John Hart, Associate Editor, Southeast Farm Press
Cotton prices have remained rangebound in the 63 cent to 68 cent level since January of last year. William Kimbrell, president and CEO of Cotton Incorporated, said two key factors driving rangebound prices are the huge availability of exportable supply of cotton and the retraction of China as an importer of cotton.
In a presentation to the Southern-Southeastern annual meeting Jan. 22 at the Westin in Hilton Head, Kimbrell said China is forecast to import 5 million bales this year, a huge drop from 2023-2024 marketing year when the communist nation imported 15 million bales. Kimbrell said this represents a big drop in global cotton demand.
Historically, China, the world’s largest producer and supplier of textile products, has been a reliable importer of cotton from the United States and other cotton-producing countries. Kimbrell said China is stepping up their own production of cotton, but they will still have to turn to the export market to meet demand.
“While China has pulled back and has not imported as much cotton, there are other countries that are stepping up and importing more cotton, which is good news for us because a lot of these countries are big cotton consumers and many of them are very friendly U.S. cotton-consuming countries,” Kimbrell told the meeting of cotton farmers and ginners.
Importers
For example, Vietnam has become the number one importer of cotton in the world, projected to import 8 million bales of cotton this year, and a good share of this number from the U.S. Historically, Vietnam has imported anywhere from 1.5 million to 3 million bales of American cotton per year.
Bangladesh is also growing as a cotton importer. The country is forecast to import 8 million bales this year. Pakistan is another big importer of cotton that likes U.S. cotton. Unlike Vietnam and Bangladesh, Pakistan produces cotton, but like China, it does not have enough production to satisfy mill demand.
“For the past several years, Pakistan increased imports by five or six times. They are forecast to go up to 6 million bales in this crop year,” Kimbrell said.
Moreover, India is now importing cotton. Historically, India has produced most of its own cotton to meet mill demand, but production issues have forced India to turn to the export market to meet demand. They are expected to import 3 million bales this year.
“India has become an important manufacturing center for a lot of brands and retailers. They are looking to India as a supply base outside of China. For the past two years, consumption demand needs have outpaced their production,” Kimbrell said.
Kimbrell noted that the huge amount of cotton China imported two years ago, 15 million bales, went into reserves and was not necessarily used to fill actual orders whereas India, Pakistan, Bangladesh and Vietnam are purchasing cotton to fulfill orders. Kimbell said this is a positive trend on the demand side.
On the production front, Kimbell said cotton acreage in Brazil is expected to remain relatively flat. Australia, where all cotton is irrigated, now faces water issues and a 20% production drop is expected this year.
“India and Pakistan production remains under pressure with weather issues and challenges with pests and disease. China recently announced structural changes inside their policies. They are very concerned about food security within China so there actually have been some reports that came out that said China is now going to shift some of their agricultural production away from cotton and work on focusing on food security,” Kimbrell said.
Refining the pillars
Kimbell said some tightening in the exportable supply of cotton should benefit U.S. cotton, but lingering questions remain about demand. To boost demand, Cotton Incorporated has refined the pillars of the cotton research and promotion program that it conducts with checkoff funds collected by the Cotton Board.
He noted goal are to support the economic viability of U.S. cotton producers, and to build sustainable long-term demand across the supply chain with pull-through to the consumer by strengthening cotton’s competitive position.
Kimbrell said the pillars center around marketing by reaching out to brands and retailers who make decisions on the types of fiber used in products.
For consumers, the goal is for more of them to check the labels of the products they buy and to make sure they seek out cotton.
“We are making sure we are influencing fiber decisions throughout the supply chain and pulling that through all the way to the consumer. It is a push-pull marketing strategy. We are marketing deliberately to the value chain to make sure that we are getting cotton into products but also pulling it through to the consumer making sure that we are generating demand on the consumer side,” Kimbrell said.
Moreover, emphasis will be on the fact cotton is more environmentally friendly and natural than manmade material, with focus on the impact of microplastics.
“We continue to do research on microplastics at the industry level but also on the consumer level. It’s great to see microplastics continue to gain traction with consumers. It is resonating with consumers, and they care about plastics in what they eat and drink, plastics damaging marine aquatic life, plastic on beaches, plastics impacting human health,” Kimbrell said.
He said Cotton Incorporated is committed to providing technical solutions to address the microplastic problem by helping manufacturers find ways to turn to cotton rather than synthetic fibers.