Report compiled for the 2006 Paris International Agricultural Fair
All you need to know about cotton
Production
Although production is scattered throughout the world, the bulk of what is produced comes from just a few countries. In 2004-2005, China, the United States, India and Pakistan produced 68% of the world's cotton fibre, with Brazil in fifth place.
For over 20 years now, China has been the leading producer, and is also the world's largest importer and consumer.
India, which is the third largest producer, is the second largest cotton consumer, thanks to its booming textile industry.
The United States is the world's second largest producer and leading exporter. It subsidizes its farmers heavily, but is producing ever greater surpluses due to the decline of its textile industry, and those surpluses are disrupting the global market.
The "franc zone" countries of West and Central Africa are the sixth largest producer and also the second exporter, with small family farms managing to produce high quality cotton without subsidies.
World fibre prices
As with other commodities (ores, cereals, coffee, cocoa, etc), world cotton fibre prices are linked to the balance of supply and demand, and cotton is quoted on various stock exchanges (New York, São Paulo, etc).
The prices quoted are influenced by crop forecasts, predictions of demand as a result of global population growth and economic growth, fibre and yarn stock levels, oil prices, which affect the competitiveness of synthetic fibres, and the behaviour of futures market operators and speculators.
However, US output and demand from China also have a very significant impact on world prices.
Actual prices are the result of negotiations between buyers and sellers, hence of their respective bargaining power.
All transaction contracts are covered by regulations, in order to settle any disputes. The most commonly used regulations are those of the International Cotton Association. The "franc zone" countries of Africa generally apply the Le Havre regulations.
Production costs
The "production cost" of a crop is what it costs the farmer: seed, labour, machinery, fuel, chemicals, storage, transport, etc. Costs vary considerably from one country to another and one farm to another. In 2003-2004, production costs per hectare ranged from under 100 dollars in Africa to 4 000 in Israel.
Production costs are a sensitive issue: if farmers sell their crop for a lower price, they risk going bankrupt. In industrialized countries, particularly the United States, Europe (Spain and Greece) and Australia, producers receive government aid. That aid is sufficient to encourage them to produce more and more. This is one of the reasons for the drop in world prices, to the detriment of developing countries, which grow cotton without any subsidies whatsoever.