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 331, October 10, 1997.) The report was prepared by the Cotton, Oilseeds, Tobacco and Seeds Division, FAS, Stop 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, 1997. Further Information Contact: U.S. Department of Agriculture Foreign Agricultural Service Cotton, Oilseeds, Tobacco, and Seeds Division Stop 1051 1400 Independence Ave. SW Washington, D.C. 20250-1051 Telephone -- (202) 720-9516 Fax -- (202) 690-1171 Larry Blum, Director Lana Bennett, Deputy Director, Analysis Abdullah A. Saleh, Group Leader, Cotton, Tobacco, and Seeds Analysis Principal Contributors Ann Murphy Cotton Analyst for the Americas & South Asia Jon Ann Flemings Cotton Analyst for FSU, Europe & East Asia Andrew Levin Cotton Analyst for Africa, the Middle East & South Asia Ada Arrington 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's TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint, write the Secretary of Agriculture, U.S. Department of Agriculture, Washington, D.C., 20250, or call (1-800) 245-6340 (voice) or (202) 720-1127 (TDD). USDA is an equal employment opportunity employer.
Summary World cotton production for MY 1997/98 is forecast at 89.9 million bales, up 1.0 million bales from the last month's projection. The U.S. cotton production forecast is 18.41 million bales, virtually unchanged from last month's forecast. World cotton production for MY 1996/97 is estimated at 89.0 million bales, up 290,000 bales from last month's estimate. U.S. cotton production is estimated at 18.94 million bales, unchanged from last month's estimate. World cotton consumption for MY 1997/98 is forecast at 90.1 million bales, up 555,000 bales from the previous month's projection. The U.S. cotton consumption forecast is 11.30 million bales, unchanged from last month's forecast. World cotton consumption for MY 1996/97 is estimated at 88.1 million bales, up 284,000 bales from last month's estimate. U.S. consumption is estimated at 11.12 million bales, unchanged from the previous month's estimate. World cotton exports for MY 1997/98 are forecast at 27.3 million bales, down 605,000 bales from the previous month's projection. The U.S. cotton exports forecast is 6.9 million bales, down 300,000 bales from last month's forecast. World cotton exports for MY 1996/97 are estimated at 26.6 million bales, up 112,000 bales from last month's estimate. U.S. exports are estimated at 6.87 million bales, down 85,000 bales from the previous month's estimate. World cotton ending stocks for MY 1997/98 are forecast at 35.8 million bales, up 647,000 bales from last month's projection. U.S. cotton ending stocks are forecast at 4.2 million bales, up 500,000 bales from last month's forecast. World cotton ending stocks for MY 1996/97 are estimated at 36.4 million bales, up 123,000 bales from last month's estimate. U.S. cotton ending stocks are estimated at 3.97 million bales, up 151,000 bales from last month's estimate. World Situation World cotton production for MY 1997/98 is forecast at 89.9 million bales, up 1.0 million bales from last month's forecast. Production in 1997/98 is forecast above last month's estimate, mainly due to increases in the production forecasts for the Argentina, Brazil, India, Syria and Turkmenistan. World cotton production for MY 1996/97 is estimated at 89.0 million bales, up 290,000 bales from last month's estimate. The increase in the production estimates for Australia, Argentina, and India was partially offset by the decrease in Syria's production estimate. World cotton consumption for MY 1997/98 is forecast at 90.1 million bales, up 555,000 bales from the previous month's projection. Increases in the consumption forecasts for China, India, and Turkey, were partially offset by the reduction in Taiwan's and Indonesia's forecast. Consumption in 1997/98 is forecast 2.0 million bales, or 2 percent, above last season's level. World cotton consumption for MY 1996/97 is estimated at 88.1 million bales, up 284,000 bales from last month's estimate. The increase in the consumption estimate for India was partially offset by the decrease in Syria's consumption estimate. World cotton exports for MY 1997/98 are forecast at 27.3 million bales, down 605,000 bales from the previous month's projection, as decreased export forecasts for Australia, the United States, and Uzbekistan offset increased projections for Argentina and Turkmenistan. Exports in 1997/98 are virtually unchanged from last season's estimate. World cotton exports for MY 1996/97 are estimated at 26.6 million bales, up 112,000 bales from last month's estimate. Increases in the export estimates for Australia and India were partially offset by decreased export estimates for Syria, Mexico, and the United States. World cotton ending stocks for MY 1997/98 are forecast at 35.8 million bales, up 647,000 bales from last month's projection. Increases in the ending stocks forecast for the United States, Argentina, Australia, Turkmenistan, and Uzbekistan were partially offset by the reduction in China's ending stocks estimate. World cotton ending stocks for MY 1996/97 are estimated at 36.4 million bales, up 123,000 bales from last month's estimate. Increases in the ending stocks estimates for China, India and the United States were partially offset by the decreases in the ending stocks estimates for Syria and other countries. Cotton Prices The 1997/98 Cotlook A-Index averaged 79.61 cents/lb. during September, down from August's 1996/97 average of 81.28 cents/lb. The A-Index which began the month at 80.2 cents/lb. ended September 30 at 79.3 cents/lb. The African quote was the lowest in the Index, averaging 77.5 cents/lb. During September, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 4.55 cents/lb. and 2.84 cents/lb., respectively. October 97 futures prices on the New York Cotton Exchange fell in September. The October contract which began the month at 73.2 cents/lb. closed September 30 at 69.4 cents/lb. Increased world supplies, favorable weather conditions, and expectations of lower cotton imports by China, provided pressure for the market. U.S. Highlights The seasonally adjusted daily rate of U.S. cotton consumption in August amounted to 42,847 bales (480-lb), slightly below July's level of 44,512 bales. A total of 868,874 bales (480-lb) were consumed during four weeks in August, compared with 780,787 bales in July (4 weeks). The seasonally adjusted annualized consumption rate for the month of August was 11.18 million bales, up from July's 11.62 million bales. Domestic mills purchased a moderate volume of cotton in August for prompt and fourth quarter 1998 delivery. Primarily Delta and Southeastern growth cotton was purchased for prompt and nearby delivery, and a limited amount was purchased from the Coastal Bend area. Though mill sales of housewares items fluctuated, they remained top sellers. Mill production of sales yarn continued at a heavy pace. Consumer interest in denim products was mostly good to strong, while sales of gray cloth and industrial goods were lackluster. Demand for casual apparel and infant wear remained steady. Most mills operated on a five day work week. Cotton stocks on hand in consuming establishments at the end of August totaled 686,802 bales (480-lb), down from 693,110 bales in July. Stocks held in public storage and at compresses totaled 2.5 million bales, down from 3.3 million in July. Active spindles in place in July 1997 totaled 5.3 million, of which 2.6 million were dedicated to 100-percent cotton, compared with 6.2 million and 2.6 million, respectively, during the same period in 1996. Cotton's share on the cotton spindle system was 78 percent. U.S. cotton exports for July totaled 501,000 bales, below the 614,000 bales in June but 63-percent above July 1996 exports, according to the U.S. Bureau of the Census. The leading markets in July were China, Mexico, Turkey, Indonesia, Japan and Korea. U.S. cotton imports for July totaled less than 1,000 bales compared with 202,000 bales in July 1996, according to the U.S. Bureau of the Census. Uzbekistan was the main source for imports in July. Texas Texas is the largest cotton producing state in the U.S., and has a long history of cotton production dating to 1886/87 when 215,000 bales were produced. Production for 1997/98 is estimated at 5.4 million bales of Upland cotton plus 53,000 of Pima cotton. Production in Texas exceeds that of most cotton-producing nations in the world. Texas farmers planted 5.3 million acres of cotton this year with approximately one-third irrigated. Texas cotton is generally short staple; however, its quality continues to improve with improved varieties and cultural practices. There are four regions in Texas where cotton is produced. West Texas is the largest supplier of coarse count cotton to the world; its main competitor is Pakistan and the FSU. The value of cotton and cottonseed to the Texas economy is estimated at $2.0 billion, with a statewide economic impact of $6.7 billion. Texas has a state breeding program to increase water use efficiency, shorten maturation period, increase fiber quality and increase yields. This program is funded by the High Plains Improvement Program through a check-off program of $0.10 per bale paid by participating Texas cotton farmers. International Highlights China China's imports are expected to be reduced by about one-third from last season due mainly to the implementation of policies intended to increase the use of surplus stocks, in particular cotton from Xinjiang province. The price of Xinjiang cotton to mills has been reduced by 10 percent of the procurement price, or 1,400 RMB per metric ton below the 1996 price. In addition, the value-added tax (VAT) of 17 percent will be refunded for exported textiles made from Xinjiang cotton. For all other textiles, 9 percent is refunded. Cotton produced in other provinces is eligible for a negotiated discount of 6 percent from the official price, compared with 4 percent prior to the policy change. Further enforcement of current cotton policies could also effect cotton imports. China's cotton policies have required imported cotton that is processed into products sold domestically to incur taxes unless the products are to be sold for export. However, during 1996/97, imported cotton was used for the domestic market without payment of the taxes. China is now expected to nire stringently infoce enforce the requirement that imported cotton not processed into exported products be taxed. The Chinese government's attempts to reduce cotton stocks and decrease cotton imports may be effective. A meeting was held during late September between government and major importers (joint venture mills and textile import/export companies). Mills reportedly purchased an estimated 1.25 million bales of Xinjiang high grades. The cost of Xinjiang cotton to the mills, given recent price cuts and value added tax rebates, is expected to fall to between 77.00 and 80.00 cents per pound. Another meeting was scheduled for October 7-9, 1997 to solicit additional orders from China's major cotton buyers who wish to purchase Xinjiang cotton under the new policy. India Recently, estimates of cotton in India have been revised to include "loose" cotton. The India Cotton Advisory Board (CAB) in a September meeting introduced this new component into its production estimate by including an estimate of cotton consumed in largely unpressed form. In the past, CAB and other agencies that develop cotton production estimates have considered only pressed and baled cotton in their estimates. Reports of increasing quantities of cotton being diverted to loose form use raised concerns in the industry that production was being under estimated. Two years ago, the East India Cotton Association (EICA) initiated a study to estimate the use of loose cotton by various segments of the industry. Though the final report of the survey is not yet available, preliminary results indicated such use at approximately 400,000 - 550,000 bales, which represents less than 5% of India's total cotton consumption. Loose cotton consumption is mostly confined to small scale open-end spindle units, handloom units and for non-spinning purposes like making mattresses, quilts and pillows. Small quantities of baled and pressed cotton illegally diverted by the ginning and pressing units to small spinning units, have also been reported in the production estimates. Total cotton consumption in India continues to grow, and is expected to reach 13.2 million bales in 1997/98. Peru Until recently Peru's cotton production satisfied local demand and supported exports of 100,000 to 150,000 bales. Estimated production for MY 1997/98 at 300,000 bales is about sixty percent of what it was ten years ago. Peru started importing small amounts of cotton in the early 1990's and by 1992/93 imports became the rule rather than the exception. In 1994/95 imports accounted for nearly 20 percent of domestic consumption as Peru's textile industry expanded. As the industry grew, value-added and labor intensive apparel operations took on a larger role in the national economy. Peru's import needs are estimated for 1997/98 to be 80,000 bales, however, this is a number which presupposes a national crop of about 300,000 bales. Import tariffs for raw cotton stand at 12 percent. The expectation of adverse weather effects of El Ni¤o has caused cotton producers to change planting decisions. An unusually warm winter decreased local demand for apparel, causing a slump in the textile sector. This sector is a priority in the Peruvian government's assessment of possible areas of intervention in case of a major El Ni¤o impact. According to Peruvian government figures the textile and apparel sector presently generates 12 percent of the nation's manufacturing contribution to GDP. Thus far no special incentives have been enacted to revive or protect the industry. Meanwhile, cotton producers are waiting to see what weather comes to the coastal valleys in the critical month of November. No one can accurately predict if devastating torrential rains or mild beneficial rains will fall on the central valley Tanguis crop, largely used in the domestic textile industry. The Pima crop, grown in the North, has a different planting season and is largely exported. This year's Pima crop is harvested and down 75 percent from last season due to both lower area and yield. There is no official government policy to support cotton production in Peru. A key factor for all producers in Peru is the availability of credit. Fearing an adverse El Ni¤o effect on agriculture, banks have cut back on lending, particularly affecting many of the smaller cotton producers. Tanguis cotton, the variety which is preferred by the national textile industry and grown in the central valley, usually constitutes 75 percent of all Peruvian cotton production, both for domestic use and apparel exports. This year's Tanguis cotton crop is tentatively estimated at 225,000 bales, depending on how El Ni¤o affects production.