After rebounding strongly in 2021–22 from COVID lows, cotton prices have fallen and drifted along at low levels in recent years. This article takes a look at cotton stocks-to-use, price ratios, and compound growth rates of the key staple fibres as background to the cotton (and wool) market.
Mecardo looked at the cotton market in August 2024 (see article here). Since then, the cotton price has drifted lower, stocks-to-use levels have eased slightly (remaining at 60% with about half in China), and the cotton-to-polyester staple fibre ratio is holding near two. In short, not a lot has changed for cotton.
Figure 1 shows annual end-of-season cotton stocks-to-use levels (broken into China and ex-China) as well as the Cotlook quote. China continues to hold a high level of stock, as it has since 2012. Stock levels outside of China, 29%, are on the low side of their normal range. This is consistent with regular feedback about merino wool stocks in the upper section of the supply chain (including farms).
The downward trend in market share for cotton, noted in the earlier article, continues with cotton now sneaking below 40% of the staple fibre market. This is shown in Figure 2, along with the total stocks-to-use ratio. This volume data is available on the excellent ICAC website statistics portal (see more here).
Figure 3 compares the market share of staple fibres for cotton and the cotton price ratio to polyester staple fibre. There is a clear relationship between a rising price ratio trend and a falling market share from around 2015 onwards, with some year-to-year variations contrary to the trend, similar to the trends seen in broader merino prices.
Figure 4 shows the compound growth rates for the main staple fibre categories during the past decade. Each column has a percentage number shown, the recent staple fibre market share for each category. The compound growth rate for cotton is close to zero for the past decade, with cotton still the largest staple fibre by market share (39.5%). Cellulosics have had the largest growth rate (close to 3%), with polyester staple the next fastest. Polyester staple is the second-largest staple fibre by market share with 32%. On the negative side, wool and acrylics have been shrinking, with acrylics shrinking the fastest (by around 4% per year) and now having a market share only slightly larger than wool (2% versus 1.6%).
What does it mean?
In terms of price, cotton is simply following the general lead of the wider apparel fibres market and tracking along at lowish levels. Stock levels outside of China are on the low side (below 30%) which bodes well when demand starts to pick up. The continued growth in production for cellulosics and polyester staple means a falling market share for cotton, which has been associated in the past decade with a rising trend in the price ratio of cotton to polyester staple.
Key Points
- The market share for cotton continues to decline due to stagnant cotton production and continued increases in cellulosic and polyester staple volumes (representing 46% of staple fibres).
- The decline in market share is associated with an increasing price ratio of cotton to polyester staple fibre
- Cotton stock levels outside of China are on the low side
- Cotton prices continue to drift along at lowish levels
Click on figure to expand
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: ICAC, ABARES, CRB, Cotlook, Cotton Inc, PCI Wood Mackenzie, Emerging Markets, World Bank, DNFI, IWTO, ICS
