NOVEMBER 13, 1996
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 320, November 12, 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 December 13, 1996.
Summary World cotton production for crop year 1996/97 is forecast at 87 million bales, down 440,000 bales from last month's forecast. The U.S. cotton production forecast is 18.6 million bales, up 405,000 bales from last month's forecast. World cotton production for crop year 1995/96 is estimated at 91.6 million bales, up 102,000 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 85.7 million bales, down 320,000 bales from last month's forecast. U.S. consumption is forecast at 11 million bales unchanged from last month's forecast. World cotton consumption for MY 1995/96 is estimated at 84.6 million bales, slightly up 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 26.3 million bales, down 150,000 from last month's forecast. U.S. exports are forecast at 5.8 million bales unchanged from last month's forecast. World cotton exports for MY 1995/96 are estimated at 27.4 million bales, up 130,000 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 36.9 million bales, up 487,000 bales from last month's forecast. U.S. ending stocks are forecast at 4.9 million bales, up 400,000 bales from last month's forecast. World cotton ending stocks for MY 1995/96 are estimated at 35.6 million bales unchanged from last month's estimate. U.S. ending stocks totaled 2.6 million bales.World Situation World cotton production for 1996/97 is forecast at 87 million bales, down 440,000 bales from last month's estimate. Major adjustments include the following: þ Pakistan's production forecast was decreased by 500,000 bales due to heavy white fly, boll worm, and aphid damage. þ Brazil's production forecast was lowered by 300,000 bales due to a decrease in planted area. þ Greece and Turkey's production estimates were each lowered by 200,000 bales due to heavy rains in October and less-than-favorable harvest weather throughout the cotton growing regions. þ Australia's cotton production estimate was increased by 250,000 bales due to excellent early season rains and more than sufficient on-farm and reservoir irrigation supplies. þ India's production was increased by 200,000 bales due to increased yield as major cotton producing states in the Northern and Central zones have had an excellent monsoon season with low insect and disease infestation. þ Egypt's production was increased by 100,000 bales due to increased yield resulting from favorable weather, increased area planted and an effective pest control campaign during growing season. World cotton production in 1995/96 is estimated at 91.6 million bales, up 102,000 from last month's estimate. The increase in the production estimate was mostly attributed to an increase in Pakistan's production estimate. World cotton consumption in 1996/97 is forecast at 85.7 million bales, down 320,000 bales from last month's forecast. Decreases in the consumption forecasts for China, Pakistan and Russia more than offset increases in the consumption forecasts for Turkey and other countries. World cotton consumption in 1995/96 is estimated at 84.6 million bales, slightly up from last month's estimate. The reduced consumption estimate in China was more than offset by the increased estimates for Turkey and Canada. World cotton exports for MY 1996/97 are forecast at 26.3 million bales, down 150,000 bales from last month's forecast. Increases in the export forecasts for Australia, India and Mali were more than offset by decreases in the export forecasts for Pakistan, Greece and Uzbekistan. World cotton exports for MY 1995/96 are estimated at 27.4 million bales, up 130,000 bales from last month's estimate mainly due to increases in export estimates for Pakistan, Paraguay and India. World cotton ending stocks for MY 1996/97 are forecast at 36.9 million bales, up 487,000 bales from last month's forecast. Ending stocks estimate increases for the United States and China more than offset decreases in ending stocks estimates for Turkey and Uzbekistan. World cotton ending stocks for MY 1995/96 are estimated at 35.6 million bales, unchanged from last month's estimate. The increase in the ending stocks estimate for China was offset by the decreases in ending stocks estimates for Turkey and other countries. Cotton Prices The 1996/97 Cotlook A-Index averaged 75.42 cents/lb. during October, up from September's average of 75.3 cents/lb. The A-Index began the month at 75.85 cents/lb. and ended on October 31 at 75.75 cents/lb. The Central Asian quote was the lowest in the Index, averaging 71.86 cents/lb. During October, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 8.80 cents/lb. and 8.73 cents/lb., respectively. With USDA estimates indicating a larger 1996/97 U.S. crop and lower mill use and exports, futures prices on the New York Cotton Exchange fell in October. The December contract began the month at 76.16 cents/lb and closed October 31 at 75.5 cents/lb. New York futures are currently trading within a narrow range with prices supported by reports of foreign crop declines. U.S. Highlights The seasonally adjusted daily rate of U.S. cotton consumption in September amounted to 41,316 bales (480-lb), slightly above August's level of 41,162 bales. A total of 1,055,923 bales were consumed in September, compared with 866,760 bales in August. The seasonally adjusted annualized consumption rate for the month of September was 10.8 million bales, up from 10.7 million in August. Domestic mill purchases increased in September. Demand for Texas cotton was good for nearby delivery, while Delta and Southeastern growths were purchased for delivery from October 1996 through September 1998. Consumer interest in cotton products continued steady. Demand for casual apparel and denims was strong. Demand for housewares, sales yarn and print cloth, along with industrial fabrics and gray cloth, remained fair. Cotton stocks on hand in consuming establishments during September totaled 551,981 bales (480-lb), down from 597,500 bales in August. Stocks held in public storage and at compresses totaled 2.1 million bales, up from 1.3 million in August. Active spindles in place in September 1996 totaled 6.1 million, of which 2.6 million were dedicated to 100-percent cotton, compared with 6.8 million and 2.7 million during the same period in 1995. Cotton's share on the cotton spindle system was 78 percent. U.S. cotton exports for August totaled 257,000 bales, up 40 percent from 183,000 bales in July, but 18 percent below August 1995 exports, according to the U.S. Bureau of the Census. The leading markets in August were China, Mexico, Canada, Japan, and Indonesia. U.S. cotton imports for August totaled 157,000 bales, down 23 percent from 205,000 bales in July, according to the U.S. Bureau of the Census. The leading sources for cotton were Uzbekistan, Argentina, Australia, and Mexico. Total U.S. cotton imports in MY 1995/96 amounted to 407,598 bales, significantly up from 20,458 bales during MY 1994/95. International Highlights Brazil Since 1994/95's good harvest, Brazilian cotton production is once again on the decline. The 1995/96 crop is estimated at 1.8 million bales, 29 percent lower than 1994/95's level. As cotton producers face high labor and credit costs, production is expected to decrease further in 1996/97. Adverse climatic and pest conditions during the 1995/96 season resulted in poor cotton yields and quality. These problems, along with high production costs, have negatively affected 1996/97 cotton planting decisions. Brazil's 1996/97 cotton planted area is forecast to drop 22 percent from last season, and the current production forecast of 1.6 million bales is the lowest in decades. With lower projected production and stable consumption, Brazil's 1996/97 cotton imports are forecast at 2.3 million bales, 23 percent higher than in 1995/96. Argentina, Paraguay, the United States and Uzbekistan are Brazil's major cotton suppliers. In 1995/96, the United States accounted for 8 percent of Brazil's total cotton imports, supplying 170,000 bales. Paraguay Lower cotton prices and high input costs resulted in a 25 percent decrease in Paraguayan cotton production in 1995/96. Cotton production in Paraguay is dominated by small farmers with an average size of 2.2 hectares. About 80 percent of the crop is hand cultivated and rainfed. Due to financial constraints, use of fertilizer and chemical inputs is limited. Low profitability and lack of quality seeds have led many farmers, with government encouragement, to switch to more profitable crops such as soybeans. For the 1996/97 season, cotton production is expected to continue its downward trend, with current projections at 370,000 bales, considerably below 1995/96's level of 500,000 bales. Since removal of its cotton import ban last year, Paraguay has imported cotton from Argentina to keep the mills and gins running at higher capacity and allow mills to meet export commitments. In 1995/96, Paraguay effected its first imports from Argentina, taking in 46,000 bales. For the 1996/97 season, Paraguay's imports are expected to reach 100,000 bales. Argentina is expected to be the primary supplier. Potential for Substantial U.S. Cotton Exports to Russia Russia's recent abolishment of the value-added tax on cotton imported from non-Former Soviet Union (FSU) sources and the problems with FSU financing terms have encouraged Russian officials to investigate importing U.S. cotton. Traditionally, Russia has imported all of its cotton needs from FSU producers, most notably, Uzbekistan. However, in recent years, FSU cotton exports to Russia and other non-producing countries have declined substantially. FSU cotton producing and exporting countries such as Uzbekistan and Turkmenistan have shifted their cotton export sales to markets in Europe, Asia, and the Western Hemisphere (including the United States) where they are assured payments in hard currency. Uzbekistan, which is expecting a considerably reduced cotton harvest this year and is already struggling with foreign exchange shortages, is reportedly requiring prepayment on cotton sales to Russia. Import financing within Russia, on the other hand, is problematic and subject to high interest rates. Despite the fact that Russian textile mills are now working at only a fraction of capacity, Russia continues to be one of the largest importers of cotton in the world, with MY 1996/97 imports forecast at 950,000 bales. Currently, USDA expects the United States to supply Russia with 4 percent of its projected imports, but U.S. market share has the potential to increase significantly if problems related to financing could be solved. U.S. cotton sales to Russia would likely be heavily dependent on the availability of credit guarantees under USDA's GSM-102 program. Thus far for FY 1997 the USDA has authorized $30 million in credit guarantees for the sale of a variety of agricultural commodities, including cotton, to Russia under the GSM-102 program. Thailand The Thai Cabinet agreed on October 15, 1996, to set up a Textile Industry Development Institute (TIDI) to boost the textile sector. The institute will operate as an independent organization under the Industrial Development Foundation, which is primarily funded by private companies. It will be managed by a board composed of members from both the government and private sectors. The Government of Thailand will allocate $2 million towards establishing the institute, while its operating budget will be met by a 0.03 percent fee levied on textile manufacturer's previous year's sales. The responsibilities of the institute encompass the following: 1) developing an information system and distribute market news; 2) researching and developing textile technology; 3) assisting in the maintenance of quality and standards for textile products; 4) developing skills of textile workers and personnel; and 5) coordinating textile interests within the private sector and between private and government sectors. Thailand's mill consumption of cotton declined from 1.7 million bales in MY 1991/92 to 1.4 million bales in MY 1995/96. During the same period cotton yarn and fabric production declined 8 percent and 13 percent, respectively. With the establishment of TIDI, mill activity is expected to increase. Virtually all of Thailand's raw cotton demand is met by imports. The United States has remained a significant supplier and accounted for 25 percent of Thailand's total cotton imports in 1995/96.