Cotton Sector at a Glance

The United States plays a vital role in the global cotton market, acting as a key producer and exporter of the fiber. In 2017, the United States produced more than 20 million bales of cotton, representing over 7 billion dollars in total value. Furthermore, the United States is the world's leading cotton exporter, providing more than a third of the world’s cotton exports. Through its participation in global trade, the United States supports global textile industries and provides opportunities for domestic farmers to market their cotton to the world.

In the United States and around the world, there are two main species of cotton cultivated for commercial use: Upland cotton, and Pima (Extra-Long Staple) cotton. Upland cotton comprises the vast majority of production. The primary difference between species is fiber length, with other small differences in growing conditions and end uses.  

Cotton is a versatile commodity used in many products, particularly clothing. One “bale” of cotton -approximately 480 pounds of cleaned cotton lint- can make more than 200 pairs of jeans, or 1200 t-shirts.

Table 1: Upland v. Pima Cotton Characteristics
Cotton species Fiber length Percentage of U.S. production End uses Growing conditions
Upland (Gossypium hirsutum) 1" to 1 1/4"                      95% Apparel, home use (curtains, upholstery, etc.), hospital/medical use Warm/hot conditions, dry falls, later planting
Pima (Gossypium barbadense) 1 3/8" or longer        5% Expensive/high end apparel, sewing thread Hot, dry conditions, earlier planting


Domestic Production

In the United States, cotton is planted from March to June, and harvested from August to December.  Most cotton is grown within the “Cotton Belt,” which comprises 17 southern-tiered States, from Virginia to California. Among them, Texas is the largest producer, contributing approximately 45 percent of U.S. cotton production in recent years. Within Texas, most production is concentrated in the High Plains region, as cotton is particularly suited for that area’s climate (See Figure 1 and Figure 2).

At harvest, cotton is picked and brought to a gin. There, cotton fibers are separated from the seeds, and cleaned of foreign material and pressed into bales. After that, the cotton is ready to transport and use by a mill. In the United States, a small sample of the cotton is sent to a USDA classing office where it is graded and classified thereby providing the quality characteristics on which cotton is marketed.

Figure 1: Cotton, U.S. harvested acres, 2012

Figure 2: U.S. cotton production, leading States, 2015-2017 


Within the United States, the USDA regulates cotton quality and grading. Industry organizations such as the National Cotton Council advocate for cotton growers and other cotton industry participants. A key piece of Government legislation that impacts cotton growers in the United States is the Agricultural Act of 2014. Unlike other commodities, cotton was not covered by Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) created in the 2014 Farm Bill. Rather, it was covered under two other programs: the Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX), which are administered by the USDA’s Risk Management Agency (RMA). These programs work in addition to traditional crop insurance policies and help protect farmers from catastrophic and weather related losses (see link for more information).

Federal Crop Insurance Options for Upland Cotton Farmers and Their Revenue Effects

However, beginning with the 2018 season, seed cotton became a covered commodity under PLC and ARC programs (see Farm Policy for more information on the Farm Bill).

Global Supply and Use

Globally, cotton production and consumption can vary, but the long-term upward trend continues. Major factors driving the growth of cotton supply and demand include biotechnology innovations, increasing farm mechanization, population growth and economic growth.

                                     Figure 3: World cotton production and mill use, 2000-2017

However, this growth is punctuated by periods of sharp decline. In 2008, the recession reduced consumer demand for clothing and high oil prices increased cotton production costs. Additionally, in 2015, production decreased in response to declining Chinese import demand and large global stocks, which lowered cotton prices.

The top two producers, China and India, comprise approximately 50 percent of the world’s production, while the top five producers comprise over 75 percent of global cotton production. Currently, India is the world’s top producer of cotton. The use of genetically modified seed and an abundance of cheap labor have decreased the cost of cotton production and increased the country’s yields. These factors, combined with a reduction in China’s cotton production, allowed India to emerge as the production leader. The United States is the third-largest producer of cotton globally. U.S. cotton production decreased significantly from 2005 to 2008 due to poor planting weather and competition from other field crops for acreage, particularly corn and soybeans. However, since 2015, U.S. cotton production has rebounded, as favorable cotton prices compared to other field crops and growth in global demand for cotton encouraged farmers to increase production

On the consumption side, China is by far the world’s leader in cotton mill use, processing the most raw cotton fiber into textiles and apparel. While shifts in Government policy and industry have caused a decline in consumption since its peak in the mid-2000s, mill use has rebounded and China remains the primary consumer of cotton. 

India’s cotton consumption is second globally, but its mill use is only about half of China’s (See Cotton Policy in China). Also of note is the increase in Bangladesh’s and Vietnam’s cotton consumption. Companies are shifting their manufacturing toward countries with relatively cheap labor, thereby increasing the countries’ demand for and consumption of raw cotton fiber.

Global Trade

Cotton is a global commodity, with robust trading in raw and finished products. Much of the world’s cotton crosses international borders before finally arriving at its end-use destination, and factors that affect trade and marketing of cotton have far-reaching impacts.

China has been the world's dominant cotton importer. Since the country joined the WTO in 2001, textile manufacturing has been a core component of its economic development. Beginning in 2010, the Chinese government built strategic stockpiles of cotton to protect their textile industry. This, among other policies, generated a massive demand for foreign cotton. China began to phase out these measures in 2014 and sell off its stockpile, bringing import levels in line with other countries. Currently, Bangladesh leads the world in imports, followed by Vietnam, and then China.

The United States is the leader in global exports, making up approximately 38 percent of the world’s export market for raw cotton fiber. The other top five exporters combined supply fewer bales than the United States does to the global market. Despite this, export levels have shifted over time. In 2011, Indian export levels nearly overtook those in the United States. This was driven by high global prices, which encouraged production and provided excess supplies. Furthermore, demand from China also drove India’s exports through 2013. In 2016/17, U.S. export levels increased dramatically. This change was generated by a high quality crop, coupled with production decreases from other producers, primarily India and Brazil. U.S. export levels have remained strong since then.

The United States is also a key player in the global trade of cotton goods. While the United States exports much of its raw cotton fiber, it imports the bulk of its textile and apparel products, with China and India accounting for over 40 percent of U.S. imports. Although of a much smaller quantity, U.S. cotton product exports also play a role in global trade, with over 50 percent of them going to Honduras and Mexico for further processing.

World Stocks to Use and Prices

A measure often used to demonstrate the balance between cotton supply and demand is stocks-to-use, the ratio of cotton stocks available to how much was used. Higher stocks-to-use ratios will generally produce lower prices, and vice versa. U.S. stocks-to-use have remained more or less constant, particularly when compared to global stocks-to-use.  Cotton prices themselves are often measured by the “Cotlook A Index,” which is an average of the five cheapest cotton price quotations available for trade.  

In 2010, cotton prices rose significantly as a result of a combination of factors that drove stocks to unexpectedly low levels and also limited global production increases that year. In addition, the introduction of export limits by India raised demand for cotton stocks elsewhere in the world, boosting prices even further.

Following 2010, global stocks and the stocks-to-use ratio increased as both supply and demand responded to higher prices. In addition, the Chinese government’s policy of strategic stockpiling of cotton also helped generate large world ending stocks. Since 2014, and the end of this policy, global stocks-to-use have decreased significantly as China slowly sold off or used stocks. This generated a slight increase in prices due to decreased global supply, and current price levels have remained approximately the same since then.

The price of cotton is also determined by other factors. Cotton prices are impacted by the price of other field crops that compete with cotton for acres; producers will plant cotton instead of other field crops if it provides a relatively higher return, and vice versa. Common crop alternatives include corn, soybeans, and wheat, though regional crops such as tobacco and peanuts can also be substituted for cotton. The cost of fiber substitutes (particularly polyester and other synthetics) also impacts the price of cotton. If cotton prices rise too high, manufacturers can substitute synthetics for cotton. Given the number and variety of cotton fiber alternatives, cotton producers face stiff price competition, and operate in a competitive environment.

           Figure 4:  World stocks-to-use versus price, 2007-2017




Last updated: Tuesday, August 20, 2019

For more information, contact: Leslie Meyer