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This Year’s Droughts Are Crushing the US Cotton Industry

Neil lives in Canada and writes about society and politics.
Published: August 17, 2022
Drought has crushed the U.S. cotton industry.
An uncropped and abandoned cotton field hit by drought is seen in Apodi, Rio Grande do Norte, Brazil on June 29, 2012. (Image: YASUYOSHI CHIBA/AFP/GettyImages)

The massive and unprecedented droughts impacting not only the United States, but much of Europe, Asia, and China, are now severely impacting the U.S. cotton industry, driving prices up more than 20 percent in a month.

In an Aug. 12 Cotton: World Markets and Trade industry update by the U.S. Department of Agriculture (USDA), the agency heavily slashed future outlooks, noting that exports had dropped 1.7 million bales year over year with August stocks falling an astonishing 4 million bales below 2021’s numbers. 

The key point in the figures, they stated, was simply that stocks and export rates had crashed due to significantly decreased supply.

Of particular note in the release is that China is the largest export market and consumes a third of U.S. cotton.

The United States is the world’s top cotton exporter, dwarfing second place Australia by a factor of two.

But most concerning was the slashing of the USDA’s outlook for the 2022-2023 season.

The Department now expects exports to drop 2.5 million bales and production to drop 5 million bales, bluntly, “Because of drought, particularly in Texas which normally accounts for more than one-half of U.S. plantings.”

The production drop amounts to 28 percent and is set to be the worst harvest since 2009.

An infographic provided in the document shows that 66 percent of cotton production, including approximately half of the major crop locales, are situated in a drought area.

USDA Cotton Areas in Drought infographic. 66 percent of cotton production is seated in an area suffering from drought.
USDA Cotton Areas in Drought infographic. 66 percent of U.S. cotton production is seated in an area suffering from drought. (Image: United States Department of Agriculture)

The Administration also slashed global production 3.1 million bales on account of the impact to U.S. farmers, since the United States is the world’s top exporter.

Overall, American export outlook was slashed a staggering 15 percent from 14 million bales to 12 million bales.

MORE ON THE COLLAPSE OF THE ENVIRONMENT

Accordingly, China’s import outlook was hammered 10 percent from 10 million bales to 9 million.

As a result of the redefined outlook, cotton futures on the New York Mercantile exchange spiked almost 7 percent from their Aug. 12 close to time of writing, and are up more than 28 percent from July.

Jon Devine, an analyst for industry firm Cotton Inc., told Bloomberg in an Aug. 16 article that the market “has struggled to find the balance between the weakened demand environment and limited exportable supply in recent months.”

The precarious situation “makes it difficult to discern a clear direction for prices and suggests continued volatility,” he added.

Louis Barbera, Managing Partner for VLM Commodities, told the outlet that the Texas drought situation is so bad that there is “literally nothing” in fields, which are now composed merely of desert sand.

Aug. 16 reporting by Corpus Christi media outlet 3News cited a local expert as stating that the situation in the Texas cotton belt is far worse than the USDA’s numbers were letting on, forecasting a real-world 65 percent drop in production.

Michael Thompson, Gin Manager for True Co-op, told the outlet that this year, after farmers sewed their fields, “Some areas it came up. Some areas it never even came up. The seed never even did sprout, that’s how dry we were.”

A Professor from Texas A&M told 3News that 2022’s outputs were the worst they’ve been since 1986.

Same day reporting by the Wall Street Journal noted ominously, “U.S. agricultural forecasters expect drought-struck farmers to walk away from more than 40% of the 12.5 million acres they sowed with cotton and harvest the smallest area since Reconstruction.”

One Texas farmer was paraphrased by the Journal as having stated he had “given up on all but about 280 of his 5,000 acres.”

The farmer added, “Thank goodness we have federal crop insurance…It’s nothing like making a crop, but it will keep the farmers in business.”

And it’s not just the cotton industry in Texas that is hurting. An Aug. 15 article by Fox West Texas stated that the local wool industry was also severely hampered by a lack of water.

“Unfortunately, the wool industry hasn’t been faring too well. It’s kind of just maintained at that kind of mid to low range. The prices really haven’t gone up even though maybe there’s some pretty decent demand for the final products,” said Reid Redden, an Associate Professor at Texas A&M. 

Redden added, “Generally by the time all of the inflation and shipping and energy costs that come with manufacturing, ranchers don’t see an increase.” 

Just as the drought situation has led U.S. cattle ranchers to send a large number of their breeding stock to feedlots in preparation for slaughter, sheep farmers have been faced with the same tough decision as a lack of water leaves homesteads without the ability to cool or hydrate their animals.