King Cotton: Cause Of The American Civil War

Cotton is one of the most important commodities to, not only the United States’ economy, but has also played a trivial role in American history. America was once known as “King Cotton” and was the most profitable crop for Southern farmers, causing a rift in the relationship between the north and the south in the mid nineteenth century. It is arguably a cause of the American Civil War, and reshaped the economy. Today, cotton is still a very important crop to the United States economy and something that almost everyone uses in their everyday life. According to Wikinvest, 64 percent of cotton is used for apparel, 28 percent for home furnishings, and 8 percent for industrial products (1). America is still one of the biggest producers of cotton;

Nation’s cotton farmers harvest about 7.3 billion bounds of cotton annually, which equates to a revenue of about $100 billion, annually (7). However, cotton requires many capital investments in order to use less labor and have a consistent crop quality (8). Examples of these investments include: tractors, storage mills, irrigation and cotton gins (8). With technology advancements, there has been an increase in cost for these items, which also makes it harder for new competitors to enter into the market without them (8). Each year of crop production involves a purchase of $5.8 billion worth of inputs, labor and equipment (7). In 2015, IBIS World estimated that “an average cotton farmer spends $0.79 on capital for every dollar spent on labor,” (8). Besides the increasing costs involved in the cotton industry, there are other factors that can deter new competitors from entering the market, as well as increasing the price of cotton for

Louis Dreyfus Company, the world’s largest trader of raw cotton, has suffered significant losses in it’s cotton sales. The company’s full year profit fell 68%, the lowest sales it has seen in a decade. The company says the drop is due to “an environment of reduced commercial opportunities,” according to Chief Executive Officer Gonzalo Ramirez. The cotton decline not only affects shareholders of Louis Dreyfus and companies who need use cotton to make their products, it could potentially effect the inflation on the Brazilin Real (4). Another cotton company that has fallen victim to the cotton decline is Cargill Inc. The head of Cargill cotton company, Doug Chrisite has left the business. The company has been facing a decline in sales ever since the end of the bull market in 2010. Christie was apart of Cargill Inc. for two decades