U.S. Cotton Exports to Turkey
Cotton production is an important economic factor in the United States as the country leads, worldwide, in cotton exportation. The United States is ranked third in production, behind China and India. Almost all of the cotton fiber growth and production occurs in southern and western states, dominated by Texas, California, Arizona, Mississippi, Arkansas, and Louisiana. Cotton production is a $25 billion-per-year industry in the United States, employing over 200,000 people in total.
U.S. cotton is the world’s premium cotton fiber. The United States devotes more resources than any other country in producing a consistent, high quality, reliable product. Textile products made with a majority of U.S. cotton have an advantage. U.S. manufactured yarns and fabrics contain 100% U.S. cotton. According to the “National Cotton Council’s Economic Outlook“, U.S. producers planted 11.0 million acres of cotton in 2014, an increase of 6.1% from the previous spring. Only 12.0% of U.S. cotton acres were un-harvested, and the resulting 2014 crop of 16.1 million bales marked a 3.2 million bale increase from 2013. U.S. remains the largest exporter with 2014 shipments at 10.2 million bales.
“The U.S. Cotton Belt” includes eighteen states that stretch from the Atlantic to the Pacific oceans. The largest producing states are Texas, California, and Mississippi. Cotton is planted in the United States in the spring and harvested in the fall each year. After harvesting, the cotton is processed at the cotton gin to remove the fiber or “lint” from the fiber. The fiber is then packaged in 480 pound bales. Of the total U.S. raw cotton production, around 75% is exported to textile mills around the world. China is the largest export market for U.S. raw cotton, followed by Mexico and Turkey. Within the Western Hemisphere, US raw cotton is also exported to Colombia, Ecuador, Peru, Guatemala and El Salvador.
International markets are of critical importance to the U.S. cotton industry with approximately 75% of U.S. cotton production exported. Overseas sales of U.S. cotton make a significant contribution to the reduction in the U.S. trade deficit. Annual values of U.S. cotton sold overseas recently have averaged $7 billion. The U.S. commonly supplies 12 million bales or more of the world’s cotton exports, accounting for over 30 percent of the total world export market.
In recent years, China’s imports have accounted for as much as 50% of total world trade, but recent declines in their trade position has lowered that share to below 20%. Much of the reduction in Chinese imports is projected to be offset by increased imports from Bangladesh and Vietnam. In the last five years, the share of U.S. cotton exports by country has changed considerably, particularly for China, Vietnam, and Indonesia. In 2014, China accounted for 23% of U.S. cotton exports compared to their 2010-2014 five-year average of 37%. Vietnam accounted for 15% of U.S. cotton exports in 2014, compared to their 2010-2014 five-year average of 6%. Turkey, Indonesia, and Mexico have continued to remain important export customers as well.
Over the past five years, Turkey has continued to be second largest customer, accounting for about 15% of U.S. cotton exports, importing as much as 2 million bales annually. The textile industry in Turkey is a critical segment of the overall economy, providing jobs at textile mills and export revenue through trade in textile products. With the assistance of government support averaging approximately $0.25 per pound (as estimated by ICAC), Turkish cotton farmers produce only about half of the cotton required by the textile industry. In addition to a lack of quantity, Turkey’s cotton production also fails to meet the quality specifications required for certain textile production. As a result, Turkey has been a reliable customer of U.S. cotton.
In October 2014, Turkey’s Ministry of Economy (MoE) announced the self- initiation of an antidumping (AD) investigation of imports of U.S. cotton. A review of publicly available price data indicates no evidence of dumping, and public statements by Turkey’s Minister of Economy suggest that the investigation is conducted in retaliation of U.S. investigations of imported steel products from Turkey. Any application of a duty would put U.S. cotton at a disadvantage to competing growths, thus jeopardizing the second largest market. The antidumping investigation on U.S. cotton exports to Turkey is still continuing and causing a disturbance in the Turkish textile industry since Turkey produce less than half of its needs, and about half of the total imports are sourced from the United States.
China has historically been the world’s largest producer. For the 2015 crop year, India will be the largest cotton producer, surpassing China for the first time, and is expected to account for 30% of world output in 2024. As Indian farmers continue to apply new and existing technologies to capture currently unrealised yield potential, rising relative cotton prices on world markets will add additional incentives to increase planted area and output.
The world cotton market in 2014 was affected by policy changes in China, which reduced the amount of support offered to farmers. This policy change lowered the gap between domestic and international cotton prices introduced in 2011. Falling domestic prices increased mill consumption after several seasons of decline, and a reduction in import quotas sharply reduced China’s demand for cotton from the rest of the world. World cotton trade for 2015 is estimated at 34.6 million bales, up from 34.1 million in 2014 but well below the 2009-13 5-year average of 41.2 million bales.
As the 2015 harvest progresses in the United States, producers across the Cotton Belt are facing difficult economic conditions. U.S. crop is forecast at 13.0 million bales. China’s 2015 crop is estimated at 30.0 million bales, an 8-percent drop from last season as farmers in eastern China reduced area significantly due partly to uncertainties regarding changes to China’s support policy. India’s 2015 crop is estimated at 30.5 million bales, down slightly from the preceding year on lower yields. Pakistan is expected to produce 10.4 million bales in 2015, an increase of nearly 10 percent from the previous year. Brazil, the largest producer in the Southern Hemisphere, is forecast to produce 7.0 million bales in 2015.
The United States is projected to capture 31% of world trade by exporting 10.7 million bales in 2015. The growth is leading to additional cotton import demand in key countries such as Vietnam, Indonesia and Bangladesh. Further growth is projected for the coming year, lending support to better trade numbers for the U.S.
We at Mylo Trade support long-term business partnerships between American and Turkish firms. We’re also here to connect Turkish cotton importers with the best U.S. cotton exporters. To learn more about how to grow your U.S. cotton export business in Turkey, send us an email.