March 9, 2009
Written by Cory Chandler
Agricultural economists believe it could take six to eight years before price improvements are seen in the textile industry.
The weakening global economy is taking its toll on the textile industry, and the U.S. will continue losing market share in the global cotton market, said agricultural economists in Texas Tech University’s Cotton Economics Research Institute (CERI).
Annual forecasts released by the institute show a substantial decline in Chinese mill use, which consumes about 50 percent of the world’s cotton crop. This should result in increasing cotton stocks over the next year or two, driving prices down.
“The weak economy is taking a heavy toll on textiles,” said CERI Director Darren Hudson. “If we see economic recovery beginning in late 2009 or 2010, we would expect to see recovery in mill use two or three quarters later. Right now, we are forecasting farm price around 50 cents per pound this year.”
Researchers also forecast that cotton acreage will continue to decline after several years of high grain prices and lower relative cotton price. Hudson said researchers expect to see more substantial reductions in cotton acreage in the Mississippi Delta area, but that decline in U.S. production is more than offset by overall production increases in Brazil and India.
“Yield increases and internal subsidization in Brazil and India continue to result in production increases,” Hudson said.
The result is that the U.S. continues to lose market share in the global cotton market.
“The bright spot,” Hudson said, “is the future.”
Forecasts show price improvements over time and suggest that prices will increase from a farm level price of about 50 cents per pound this year to around 70 cents per pound over the next six to eight years.
“As long as we get modest economic recovery starting next year, we expect to see prices recover.”
CERI produces its estimates annually in conjunction with the Food and Agricultural Policy Research Institute at the University of Missouri and Iowa State University, as well as the Agricultural and Food Policy Center at Texas A&M University. The institute releases annual 10-year forecasts for each of the major agricultural crops as well as farm income.
Darren Hudson is the director of the Cotton Economics Research Institute and Larry Combest Endowed Chair in Agricultural Competitiveness.
View his profile in our online Experts Guide.
CERI provides cotton economic analysis for policymakers and others interested in agricultural economy. The group conducts economic research on all aspects of cotton production, marketing, trade and processing.