OCTOBER 15, 1996
COTTON1.AGR This report provides the text and analysis from the current COTTON: WORLD MARKETS AND TRADE publication. This report draws on information from USDA's global network of agricultural attaches and counselors, official statistics of foreign governments, other foreign source materials, and results of office analysis. Estimates of U.S. acreage, yield and production are from the USDA Agricultural Statistics Board, except where noted. This report is based on unrounded data; numbers may not add to totals because of rounding. The report reflects official USDA estimates released in the World Agricultural Supply Estimates (WASDE number 319, October 11, 1996.) The report was prepared by the Tobacco, Cotton and Seeds Division, FAS, AGBOX 1051, 14th and Independence Ave., Washington, DC 20250-1000. Further information may be obtained by writing to the division, or by calling (202) 720-9516, or by FAX (202) 690-1171. The next issue of the Cotton circular will be available electronically after 3:30 pm local time on November 12, 1996. Further Information Contact: U.S. Department of Agriculture Foreign Agricultural Service Tobacco, Cotton, and Seeds Division Stop 1051 1400 Independence Ave. SW Washington, D.C. 20250-1051 Telephone -- (202) 720-9516 Fax -- (202) 690-1171 Kenneth E. Howland, Director Lana Bennett, Deputy Director Abdullah Saleh, Group Leader, Cotton Analysis Principal Contributors Anita Regmi-- Cotton Analyst for Asia, Latin America, Africa & Oceania Rozlyn M. Sikora--Cotton Analyst for FSU, Middle East &Europe Deidre Winters--Electronic Word Processor Ron Roberson--Chairperson for Foreign Area and Production, PECAD The United States Department of Agriculture (USDA) prohibits discrimination in its programs on the basis of race, color, national origin, sex, religion, age, disability, political beliefs and marital or familial status. (Not all prohibited bases apply to all programs). Persons with disabilities who require alternative means for communication of program information (braille, large print, audiotape, etc.) should contact the USDA Office of Communications at (202) 720-2791 (voice) or (202) 720-7808 (TDD). To file a complaint, write the Secretary of Agriculture, U.S. Department of Agriculture, Washington, D.C., 20250, or call (202) 720-7327 (voice) or (202) 720-1127 (TDD). USDA is an equal employment opportunity employer. Summary World cotton production for crop year 1996/97 is forecast at 87.5 million bales, up 104,000 bales from last month's forecast. The U.S. cotton production forecast is 18.2 million bales, up 289,000 bales from last month's forecast. World cotton production for crop year 1995/96 is estimated at 91.5 million bales, unchanged from last month's estimate. U.S. cotton production in 1995/96 totaled 17.9 million bales. World cotton consumption for MY 1996/97 is forecast at 86.1 million bales, down 790,000 bales from last month's forecast. U.S. consumption is forecast at 11 million bales, down 200,000 bales from last month's forecast. World cotton consumption for MY 1995/96 is estimated at 84.6 million bales, down 376,000 bales from last month's estimate. U.S. cotton consumption in 1995/96 totaled 10.6 million bales. World cotton exports for MY 1996/97 are forecast at 26.5 million bales, slightly up from last month's forecast. U.S. exports are forecast at 5.8 million bales, down 400,000 bales from last month's forecast. World cotton exports for MY 1995/96 are estimated at 27.3 million bales, down 305,000 bales from last month's estimate. U.S. exports in 1995/96 totaled 7.7 million bales. World cotton ending stocks for MY 1996/97 are forecast at 36.4 million bales, up 289,000 bales from last month's forecast. U.S. ending stocks are forecast at 4.5 million bales, up 898,000 bales from last month's forecast. World cotton ending stocks for MY 1995/96 are estimated at 35.6 million bales, up 639,000 bales from last month's estimate. U.S. ending stocks are estimated at 2.6 million bales, unchanged from last month's estimate.World Situation World cotton production for 1996/97 is forecast at 87.5 million bales, up 104,000 bales from last month's estimate. Major adjustments include the following: þ The production forecast for India was increased by 700,000 bales due to increased yield as major cotton producing states in Northern and Central Zones have had excellent monsoon season with low insect and disease infestations. þ The production forecast for Pakistan was lowered by 600,000 bales due to severe white fly damages throughout the main cotton growing area of the Punjab Province. þ The production forecast for China was lowered by 500,000 bales mainly due to a reduction in area reflecting losses from heavy rains in August, and lower yields resulting from less-than-favorable pre-harvest weather conditions. þ The production forecast for the United States was increased by 289,000 bales due to higher yields in California and Texas. þ The production forecast for Egypt was increased by 100,000 bales due to increased yields. þ The production forecast for Mexico was increased by 100,000 bales due to increased area and a slight increase in yields. World cotton production in 1995/96 is estimated at 91.5 million bales, unchanged from last month's estimate. World cotton consumption in 1996/97 is forecast at 86.1 million bales, down 790,000 bales from last month's forecast. Decreases in the consumption forecasts for China, Pakistan, the United States and Russia more than offset increases in the consumption forecasts for Mexico and other countries. World cotton consumption in 1995/96 is estimated at 84.6 million bales, down 376,000 bales from last month's estimate, mainly due to reduced consumptions in China, Greece and Russia. World cotton exports for MY 1996/97 are forecast at 26.5 million bales, slightly up from last month's forecast. Increases in the export forecasts for India, Uzbekistan, Egypt and Greece more than offset the decreases in the export forecasts for the United States, Pakistan and China. World cotton exports for MY 1995/96 are estimated at 27.3 million bales, 305,000 bales from last month's estimate. The decrease in the export estimate was attributed to decreases in the export estimates for Uzbekistan and Turkmenistan. World cotton ending stocks for MY 1996/97 are forecast at 36.4 million bales, up 289,000 bales from last month's forecast. The increase in ending stocks estimate is mainly due to increases in the ending stocks estimates for the United States, India and Greece. World cotton ending stocks for MY 1995/96 are estimated at 35.6 million bales, up 639,000 bales from last month's estimate. The increase in the ending stocks estimate was attributed to increases in the ending stocks estimates for China, Greece, Russia, Uzbekistan and Turkmenistan. Cotton Prices The 1996/97 Cotlook A-Index averaged 75.3 cents/lb. during September, down from August's average of 76.33 cents/lb. The A-Index began the month at 76.15 cents/lb. and ended on September 30 at 75.5 cents/lb. The Central Asian quote was the lowest in the Index, averaging 70.82 cents/lb. During September, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 10 cents/lb. and 9.58 cents/lb., respectively. Amid fears about hurricane Fran, frequent rains in most of the cotton growing areas, and cool temperatures in Texas, futures prices on the New York Cotton Exchange remained steady. The October contract began the month at 76.4 cents/lb. falling initially, but moved up with USDA's bullish crop report. The October contract closed the month at 75.5 cents/lb. U.S. Highlights The seasonally adjusted daily rate of U.S. cotton consumption in August amounted to 41,162 bales (480-lb), below July's level of 41,567 bales. A total of 866,760 bales were consumed in August, compared with 750,794 bales in July. The seasonally adjusted annualized consumption rate for the month of August was 10.7 million bales, down from 10.9 million bales in July. Domestic mill purchases, although slow early in the month, were more active by mid-August. Mill buying increased as additional 1996-crop cotton became available. Demand for prompt deliveries was strong, and demand for nearby deliveries increased. Consumer interest in cotton products continued steady. Demand for casual apparel and denims was strong. Fleece, specialty fabrics and infant wear sales continued fair. Production of fleece increased due to preparation for the winter apparel season. Demand for housewares, sales yarn and print cloth remained good, while industrial fabrics and gray cloth was lackluster. Cotton stocks on hand in consuming establishments during August totaled 597,500 bales (480-lb), down from 613,506 bales in July. Stocks held in public storage and at compresses totaled 1.3 million bales, down from 1.9 million in July. Active spindles in place in August 1996 totaled 6.2 million, of which 2.6 million were dedicated to 100-percent cotton, compared with 6.8 million and 2.8 million during the same period in 1995. Cotton's share on the cotton spindle system was 77 percent. U.S. cotton exports for July totaled 183,000 bales, down 30 percent from 263,000 bales in June, and 39 percent below July 1995 exports, according to the U.S. Bureau of the Census. The leading markets in July were Mexico, Japan, South Korea, and Canada. Total U.S. cotton exports in MY 1995/96 amounted to 7,675,451 bales, down 18 percent from 9,402,000 bales during the same period in MY 1994/95. International Highlights Cote d'Ivoire's Cotton Parastatal to Privatize On September 26, 1996, the government of Cote d'Ivoire (GOCI), in consultation with the World Bank, adopted a privatization plan for its cotton parastatal, CIDT (Compagnie Ivoirienne pour le Developpement des Textiles). The privatization plan will divide CIDT's 10 gins into three companies, the Northeast company, the Northwest company and the Center company. The Northeast and Northwest companies, each consisting of 3 gins, will be sold to private investors. The Center company, with 4 gins, will continue to be owned by CIDT. The "privatized" companies' capital share will be held 34 percent by GOCI, 30 percent by the French cotton development parastatal, CFDT (la Compagnie Francaise pour le Developpement des Fibres Textiles), 20 percent by farmers, 3 percent by employees and 13 percent by private investors. Currently, CIDT provides free seeds, credit and extension services to cotton farmers. It purchases seed cotton after harvest and maintains a monopoly on ginning and marketing of cotton. For two years, CIDT will continue its extension and credit activities and will remain the sole purchasing agency for seed cotton. The seed cotton price will be fixed by an independent committee which will include representatives from the government, the private companies and farmers. The three cotton companies will market their cotton individually. However, they will be required to give priority to the domestic mills. The private companies will be required to participate in the development and expansion of cotton production through the provision of extension services and credit facilities to farmers. Cote d'Ivoire when considered together with the other Franc Zone African countries is the third largest cotton exporter in the world. The World Bank seeks to privatize and restructure all Franc Zone cotton parastatals. Privatization of cotton parastatals is expected to enhance seed cotton prices received by farmers, ultimately boosting cotton production in the region. India The government of India (GOI) granted an additional 100,000 bales (170 kg-bales) of 1995/96 export quota to the Maharastra State Cooperative Cotton Growers Marketing Federation. About half of India's 1995/96 cotton export quota, now at 1.59 million 170 kg bales, has thus far been shipped. To accommodate late season shipments, the Textile Ministry has extended the shipment date under the 1995/96 export quota to October 31, 1996. India's total cotton export quota for the 1996/97 crop season is currently set at 500,000 bales (170-kg bales). On September 25, 1996, the GOI announced an export quota of 150,000 bales of short stapled Bengal Deshi cotton. An additional 5,000 bales quota has been set for the non-spinnable variety, Assam Comilla, and a 345,000 bales quota for staple cotton. Most of the quota has been allocated to the Cotton Council of India and the various state government marketing federations. Bids from exporters will be accepted by the Textile Commissioner's Office through October 31, 1996 for Bengal Deshi cotton and through November 4, 1996 for staple cotton. Pakistan's Cotton Sector Pakistan's cotton production has once again suffered from a severe white fly and leaf curl virus (LCV) infestation. With recurring pest and disease problems, Pakistan has been unable to duplicate its record 10 million bales crop produced during the 1991/92 season. Despite a 6 percent increase in area, this year's cotton crop is estimated at 7.6 million bales, 500,000 bales lower than 1995/96's level. Due to damages from white fly and LCV, Punjab's cotton yields are 10-33 percent lower than last year's. Unlike its normal mid-September emergence, this year's white fly emerged in August when the crop was at early developmental stages and more vulnerable. This factor combined with increasing pest resistance to chemical control has severely damaged Punjab's cotton crop. With about 9 percent increase in area, Punjab was expected to produce about 7 million bales of cotton. However, the current estimate pegs Punjab's crop at 6.1 million bales. Pakistan's remaining 1.5 million bales will be produced in Sindh, where better seeds and better management are expected to lead to a good crop. Cotton areas in Sindh have remained relatively free from pests and diseases. The textile industry is the largest industry in Pakistan and the textile sector accounts for about 65 percent of the country's GDP. The industry grew from 6,217 installed spindles in 1991/92 to 8,734 in 1995/96. Conversely, the weaving sector declined over the same period from 15,000 to 14,000 looms. Despite the growth in spinning capacity between 1991/92-1995/96, the percentage of active spindles declined from 85 to 77 percent. The textile sector is currently recovering from a combined shock of rising input costs for electricity and cotton, and the high cost of capital. Many textile firms are in financial trouble and are failing to make principal and interest payments on existing loans; while others have closed. There have been some speculation that operating credit may be denied to some of the mills in major financial trouble. Given the problems in the textile sector, and continued closing of mills, Pakistan's cotton consumption for 1996/97 is estimated at 6.8 million bales, 200,000 bales below 1995/96's level. Since January 1995, Pakistan has liberalized cotton trade. There is no duty on raw cotton exports, however, cotton imports are subject to a 5 percent duty and a 10 percent general sales tax. Textile mills have complained that this policy has driven up cotton prices in the domestic market. During the past few months, domestic cotton prices have been much higher than international prices. High domestic cotton prices have led to increased cotton imports. Most upland imports have been sourced from Central Asia. Pakistan's 30,000 bales of annual ELS cotton needs are met mainly by imports from the United States and Egypt. Raw and value-added cotton exports account for about 60 percent of the value of Pakistan's total annual exports. Japan, Indonesia, S. Korea and Thailand are the major destinations for Pakistan's cotton and textile exports. Except in the years of major crop failures (such as 1993/94 and 1994/95), Pakistan has been a major exporter of raw cotton. Based on current estimates, Pakistan is expected to export 1 million bales of cotton during the 1996/97 season. Cotton yarn exports, whose value exceeded U.S.$ 1.5 billion during MY 1994/95, account for the largest share of Pakistan's total exports. During the seven month period July 1995 through January 1996, yarn exports have totaled U.S.$ 742 million. Due to the financial problems in the textile sector, Pakistan's yarn exports are believed to have slowed down during the third quarter of 1996. Given the problems facing the textile industry, Pakistan's 1996/97 textile exports are expected to remain flat or decline slightly. The long-term outlook indicates that Pakistan will continue to be a major producer and exporter of raw cotton. Pest and disease problems experienced this year should diminish with extensive use of the two new LCV resistant varieties, CIM 1100 and CIM 448, recently released by the Central Cotton Research Institute in Multan. As the textile sector currently is going through a much needed adjustment, the short-run outlook indicates a slight decline in mill use of cotton. Industry experts believe that many firms are currently operating inefficiently and that a large sector of the industry suffers from gross overcapacity. The government's reform oriented policies which have forced the industry to face higher raw cotton prices are seen as necessary for Pakistan to develop a more competitive industry capable of operating in a liberalized trade environment. This policy in the short-run may flatten or lower textile exports. However, given the large domestically grown cotton base in Pakistan, the Pakistani textile industry should recover. SPECIAL SECTION U.S. COTTON EXPORTS BY CUSTOMS DISTRICT Cotton shipment activity in U.S. ports of departure in marketing year 1995/96 was down 18 percent, reflecting decreased U.S. cotton export demand from the previous year. Total exports from all ports were 7.7 million bales, valued at $3.1 billion, compared to 9.4 million bales, valued at $3.5 billion in MY 1994/95. Recent Bureau of the Census reports show that West Coast ports continue to dominate export movement of U.S. cotton. During 1995/96, West Coast ports accounted for 5.3 million bales, 69 percent of all cotton exports. West Coast shipments in MY 1995/96 registered a 24 percent decrease over MY 1994/95 with the largest share of movement through Los Angeles and San Francisco. The majority of the West Coast shipments are destined for Asian markets. Exports from Gulf ports represented the second largest volume of U.S. cotton shipments, accounting for 1.5 million bales or 20 percent of total exports in MY 1995/96. Exports from the Gulf decreased 15 percent from the previous year with increases from all but two ports. Compared with MY 1994/95, shipments were up 28 percent from Mobile, Alabama and 11 percent from Laredo, Texas. East Coast ports experienced a 45 percent increase in shipment activity in MY 1195/96, while shipments from the Great Lakes ports increased by 16 percent. Leading individual ports were Los Angeles, 3.9 million bales; San Francisco, 976,890 bales; Laredo, 604,309 bales; Houston-Galveston, 436,072 bales; and Seattle, 357,833 bales.