Production response of cotton in India, Pakistan, and Australia

The problematic situation confronted by the cotton sector during recent years and the increasing level of globalization has led to a greater need for understanding production and marketing systems of countries other than the United States. A better understanding of the supply and demand forces underlying cotton markets in other countries can improve policy and industry decisions in the United States. The assessment of the magnitude and direction of the global future cotton supply and demand relations could provide U.S. producers and processors useful information in appraising the potential and sustainability of cotton production and trade. The study of the cotton supply and demand forces would be useful for U.S. policymakers to design market and trade policies to sustain and develop the cotton industry.

Since the activities of production, consumption and trade of cotton in the world are concentrated in very few countries, the study of the foreign cotton industry needs to focus primarily in those countries that are major participants in the global cotton market. Given the resources constraint (i.e., time, data availability, etc.) only a subset of those countries was selected for this research, and the cotton subsector in which this study focused was the production sector. Three countries were chosen: India, Pakistan, and Australia. Current information about production response' for cotton in these countries is limited. The most recent studies found in the literature for India and Pakistan date back to the 1980s, and in the case of Pakistan the eariy 1990s. Therefore, there is a need for further research to develop updated production response functions for these major-producing countries. These three countries are key players in the worid cotton market. India is the largest producing country in the worid after China and the United States, and the second consuming country after China. Although during the last decades India has not imported or exported large quantities of raw cotton, it is predicted that this country will become a net importer of cotton in the near future (FAO, 1999a). Pakistan is the third largest consuming country, and the fourth largest cotton producing country in the worid, and it is likely that it will become an importer of cotton in the future, as well (FAO, 1999b). Australia is the seventh largest producing country and the third largest exporter.