1. Trends in Global Cotton Supply, Demand, and Trade
Adam Branson
U.S. Department of Agriculture
Foreign Agricultural Service

2. USDA and the Foreign Agricultural Service
Who We are and Why We Care about Cotton
Timely, Reliable, Consistent and Unbiased Analysis to Support Market Functions and Price Discovery

3. WASDE (Aug 2016) MY16/17 (Aug/July)
World and U.S. Cotton Outlook
WASDE (Aug 2016) MY16/17 (Aug/July)
World Consumption Surpassing Production to Continue a Draw Down of Ending Stocks
U.S. Production Climbing with Better Yields/Weather that Results in Higher Stocks
Farm prices rising on tighter global supply

4. The History of Production
Where do we go from here?
Europe
Africa
Former Sov. U.
U.S.
Non-US, W. Hem.
Middle East
SE Asia/Oceania
Other South Asia
China declining back to 1990s levels. Central Asia at historic lows. United States production is down. India at or near historic records
India
China

5. The Future of Production
China- Wholly dependent on policy; United States- slight rise, not as high as in the past; Central Asia- gradual decline in exports, Some production increase, growing use, marketing constraints;
Pakistan- Production will recover to higher levels; India- Continued long-run growth of cotton yields; Australia- higher production as SE Asia continues to be a strong market; Africa- Strong growth on cost factors;

6. U.S. Cotton Program Changes
MSP Lint Equivalent

7. U.S. Cotton Program Changes

8. China Policy Changes
Reserve sales have been more successful than initially expected; Target successfully reached with very high sales ratios; Some logistics problems, issues with cotton rejected at classing; May speak to storage conditions being less than ideal; New China crop program: not clear what structure will be?

9. The History of Consumption
Future market opportunities
Europe
Africa
Other East Asia
Former Sov. U.
U.S.
Non-US, W. Hem.
Middle East
SE Asia/Oceania
Other South Asia
India
China spinning boom seems to be slowing; India, Southeast Asia growing very rapidly; Dramatic decline in US, FSU, EU, non-China east Asian spinning; Developing decline in Latin American spinning;
China

10. The Future of Consumption
China- continuing to be a large player; Latin America- unlikely to gain in share terms, may shrink in absolute terms; India- some real growth potential; Vietnam- major prospect for future growth: TPP, China; Bangladesh- has already risen to be world’s largest importer: GSP access, labor, safety & security; Africa- limited prospects for Franc Zone, North African spinning, may see growth in East Africa;

11. Future Challenges
Many new and different challenges loom for future cotton demand
Change in MMFs:
Polyester has become more technically advanced, comfortable, and abundant
Textile mfg. environmental concerns
Change in Consumer Preferences:
Green and other environmental concerns
Social concerns (child labor?)
Rise of athleisure wear, new lifestyle products

12. Future Challenges: MMFs
*Data Source: PCI

13. Future Challenges: Green
Change in Value-Add Sector: Regulation of ecological footprint for textile manufacturers; Tightening environmental regulations
Consumers buying “organic” or “sustainable” cotton: Current brands/projects/organizations include Better Cotton Initiative, CMIA; Ex. denim-dying in China; Ex. water use in California

14. Future Challenges: Social
Change in Value-Add Sector:
Brands and designers obtaining higher markup for products with verifiable, high-quality supply chains
Firms facing risk for downstream labor practices
Countries losing trade preferences due to safety or labor standard concerns for facilities and employees
Change in Consumer Preferences:
Consumers buying “fair trade” or “socially responsible” cotton, avoiding cotton perceived as unsustainable as consumers and brands want to avoid possible “bad” actors and accept “better” alternatives

15. Thank You! Future Challenges = New Opportunities
Cotton producers can successfully market in a new climate!
Even producers on the “wrong side” of changing trends (such as selling varieties not easily blended with polyester) will still move their product: just at a discount, leaving money on the table
Proactive adaptation to changing cotton market can yield revenue benefits for producers
Thank You!