GENEVA — The global cotton industry is facing higher government subsidies to cotton producers triggered by lower market prices and stiff competition from reformulated synthetics, while stepping up its efforts to produce the natural fiber in a more sustainable manner.
This story first appeared in the October 16, 2012 issue of WWD. Subscribe Today.
Subsidies to the cotton industry — including direct support to production, border protection, crop insurance funding and minimum support price mechanisms — are estimated at $4.8 billion in 2011-2012, up from $1.4 billion the previous year, concludes a report from the International Cotton Advisory Committee, an association of 41 cotton producing, consuming and trading nations.
The study, “Production and Trade Policies Affecting the Cotton Industry,” released at last week’s ICAC plenary meeting in Interlaken, Switzerland, notes that the Cotlook A Index, a global price benchmark, averaged $1 a pound during 2011-12, down from $1.64 a pound in 2010-11, when cotton reached record high prices. A global assessment by the U.S. Department of Agriculture forecast that prices received by U.S. upland cotton producers will be in the range of 62 to 78 cents in the 2012-13 marketing year.
The ICAC report shows the biggest outlays of direct subsidies in 2011-12 were provided by China at an estimated $3.1 billion, up from $330 million in 2010-11, followed by the U.S. with $819 million, up from $319 million, and Turkey at $428 million, an increase from $302 million. However, prices in 2011-12 were still above long-term averages and government interventions in a number of support programs in several countries such as Pakistan, Mexico and India did not trigger payments to producers.
The price competition cotton is facing from synthetic fibers also featured prominently in the ICAC gathering, which was themed “Shaping Sustainability in the Cotton Value Chain.”
“It is important to remember that polyester is at the heart of cotton’s eroding market share,” said Jeffrey Silberman, executive director with the International Forum for Cotton Promotion.
Silberman said 2010-2011 price spikes…and market volatility “created market disruptions, exacerbated by a lull in mill demand,” and as a result, companies “intensified their searches for alternative fiber choices.” More needs to be done, he said, on “demand enhancement activity throughout the supply chain,” for cotton to proactively regain market share. He said, “Consumers want to know that cotton is produced responsibly, and that it brings overall positive social and ecological impacts to those associated with it.”
In 2011, cotton’s share of the world fiber market stood at about 30 percent, sharply down compared with more than a 50 percent share in 1975, Silberman noted.
While cotton is “a global brand,” IFCP said more needs to be done to promote cotton over synthetics. Silberman cited initiatives such as the Better Cotton Initiative and organic cotton are making advances.
Berrye Worsham, chief executive officer of Cotton Incorporated, discussing the environmental impact of U.S. cottons, said in the last 30 years the sector made major strides, including a 75 percent reduction in water usage, a 68 percent decrease in soil loss, a 36 percent decline in energy usage, a 30 percent efficiency improvement in land usage and a 30 percent reduction in greenhouses gases.