SIC 0131
COTTON



This industry classification includes establishments primarily engaged in the production of cotton and cottonseed.

NAICS Code(s)

111920 (Cotton Farming)

Industry Snapshot

Farmers harvest approximately 17 million bales of cotton every year from an average of more than 12 million acres planted annually. Cotton's many uses make it a major U.S. textile export, increasing in 2001 to 11 million bale equivalents shipped, a 75-year high. Often overlooked as significant, the cottonseed produces more than 9 billion pounds of feed for livestock on average and more than 154 million gallons of cottonseed oil (used for a variety of food products ranging from margarine to salad dressing) annually. According to the National Cotton Council, cotton stimulates an estimated $120 billion in business revenue on the nation's economy.

Background and Development

Earliest records of domesticated cotton or Gossypium date back to 5000 B.C. and traces of cotton processed into cloth have been found in Peru with the estimated date of 2500 B.C. Since the eighteenth century, the United States has been a leading producer of cotton, usually the second largest. Virginian colonists grew and exported small amounts of cotton since the founding of the colony in 1607 using imported seed from the West Indies, but it was the invention of Eli Whitney's cotton gin in 1793 that allowed cotton to become a major component of the American economy. According to Harold Woodman, author of King Cotton and His Retainers, exports of cotton increased from 500,000 pounds in 1793 to more than 90 million pounds in 1810. In the three decades preceding the American Civil War, cotton production accounted for more than half of the nation's exports. Spurred by continuing worldwide demand, U.S. cotton production and acres planted grew steadily until reaching its peak in 1925, when 45 million acres of American soil were planted with cotton. By the early 1990s, U.S. mills annually consumed some four billion pounds of cotton.

The mechanization of cultivation and harvesting led to dramatic changes in the U.S. cotton industry. In the early 1950s, only 18 percent of U.S. cotton was harvested mechanically; by 1967 that figure had jumped to 95 percent, and productivity increased with mechanization. As a result, total acreage devoted to cotton production dropped 75 percent between the 1920s and the 1990s, while annual production stabilized at approximately 16 million bales. U.S. cotton growers produced close to 20 percent of the world's cotton supply throughout the 1980s, and approximately half of their annual production during that time was exported.

Because cotton requires warm conditions for germination and growth, it has always been grown in the southern regions of America, from Virginia to California. For three centuries, U.S. cotton production was centered in the area stretching from the Atlantic coast westward to central Texas. However, the increasing availability of irrigation facilities has allowed western growers to produce cotton that is more consistent in color and weight. By 1995, the largest producers of cotton were Texas and California, with annual harvests of about 4.5 million and 2.5 million bales, respectively. Although California growers plant approximately one-quarter the number of acres as Texas growers, their yield per acre has often been triple that of Texas growers.

Two kinds of cotton are grown in the United States: American upland cotton, which accounts for 95 to 98 percent of production, and Amer-Pima, which accounts for two to five percent of production. Cottonseed is planted mechanically between February and June and is harvested in the fall, usually before the first frost. The cotton plant grows three to six feet tall, has broad bushy leaves and a stalk that measures up to an inch in diameter. After flowering, the cotton plant produces a boll, which contains the seeds and fiber that are eventually harvested. Cotton bolls are harvested mechanically after the plants have been defoliated, either by frost or by application of chemicals. The harvested bolls are cleaned, ginned (a process that strips the fibers from the seeds), packed into bales weighing approximately 500 pounds, classified according to staple (fiber) length, grade, and character, and then brought to market. The longest cotton fibers are processed into yarns for making fabrics, the shorter fibers, called linters, are used as a source of cellulose for industrial applications. The seeds are processed into cottonseed oil, while the seed husks are used as a feed for livestock.

The emergence of the man-made fiber market in the mid-1970s represented the greatest challenge to cotton's dominance of the world fiber market. With the introduction of fibers such as polyester, cotton's share of the clothing market fell from 50 percent in 1970 to 34 percent in 1975, according to The Economist. The cotton industry responded to this challenge by forming Cotton Incorporated, a promotional organization funded by voluntary levies paid by cotton growers. During the 1980s and 1990s, cotton began to reclaim the fiber and lint market; it recaptured 50 percent of the U.S. retail clothing market, indicative of its success worldwide.

Though the cotton industry had been stabilized by U.S. government subsidies and price supports that eased the pressures of a volatile world cotton market since 1933, Congress passed the 1996 Freedom to Farm Bill in an attempt to bring about a new era of market-dependent farming. The bill called for the freezing and incremental reduction of farm subsidies over a seven-year period ending altogether in 2002. However, the Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, reversed conditions by returning to higher levels of government support for farmers.

Along with other agricultural products, cotton producers faced pressure to implement more environmentally-friendly production techniques. Retailers and manufactures, such as Esprit, O Wear, Eco Sport, and GAP, called for an increased supply of organic cotton and began to market organic cotton products. In the 1980s, the United States accounted for only 3 percent of the world's farmland but almost 25 percent of the world's pesticide use.

Because organic cotton cost up to three times as much to produce as traditional cotton, customers buying the clothes manufactured with pure organic cotton were not pleased with the prices. After spiking to more than 25,000 acres in 1995, organic cotton farming dropped to 10,000 acres in 1996. Following the rise and fall, retailers and manufacturers introduced new blended cotton clothing, which allowed customers the benefit of organic cotton while keeping the prices down. According to the Organic Trade Association's 1997-98 survey, more than 4 million pounds of organic cotton were grown in Arizona, California, Missouri, New Mexico, and Texas. Additionally, in 1997 Ecomall.com revealed that more than 1 million pounds of organic cotton were purchased by Levi's, the world's largest apparel user of cotton.

Current Conditions

Cotton is produced on more than 31,400 farms in the United States, with 98 percent grown in fourteen states. Texas is the largest grower, producing an estimated 5.0 million bales of cotton in 2002, while Mississippi, the second largest, produced only 1.9 million bales.

In the early 2000s, the cotton industry was benefiting from increased demand. According to the U.S. Department of Agriculture (USDA), in 2002 demand for domestic cotton increased more than 3 million bales, reaching 18.7 million bales. This increase was fueled by explosive growth in exports, which grew 60 percent from 2001 to 11 million bales. Such export levels had not been seen for 75 years. While exports skyrocketed, consumption at domestic textile mills fell 13 percent from 2001, settling at 7.7 million bales. Levels this low had not been seen since the 1987-88 season. The USDA attributed this situation to reduced mill capacity and output amid weak economic conditions. In addition to lower levels of consumer spending, a strong U.S. dollar that favored imports also contributed to the downturn in domestic consumption.

A major agricultural sector development occurred on May 13, 2002, when the Farm Security and Rural Investment Act of 2002 was signed. Impacting the industry for a period of six years, the 2002 Farm Bill provides higher levels of support for farmers. As the USDA explains, the legislation "Alters the farm payment program and introduces counter-cyclical farm income support; expands conservation land retirement programs and emphasizes on-farm environmental practices; relaxes rules to make more borrowers eligible for Federal farm credit assistance; restores food stamp eligibility for legal immigrants; adds various commodities to those requiring country-of-origin labeling; and introduces provisions on animal welfare." Consumers' Research Magazine criticized the bill for its potentially negative impact on international trade. However, many sectors within the agricultural industry stood to benefit from higher levels of support for export programs, provided as a direct result of the new farm bill.

Further Reading

Apodaca, Julia Kveton. "Potential of Organically Grown Cotton." Available from http://www.ecomall.com/greenshopping/panna3.htm . Accessed 20 February 2003.

McConnell, Jane. "Organic Cotton Clothing Industry Booming." Available from http://www.ecomall.com/greenshopping/mothero.htm . Accessed 20 February 2003.

Montgomery, Delia. "Organic Cotton: A Better Alternative." Available from http://www.ecomall.com/greenshopping/chiceco5.htm . Accessed 20 February 2003.

National Agricultural Statistics Service. "Cotton and Wool Outlook." December 1999. Available from http://www.usda.gov/nass .

National Cotton Council of America. "Cotton: Profile of a Resourceful Industry." 1999. Available from http://www.cotton.org/ncc/education .

——. "Frequently Asked Questions About Cotton." 1999. Available from http://www.cotton.org/ncc/education/cotton_faq.htm .

——. "United States Cotton Production, 2001 Crop Year." 18 January 2003. Available from http://www.cotton.org .

——. "The World of Cotton." 18 January 2003. Available from http://www.cotton.org .

Rippel, Barbara. "Farm Bill Undermines Open Trade—and Consumer Welfare." Consumers' Research Magazine. June 2002.

U.S. Department of Agriculture. Economic Research Service. "Briefing Room, Cotton." Washington, DC: 13 August 2002. Available from http://ers.usda.gov .

——. Cotton and Wool Outlook/CWS-1102. Washington, DC: 11 December 2002. Available from http://ers.usda.gov .

——. Cotton and Wool Situation and Outlook Yearbook/CWS-2002. Washington, DC: November 2002. Available from http://ers.usda.gov .



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