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 322, January 10, 1997.)
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 February 13, 1997.
Further Information Contact:
U.S. Department of Agriculture
Foreign Agricultural Service
Cotton, Oilseeds, Tobacco, and Seeds Division
1400 Independence Ave. SW
Washington, D.C. 20250-1051
Telephone -- (202) 720-9516
Fax -- (202) 690-1171
Lana Bennett, Acting Director
Abdullah Saleh, Group Leader, Cotton, Tobacco, and Seeds Analysis
Principal Contributors Anita Regmi.............Cotton Analyst for Asia, Latin America, Africa & Oceania Rozlyn M. Sikora.....Cotton Analyst for FSU, Middle East & Europe Anita Middleton........Electronic Word Processor
Ron Roberson..........Chairperson for Foreign Area and Production, PECAD
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The 1996/97 Cotlook A-Index averaged 79.06¢/lb. during December, up from November's average of 75.94¢/lb. The A-Index which began the month at 77.89¢/lb. ended January 2 at 79.33¢/lb. The Central Asian quote was the lowest in the Index, averaging 75.02¢/lb. During December, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 4.92¢/lb. and 5.21¢/lb., respectively. The California/Arizona quote continued to be included in the A-Index after the withdrawal of Mexican quotation last month. March 97 futures prices on the New York Cotton Exchange fluctuated slightly in December. The March contract began the month at 76.49¢/lb and declined slightly for the first half of the month. After a peak futures price of 76.5¢/lb. in mid-December, the March contract closed December 31 at 75.15¢/lb.
The seasonally adjusted daily rate of U.S. cotton consumption in November amounted to 42,502 bales (480-lb), above October's level of 41,348 bales. A total of 843,413 bales were consumed in November, compared with 858,269 bales in October. The seasonally adjusted annualized consumption rate for the month of November was 11.09 million bales, up from October's 10.79 million bales. Domestic mill purchases continued at a moderate pace with light purchases for prompt and nearby deliveries. Southeastern and Delta growths were in greatest demand, with Virginia and Carolina growths purchased for immediate delivery. A moderate amount of cotton was purchased for second quarter 1997 through second quarter 1998 delivery. Consumer interest in cotton products continued steady. Demand for denims and apparel fabrics remained good. Interest in sales yarn, infant wear and housewares was steady. Demand for gray cloth, fleece and industrial fabrics was light. Many mills operated only three days during the Thanksgiving week.
Cotton stocks on hand in consuming establishments during November totaled 578,769 bales (480-lb), down from 581,419 bales in October. Stocks held in public storage and at compresses totaled 10.2 million bales, up from 6.6 million in October. Active spindles in place in November 1996 totaled 6 million, of which 2.6 million were dedicated to 100-percent cotton, compared with 6.7 million and 2.7 million, respectively, during the same period in 1995. Cotton's share on the cotton spindle system was 78 percent.
U.S. cotton exports for October totaled 277,000 bales, up 62 percent from 171,000 bales in September, but 39 percent below October 1995 exports, according to the U.S. Bureau of the Census. The leading markets in October were China, Mexico, Korea, Canada, and Indonesia.
U.S. cotton imports for October totaled 24,000 bales, dramatically down from 194,000 bales in September, according to the U.S. Bureau of the Census. The leading sources for U.S. cotton imports were Argentina, Uzbekistan, and Mexico. International Highlights
Cameroon's state cotton company, SODECOTON, responsible for purchasing and ginning cotton, is to be privatized. The French company CFDT (Compangnie Francaise pour le Developpement des Textiles) holds 30 percent of SODECOTON. The remaining 70 percent held by the Government of Cameroon (GOC) is to be sold by the end of June 1997. In addition to providing infra structural support to the cotton sector, SODECOTON administers ginneries and oil processing plants in Cameroon.
Along with other Franc-Zone African countries, Cameroon has experienced tremendous growth in cotton production and export. For the 1996/97 season, Cameroon's cotton production and exports are forecast at 400,000 and 350,000 bales, respectively, up 65 and 75 percent since 1992/93. Private sector participation in ginning and marketing of cotton is expected to promote continued expansion of cotton production in Cameroon.
During MY 1996/97, China's cotton consumption is expected to continue its declining trend. In an effort to curb oversupply of cotton textile products, China is reportedly reducing its cotton processing capacity. Mills have been asked to lower production and uncompetitive mills are expected to restructure through mergers, bankruptcy or switching to other products. China's 1996/97 cotton consumption is forecast at 19.0 million bales, down 3 percent from last year.
Along with changes proposed in the mill use of cotton, the Government of China (GOC) is also seeking to lower the large stockpiles of raw cotton through reduced imports. A recent policy announced by a GOC official is designed to increase interprovincial cotton trade and reduce cotton imports. The announcement states that market forces will govern future domestic cotton buying whereby cotton trade fairs will replace the state-planned system. In the past, the government purchased cotton from farmers at artificially high prices, making raw materials too expensive for textile mills. This system resulted in increased imports and huge stockpiles of domestically grown cotton. Earlier in September, the GOC announced intentions to suspend cotton imports starting in January 1997, unless China's domestic cotton supply and demand situation changes. Such a suspension would only apply to state-run cotton mills and not to joint-venture mills which are believed to account for at least half of China's total cotton imports. Imports from commitments made prior to January 1997 would be allowed. China's resolve to effect this import policy remains to be seen. There have been no further actions to implement it. The announcement to halt cotton imports was made at the start of the Chinese harvest season, and since then both the official and unofficial crop estimates have been reduced. Despite the uncertainty concerning implementation of the proposed policies, given the declining trend in cotton consumption and the large stockpiles of raw cotton, China's 1996/97 cotton imports are forecast lower at 1.7 million bales, down 44 percent from last season.
The Indian government has authorized another 400,000 bales (480-lb.) of staple cotton for export. This raises the 1996/97 crop quota to 1.03 million 170-kg bales (781,000 480-lb bales) of which 155,000 bales are for the short stapled Bengal Deshi and 5,000 for the non-spinnable Assam Comilla variety. With spillover expected from 1995/96's 1.59 million 170-kg bales (1.24 million 480-lb bales) export quota, and expectations of additional quota this season, India's 1996/97 cotton exports are expected to reach a record 1.2 million 480-lb. bales, almost double the 620,000 bales reached last year. Most of the quota has been allocated to Cotton Corporation of India and the various state government marketing federations.
Special Article: The Restructuring of the Brazilian Textile Industry
The Brazilian textile industry, comprised of spinners, weavers, garment makers, and ginners, has been beset with serious problems since 1990. The opening of the Brazilian market to imported products, high domestic interest rates, overvalued currency, high domestic prices, and higher social security and labor taxes have resulted in large restructuring by textile mill owners to attain economies of scale. The total number of textile enterprises has fallen 22 percent from 1989 to 1994 and the number of employees was reduced to half in the same period.
The spinning segment is the strongest link in the production chain. Of the total number of spinners, estimated at 939 in 1994, four major multinational companies control the market. According to Brazilian banking sources, only 32 percent of total Brazilian spindles and rotors are less than 10 years old. However, the Industrial Marketing Research Institute (IEMI) reported that 2,000 new spinning machines were acquired in the last six years, resulting in an 8 percent renewal of the machinery complex. This investment will likely increase efficiency in the spinning sector by reducing production costs and increasing domestic yarn production.
The profile of Brazilian weavers is characterized by a small number of large companies competing in international markets, and a large number of small companies using old technology and mainly producing for the domestic market. Many of these small companies with less sophisticated technology have left the sector over the last five years, due to stiff competition from imports and the larger, modern domestic weavers. According to IEMI, 20 percent of the Brazilian weavers modernized their plants and equipment between 1990 and 1995.
A rough assessment of the garment segment reveals that 80 percent of its enterprises are small (15 employees on average), and only five percent constitutes large enterprises. Besides the diversity that distinguishes this segment, it is populated by many firms that work in the informal economy. This trend has been especially evident since 1988, as social security and labor taxes have risen sharply, forcing some companies out of the formal economy. Large garment companies have invested in this sector, since the factors influencing its outlook have become more positive. These factors include the stabilization of imported garments made of artificial and synthetic fibers, consumer reaction to the lower quality of expensive imports, and an increase in domestic garment demand as a result of the Government of Brazil's (GOB) economic plan. These larger companies have set a high priority on modernization, productivity enhancement, and product line expansion to attract new buyers. Mergers and alliances have become common denominators among these companies.
Big shipments of synthetic fabric and low cost garment imports have arrived from China, Hong Kong, South Korea, and Taiwan since 1994. Sources claim that garment imports have caused the greatest damage to the textile industry. However, stabilization of these imports is likely to occur due to growing unfavorable consumer perception of low quality imports; delivery problems faced in the last two years; and the imposition of quotas on artificial and synthetic fiber textile products from South Korea, Hong Kong, China, Taiwan, and Panama.
The problems facing Brazil's textile sector have influenced domestic production of textile fibers. Recently, producers have not maintained the 1.1 - 1.2 million metric ton levels evident in the eighties and early nineties. Total domestic production of textile fiber decreased almost 25 percent from 1991 to 1993 - the lowest production level in the last fifteen years. Domestic cotton production maintained a similar trend, while the production of artificial and synthetic fibers has been growing in relative importance. Domestic cotton production declined 46 percent from MY 1991/92 to MY 1993/94. Artificial and synthetic fibers constituted almost 40 percent of total domestic production in 1995, while their share was close to 30 percent in 1991. Calendar year 1993 marked the beginning of an upward trend in domestic cotton production, however production levels have not amounted to earlier levels.
In spite of the general crisis facing the domestic textile industry during the nineties, total textile fiber consumption increased almost 15 percent between 1991 and 1995. However, data from the Textile Industry Syndicate indicate a shift in fiber use in Brazil. While cotton fiber consumption has grown by 11 percent during the 1991-1995 period, artificial and synthetic fiber consumption increased over 32 percent. This consumption shift follows the domestic production patterns of textile fiber. Production of cotton textile fiber has declined by almost 70 percent between 1991 and 1995, while artificial and synthetic fiber production has increased by almost 8 percent in the same period. Thus, the demand for artificial and synthetic fibers is increasingly being met by domestic production, while the excess demand for cotton fiber is being met by cotton imports.
The recent restructuring in Brazil points to increasing fiber and textile imports for domestic consumption. Currently, Brazil's cotton imports are estimated at 2.4 million bales, filling over half of estimated cotton consumption in MY 1996/97. Because of the current strong demand for imported cotton, Brazil is expected to be the world's largest importer of cotton in MY 1996/97. Brazil's cotton imports are estimated to have increased over 400 percent from MY 1990/91 to MY 1996/97. As of December 26, 1996, U.S. commitments to Brazil amounted to 80,000 bales. Currently, Brazil's imports from the United States in MY 1996/97 are estimated at 325,000 bales, over $100 million in value. Brazil imports most of its cotton needs from neighboring Argentina and Paraguay. However, as production in either of these countries falls, Brazil may need to look for other sources for supplies. The United States, as a reliable supplier, may have an opportunity to increase its export sales to this country.