Contributor: ROBERT IPOGAH
CEM INSIGHT, AGRICULTURE| The African cotton industry is poised for significant growth, with the market size expected to reach $6.06 billion in 2024 and climb further to $7.70 billion by 2029, according to a recent report.
This translates to a Compound Annual Growth Rate (CAGR) of 4.91% during the forecast period. This positive outlook aligns with a projected 3.5 million increase in global cotton consumption, reaching a record high of 116.9 million bales in 2024/25.
Analysts point to several factors fueling this cotton consumption surge. A key driver is the anticipated replenishment of inventories along the entire cotton supply chain. This is due to a combination of larger global supplies and a significant decline in cotton product inventories compared to the previous two years.
The sum of global beginning stocks and cotton production is projected to reach nearly 200.0 million bales in 2024/25. This represents a substantial increase of over 5.0 million bales compared to the prior year and the highest level in four years.
Furthermore, greater cotton supplies are expected to boost consumption by providing spinners with more readily available raw materials. Additionally, more stable operating costs for spinners, particularly in terms of financing and energy, are seen as positive factors for cotton consumption.
Competition from Man-Made Fibers Remains a Hurdle
Despite the optimistic outlook, it’s important to acknowledge the ongoing challenge of competition from man-made fibres. This competition has been steadily exerting pressure on global cotton consumption.
Notably, clothing retailers faced a significant drop in import demand in 2023 and the first quarter of 2024. This decline can be attributed to several factors, ranging from:
Excess inventories accumulated during the pandemic
Higher inflation and financing costs
Economic malaise in the European Union, a major cotton import market
Inventory Replenishment Expected to Boost Cotton Imports
The recent decline in global cotton fibre consumption and cotton product import levels suggests that current textile and product inventories are significantly lower compared to the previous two years.
This trend is further evidenced by the running annual sum of cotton product imports for major importers, which was slightly less than 7.0 million metric tons in February 2024 compared to over 8.0 million the year before. This figure falls below the 10-year average and is expected to trend higher as importers seek to replenish stocks in the coming year.
Price Swings and Economic Factors Impact Consumption
It’s worth noting that cotton consumption growth has been dampened to a certain extent since early 2022. This can be attributed to the significant rise in energy prices (natural gas, diesel, and coal) and the acceleration of U.S. interest rates. These factors have had a lagged effect, continuing to pressure consumption in key consuming markets.
However, a recent International Monetary Fund (IMF) World Economic Outlook offers a glimmer of hope. The report forecasts a decline in fuel prices and interest rates in major economies during 2024 and 2025 compared to 2022-2023 levels. This could potentially lead to a rebound in cotton consumption.
Read Also: IMF Endorses Tinubu’s Economic Reforms
Western Africa: A Powerhouse of Cotton Production
Western Africa (WA) is a region brimming with cotton production potential. Comprising twelve cotton-producing countries, including Mali, Burkina Faso, Nigeria, and Côte d’Ivoire, Western Africa accounts for more than three-fourths of Africa’s cotton exports.
Mali and Burkina Faso are currently the leading producers within the region, with forecasts predicting record crops due to expanding cultivation areas. This highlights the critical role of foreign demand for West African producers, as the region has a relatively limited domestic mill capacity, necessitating export of a large portion of its cotton harvest.
Burkina Faso Emerges as Top Exporter
Burkina Faso currently holds the title of Africa’s largest cotton exporter, having exported a staggering USD 459.3 million worth of cotton in 2021. Mali also boasts impressive production figures, achieving its highest-ever cotton production of more than 750,000 Metric tons
Nigeria Lags in Cotton Production
According to an OECD report, in 2022, Nigeria exported $14.8M in Raw Cotton, making it the 42nd largest exporter of Raw Cotton in the world. In the same year, Raw Cotton was the 65th most exported product in Nigeria. The main destinations of Raw Cotton exports from Nigeria are India ($5.1M), Pakistan ($3.65M), Vietnam ($3.6M), Bangladesh ($1.77M), and China ($359k).
The fastest-growing export markets for Raw Cotton in Nigeria between 2021 and 2022 were India ($4.97M), Vietnam ($1.66M), and Bangladesh ($1.62M).
In 2022, Nigeria imported $113k in Raw Cotton, becoming the 113th largest importer of Raw Cotton in the world. In the same year, Raw Cotton was the 1023rd most imported product in Nigeria. Nigeria imports Raw Cotton primarily from: China ($61.4k), United Kingdom ($46.4k), Hong Kong ($4.3k), Lebanon ($1.01k), and Benin ($28).
If You Ask Me
The projected growth in the African cotton market presents exciting opportunities for the continent. By addressing challenges like smallholder dependence and exploring the potential of GM cotton (while adhering to strict safety regulations), African nations can solidify their position as key players in the global cotton industry. Additionally, investments in infrastructure and processing facilities can further enhance Africa’s cotton production and export capabilities.
The success of the African cotton industry will hinge on collaboration between governments, farmers’ cooperatives, the private sector, and research institutions. By working together, stakeholders can ensure sustainable growth in cotton production, create jobs, and boost economic development across the continent
