, however, into the year-end after the USDA in its December WASDE report cut its 2013/14 U.S. and global cotton production estimates. Cotton prices finished 2013 up +12.6% at 84.64 cents a pound.
Supply - World cotton production in 2013-14 fell -5.2% yr/yr to 116.671 million bales (480 pounds per bale), below last year's record high of 124.134 million bales. The world's largest cotton producers were China with 27% of world production in 2013-14, India with 25%, the U.S. with 11%, and Pakistan with 8%. World beginning stocks in 2013-14 rose +21.6% yr/yr to 89.157 million bales, a new record high.
The U.S. cotton crop in 2013-14 fell -23.8% yr/yr to 13.186 million bales, which was well below the 2005-06 record high of 23.890 million bales. U.S. farmers harvested 7.664 million acres of cotton in 2013-14, down -18.2% yr/yr. The U.S. cotton yield in 2013-14 fell -6.9% to 826 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 32.7% of U.S. production in 2013, Georgia (18.2%), California (7.0%), Arkansas (5.5%), Mississippi (5.4%), Alabama (4.2%), and Missouri (3.7%). 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 2013-14 rose +2.7% yr/yr to 109.344 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 2013-14 were China (32.9% of world total), India (21.0%), and Pakistan (10.5%). U.S. consumption of cotton by mills in 2013-14 rose +20.9% yr/yr to 3.475 million bales, and accounted for 13.1% of U.S. production. The remaining 62.4% of U.S. cotton production went for exports.
Trade - World exports of cotton in 2013-14 fell -17.6% yr/yr to 38.471 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 27.3% of world cotton exports. Key world cotton importers include Turkey with 10.7% of total world imports in 2013-14, Indonesia with 7.0%, Mexico with 2.9%, and Russia with 1.0%. U.S. cotton exports in 2012-13 (latest data) rose by +15.2% yr/yr to 13.322 million bales. The main destinations for U.S. exports in 2012-13 (latest data) were China (42.1%), Mexico (7.4%), Indonesia (4.0%), South Korea (2.6%), and Thailand (2.5%).
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.