January 2004 Edition:
Consumption of raw cotton continues to move from high labor to low labor cost countries. Over the past 5 years China and the Asia Sub-Continent have seen the largest growth in cotton consumption due to their low labor costs. Chinese cotton consumption has risen more than 10-percent a year since 2000 with growth reaching a high of 12.4 percent in 2002/03.
At the same time developed country consumption was flat or declining. The United States has experienced the most dramatic decline in consumption from 10.2 million bales in 1999/00 to 6.2 million bales estimated for 2003/04 (39.2 percent decline). Not only higher labor rates but also an unfavorable exchange rate compared to other cotton consuming countries have caused the United States to lose its competitiveness in cotton textile production. The European Union (EU) has also experienced a decline in consumption due to a higher labor costs and unfavorable exchange rate. The generally more affluent Asian countries outside China and the Sub-Continent have seen stagnant consumption.
Lower raw cotton prices in recent years have accelerated the shift. In April of 1995 the A-index reached a record high of $1.19, then began its fall to a twenty year low of $0.35 in October of 2001. Because of this large decline in price, cotton consumers in developing countries competitive advantage in cotton textile products was enhanced. Lower labor prices became increasingly important as cotton prices fell, because with a lower cotton price labor rates became a larger portion of the overall cost of production.
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TABLE OF CONTENTS
World Cotton Outlook
U.S. Cotton Highlights
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