Cotton Rides High on Rising Oil Prices

Nearly 200 million people depend on the cultivation of cotton for their livelihood - in developing countries as well as in the industrialized world.

Around 26 million tons of cotton were produced worldwide in 2007. That represents enough fiber to make 104 billion T-shirts. The largest producer of the "white gold" was China, followed by India, which booted the U.S. to third place at the beginning of the year. With that leap, India continued its stunning transformation from a cotton importer to a leading exporter: In the past five years, India has doubled its cotton production to 4.6 million tons.

Additional major producers include Pakistan, Uzbekistan, and the nations of western Africa. But the largest cotton exporter remains the U.S.

Over the course of globalization, processing of the natural fiber has gradually been transferred to the countries where it is grown. China, which processes 40 percent of the cotton it produces, occupies one of the leading positions. Germany takes its cotton primarily from central Asia, Greece, and western Africa, importing nearly 65,000 tons of the raw material in 2006. But even for the fabric powerhouse Germany, the lion’s share of imports comes in the form of finished textiles.

With the development of high quality artificial fibers that began in the 1950s, cotton lost in significance. Today, its share of total fibers in textiles is around 40 percent. But recent years have seen a rise in demand: Cotton production grew by 43 percent between 1997 and 2007. Last season alone, the global harvest increased by 2.6 percent. Still, cotton prices on the world market have fallen continuously since 1995: The kilo of cotton that cost U.S. Dollar 2.50 in 1995 brought growers only 84 cents, seven years later. In May, 2007, the price dipped below 50 cents.

The reason behind the collapse: Cotton farmers, especially in the U.S. and the E.U., rely on subsidies. With government financial support, they can bring cheaper products to market - with lethal consequences for farmers in western Africa who lack equivalent subsidies. They are dependent on the market price alone, but it is no longer enough to cover production costs or pay off loans for seed and fertilizer. Up to 15 million people survive on earnings from cotton cultivation in western Africa.

One ray of hope is the rising price of oil: It makes the production of artificial fibers more expensive. In the medium term, it could firm up the price of cotton.