Foreign cotton area for the 2000/2001 season depends on several factors with cotton prices and those of competing crops playing a crucial role. Domestic and world financial conditions also influence foreign cotton area along with government policies and weather. The Cotlook A-Index represents the price level of international raw cotton offered to the market on a daily basis from several cotton trading countries. Generally, a very strong direct relationship exists between cotton area and this price index for the previous year. During the first six months of the 1999/2000 marketing year, the index dropped nearly 3.5 cents to 47.6 cents per pound, 7 cents below the January 1999 price. This factor alone suggests that foreign cotton area in 2000/2001 may drop below the 26.8 million hectares estimated for 1999/2000. However, area shifts also depend upon the price level of other crops in relation to the price of cotton and expected profit margins in comparison to these other crops. On average, for the past five years, corn, wheat, rice, and soybeans have been good alternatives to cotton, as cotton prices have fallen faster than these crops. The relative stronger prices of competing crops point to a continued downward slide in cotton area. However, government policy in either the form of price supports, other incentives, or inducements can alter the decline in area. With these factors affecting area, preliminary indications are that foreign cotton area in 2000/2001 could range from 26.0 to 27.0 million hectares, compared with an estimated 26.8 million for February 2000.
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