Cotton prices could get a further boost as soaring fertilizer costs risk denting US crop yields. Elevated cotton prices squeeze apparel makers’ profit margins and push up clothing prices for consumers.
Texas is the largest cotton producing state in the US, the world’s biggest exporter of cotton. But the crop has gotten off to an inauspicious start due to continued drought in the state. Gro’s Climate Risk Navigator application, which allows users to weight for specific crops, shows that soil moisture levels in cotton growing areas of Texas are the lowest since at least 2010.
Cotton is a fertilizer-intensive crop, and a near-tripling in fertilizer prices over the past 18 months could also cut into production should farmers reduce their fertilizer applications.
The challenging start to the Texas season comes on top of a weak cotton harvest in India, the world’s No. 2 cotton producer after China. Below-average rainfall at the start of India’s monsoon, followed by heavy rains from Cyclone Gulab in the fall, reduced production by an estimated 4% year over year. As a result, India’s cotton ending stocks are expected to be 33% lower than the 2020/2021 season, the lowest level in five years.
Given India’s importance to worldwide cotton supplies, global ending stocks of cotton are projected to drop 5.4% to the lowest level in three years.