Among challenges to the U.S. cotton industry’s competitiveness are securing an improved safety net for producers, making inroads against increased competition from manmade fibers, and navigating post-pandemic economic pressures.
What is the overall economic situation?
Since implementation of the 2018 Farm Bill, cotton producers have faced mounting economic challenges due to increased competition from manmade fibers and reduced consumer spending power amid post-pandemic inflation. The USDA’s August 2024 World Agricultural Supply and Demand Estimates (WASDE) report projects world cotton consumption for the 2024/25 marketing year at 116.2 million bales, down 2.8 million bales from 2018/19. Concurrently, China’s polyester production has increased by 35.5 million bales since 2018, making it nearly twice the size of the world cotton market.
U. S. cotton also faces competition from increased cotton production in Brazil and Australia, which have significantly boosted their exports. Collectively, the two countries are exporting 18 million bales, more than double their trade level from a decade ago. Consequently, the U. S. share in world cotton trade has dropped from 36% to 28% since the 2018 Farm Bill.
Cotton prices have fallen to their lowest since early 2020, while production costs have increased significantly over the life of the Farm Bill. The USDA estimates total production costs of $902 per acre for 2024, an increase of $193 per acre since 2018. The cost per pound of seed cotton for 2023 is $0.436, calculated from total costs of $883 and a yield of 2,023 pounds per acre. For 2024, with a projected lint yield of 828 pounds and cottonseed yield of 1,043 pounds, the cost per pound is expected to rise to $0.482, which is over 11 cents higher than in 2018. Current production costs are well above both the statutory reference price of $0.367 and the seed cotton market year average (MYA) price.
The projected seed cotton price for the 2024 marketing year is $0.341, based on a weighted average of USDA’s forecasts of $0.66 per pound for cotton lint and $0.1025 per pound for cottonseed.
What are current financial challenges facing producers?
Despite increased production costs, strong market prices in 2021 and 2022 allowed profitability, but declining prices in 2023 led to financial shortfalls unless producers were fortunate enough to have yields well above average levels. For 2024, costs and prices are moving in opposite directions, worsening the financial situation for cotton producers. USDA projects per-pound costs will hit an all-time high, greatly exceeding both market prices and the farm bill safety net.
Any remedies available?
Across the Cotton Belt, many farms suffered losses in 2023, and they were only able to secure 2024 production financing through either liquidating a portion of their assets or seeking financing from non-traditional sources. Now, these family farming operations are facing a second year of economic losses, with little hope for recovery in 2025. The National Cotton Council will be seeking every opportunity to build awareness of the current economic situation and pursuing multiple avenues for boosting the safety net for cotton producers. For some families continuing their generational family farms may be an unattainable dream without economic assistance from Washington.