In microeconomics, pure or perfect competition is a market structure that is characterized by many firms that produce a standardized product such as cotton. This means that each cotton producer’s output is virtually identical to every other cotton producer’s output. Firms must accept the market price of cotton as given. Additonally, new firms can easily enter or exit the cotton industry. 

According to the U.S. Department of Agriculture (USDA), cotton projections for 2025/26 indicate there is a decrease in the global production compared to 2024/25. The world cotton production is projected to be approximately 117.8 million bales in 2025/26 which is nearly 3 percent below 2024/25. Despite the decline, cotton has been among the largest crops of the last several years. For context, one bale of cotton is equal to 480 pounds. In the U.S., cotton is mainly planted in the following regions: the Southeast, the Delta, the Southwest, and the West.

Cotton demand in the U.S. is expected to be higher in 2025/26, about 11 percent above 2024/25. A contributing factor is U.S. cotton exports. They are forecast to account for the growth. U.S. export projection is 12.5 million bales for 2025/26 which is 1.4 million above the previous year. The U.S. is considered the second-largest exporter of raw cotton in the world. However, competition from Brazil is expected to limit any further potential growth in U.S. cotton exports in 2025/26. 

Discussion Questions:

  1. You have learned that the cotton industry is a great example for pure or perfect competition. What other examples come to mind besides cotton? Discuss.
  2. Discuss the conditions required for purely competitive markets.