Cotton is a natural fiber harvested from the cotton plant. Cotton is very important it is one of the oldest fibers used by humans, and we know this because traces of cotton have been found that are dated back at least 7,000 years. Cotton is also one of the most used natural fibers today by consumers from all social classes and nations. Cotton is mainly used to make clothing items but it has numerous uses and a variety of applications. There is a large demand for cotton so thousands of acres of land are dedicated to the growing of cotton globally (Smith).
Since cotton is a widely used commodity it has a very large market; in 2007 cotton was grown in as many as 90 countries the main ones being China, India, the USA and Pakistan. These four countries accounted for approximately three quarters of world output in 2007 (Anderson).
Since cotton is a highly demanded commodity it has a rather large market and this is why the government is constantly making changes in order to make this market more successful. The government continually makes price adjustments to cotton to be able to stimulate the growth of the production. There is more than enough cotton to go around but there was a fear that the supply would be less than the demand, it is a relief to see now that the supply is on its way to doubling what it was in previous years. “Since the beginning of the 1940s, world cotton consumption has increased at an average annual growth rate of about 2% which was about equal to the growth of production” (Smith).
Market Demand and Potential Paper In today's healthcare market, it seems like managed care companies are paying for less screenings, wellness and preventative medicine. Everyone wants to be healthy and know the numbers that can affect their lives. The thought of getting a disease or dying at an early age scares all of us but especially the baby boomer and elderly population. This large growing ...
The 2010/11 U.S. cotton forecasts shows a higher production which will include the use of domestic mills and increased exporting of cotton. According to Lowell production is around 18.5 million bales which is nearly 52% above last year’s cotton production this may be based on the fact that there has been an increase in the uses of the cotton belt which is southern regions in the united states where cotton is predominantly grown.
The demand for cotton has dropped during the times of the recession, but now larger countries are starting to see the demand jump back up dramatically these places are mainly developing countries like India and China. According to Anderson’s research close to 90% of cotton consumption comes from developing countries. Cotton consumption has shifted to developing countries as a reflection of the rising wage levels. All over the middle class persons seem to spend quite more on clothing then before and this is particularly what is causing the demand of cotton to increase so rapidly now that more people are starting to gain their jobs back from the recession. According to Grewal, “In India, the Cotton Advisory Board recently announced that mill use is expected to increase by 8.9%, pushing total demand for cotton up nearly 26% year over year.,” so it is a concern that there may be a shortage in the supply and the U.S. will not be able to keep up with the fast increase of demand. There are so many factors that affect the supply and demand that just because it is believed the demand for cotton is too large for the supply silk may become the new cotton and no one would have as much as a demand for it. For example on event that has taken a great toll on the cotton market is the recession. “Fundamentally, most of the cotton trade thought that global demand would step to the plate at 70 cents to 67 cents. The market’s sharp drop through those levels without a pickup in export demands has shaken confidence greatly” (Robinson).
Market failure is said to occur when goods or services are not allocated in an efficient manner, or when the quantity of a good or service in demand is unequal to the quantity supplied (“Market Failure,” 2007). In other words, market failure is the absence of perfect competition in which prices are known to automatically move to economic equilibrium and the quantity demanded equals the quantity ...
Researchers say that cotton consumers were scared off by the unknown so there was no demand present, they say the demand is just hidden and will return when consumers feel confidence in the economy again. In December there was such a surplus of cotton on the market that it even caused the price to drop about 20 cents stated Robinson. At this time there seemed like there was no hope for the market prices that kept dropping because of a surplus and the demand was not increasing because consumers couldn’t afford it. This was a troubling time money wise for everyone, consumers and producers, but after about 2 years since 2008 the so called recession started to come to an end in mid-2010. In 2010 there seemed to be a raise is cotton consumption again. This may be for the simple fact that more new jobs were starting to open up and consumers had extra money again to spend on new clothes and shoes. This made many producers in the cotton market happy because consumption shot up about 24% in less than a month (Robinson).
Anderson claims that low cotton prices in China are encouraging mills to buy locally. Meanwhile, time is fleeting for U.S. cotton prices to rise high enough to encourage farmers to plant more cotton next year. Below on the graph between the year 2008 and 2010 it is seen that the supply of cotton stayed steady it was the demand curve that shifted downwards. In 2008 the highest cotton was ever sold for in that years was 80.01 cents per pound but it stayed more in the 50 cents per pound range that year; in 2010 the highest cotton has been sold for so far is 91.69 cents per pound with an average around 85 cents per pound (Lash).