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  • Overview

    Chapter 1 - The world cotton market - Overview 

    Cotton and cotton textile industries are central to the economic growth of both developed and developing countries, and contribute to development that is sustainable and socially responsible. Cotton is the raw material of wealth, industrialization and development. It is a vital cash crop providing income for everything from education, health and housing to transportation, and often serves as a catalyst for industrialization and rising social welfare.

    World cotton production and consumption are trending higher, and the industry is being transformed by new technologies, including biotechnology. World cotton production reached a record of 26 million tons in 2004/05, and production remained nearly as high in the two years following. Biotech cotton varieties accounted for over one-third of world area in 2006/07.

    The average cost of cotton production varies widely across countries, but the cost of production for most producers is between US$ 0.50 and US$ 0.60 per pound. While per capita consumption of cotton at the retail level is highest in developed countries, the strongest growth in both retail consumption and mill use of cotton is occurring in developing countries, particularly China, India and Pakistan.

    The elimination in January 2005 of quotas that limited trade in textiles and apparel for more than 30 years is leading to a shift in textile and apparel production toward China and other developing countries, and the cotton industry is benefiting from increased consumption caused by lower retail prices of textile and apparel products. However, substantial distortions caused by subsidies still exist in the market for cotton itself.

    International cotton prices have declined in real terms over the last six decades because of advances in technology, and this process is continuing. During the 1970s, 1980s and 1990s, the average world price of cotton was more than US$ 0.70 per pound, but the average international price during the current decade is expected to be between US$ 0.50 and US$ 0.60 per pound, in line with the costs of production for most producers.

    Cotton is one of the most important and widely produced agricultural and industrial crops in the world. Cotton is grown in more than 100 countries, on about 2.5% of the world’s arable land, making it one of the most significant crops in terms of land use after food grains and soybeans. Cotton is also a heavily traded agricultural commodity, with over 150 countries involved in exporting or importing cotton.

    More than 100 million family units are engaged directly in cotton production. When family labour, hired farm labour and workers in ancillary services such as transportation, ginning, baling and storage are considered, total involvement in the cotton sector reaches an estimated 350 million people. It provides employment to additional millions in allied industries such as agricultural inputs, machinery and equipment, cotton-seed crushing and textile manufacturing. Cotton cultivation contributes to food security and improved life expectancy in rural areas of developing countries in Africa, Asia and Latin America. Cotton played an important role in industrial development starting in the eighteenth century and continues to play an important role today in then developing world as a major source of revenue. The value of 25 million tons of world cotton production in 2006/07 at an average world price of about US$ 0.58 per pound of lint, or US$ 1.28 per kilogram, is more than US$ 30 billion.