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DECEMBER, 1997
This report provides the selected data 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 333, December 11, 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 3:00 pm local time on January 12, 1997. 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. World & U. S. Situation World cotton production for MY 1997/98 is forecast at 90.1 million bales, down 64,000 bales from last month's forecast. Increased 1997/98 production estimates for China, Syria and Mexico were more than offset by reductions in Pakistan, India, Sudan, Turkmenistan, and Uzbekistan. U.S. cotton production for MY 1997/98 is forecast at 18.82 million bales, is virtually unchanged from last month's forecast. World cotton production for MY 1996/97 is estimated at 89.2 million bales, up 50,000 bales from last month's estimate, due to marginal increases in South Africa and Sudan. U.S. cotton production for MY 1996/97 is estimated at 18.94 million bales, unchanged from last month's estimate. World cotton consumption for MY 1997/98 is forecast at 89.6 million bales, down 175,000 bales from the previous month's projection. Decreases in the consumption forecasts for Korea and Indonesia were partially offset by the increase in Mexico. U.S. cotton consumption for MY 1997/98 is forecast at 11.40 million bales, unchanged from last month's forecast. World cotton consumption for MY 1996/97 is estimated at 88.3 million bales, down 51,000 bales from last month's estimate. U.S. consumption is estimated at 11.13 million bales, unchanged from the previous month's estimate. World cotton exports for MY 1997/98 are forecast at 26.7 million bales, down 225,000 bales from the previous month's projection, as decreased export forecasts for Pakistan, Turkmenistan, Egypt, Sudan and Uzbekistan were partially offset by the increases for India, Syria, and the United States. U.S. cotton exports for MY 1997/98 are forecast at 7.1 million bales, up 100,000 bales from last month's forecast to reflect continued strong sales, reduced crop prospects in competing countries and greater demand from Mexico. World cotton exports for MY 1996/97 are estimated at 26.6 million bales, down 66,000 bales from last month's estimate. U.S. cotton exports for MY 1996/97 are estimated at 6.87 million bales, unchanged from the previous month's estimate. World cotton ending stocks for MY 1997/98 are forecast at 37.0 million bales, up 599,000 bales from last month's projection, and nearly 2 percent above the beginning level. Increases in the ending stocks forecast for China, India, and Syria are partially offset by the decrease in the United States. U.S. cotton ending stocks for MY 1997/98 are forecast at 4.3 million bales, down 100,000 bales from last month's forecast. World cotton ending stocks for MY 1996/97 are estimated at 36.4 million bales, virtually unchanged from last month's estimate. U.S. cotton ending stocks for MY 1996/97 are estimated at 3.97 million bales, the same as the previous month's estimate. Cotton Prices The 1997/98 Cotlook A-Index averaged 77.22 cents/lb. during November, down from October's average of 77.55 cents/lb. The A-Index which began the month at 77.45 cents/lb. ended November 27 at 76.90 cents/lb. The African quote was the lowest in the Index, averaging 76.25 cents/lb. During November, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 4.27 cents/lb. and 2.74 cents/lb., respectively. December 97 futures prices on the New York Cotton Exchange fell in November. The December contract which began the month at 72.77 cents/lb. closed November 26 at 70.38 cents/lb. U.S. Highlights The seasonally adjusted daily rate of U.S. cotton consumption in October amounted to 44,031 bales (480-lb), below September's level of 44,305 bales. A total of 872,086 bales (480-lb) were consumed during four weeks in October, compared with 1,100,031 bales in September (5 weeks). The seasonally adjusted annualized consumption rate for the month of October was 11.49 million bales, down from September's 11.56 million bales. Domestic mills purchased a light volume of cotton for prompt and forward delivery. Mills placed price fixations on large volumes of their previous purchases when the NY futures market was at or near contract lows. Mills producing fine count yarns were running at near capacity, while the coarse count spinners were running at less than capacity because of a slowdown in sales. Most mills operated on a five day work week. Cotton stocks on hand in consuming establishments at the end of October totaled 555,202 bales (480-lb), down from 634,960 bales in September. Stocks held in public storage and at compresses totaled 6.5 million running bales, down from 2.0 million in September. Active spindles in place in October 1997 totaled 5.3 million, of which 2.6 million were dedicated to 100-percent cotton, compared with 5.6 million and 2.6 million, respectively, during the same period in 1996. Cotton's share on the cotton spindle system approached 79 percent. U.S. cotton exports for September totaled 299,000 bales, below the 458,000 bales in August but 57-percent above September 1996 exports, according to the U.S. Bureau of the Census. The leading markets in September were Mexico, China, Indonesia, Korea and Taiwan. U.S. cotton imports for September totaled 314 bales compared with 156,000 bales in September 1996, according to the U.S. Bureau of the Census. Canada was the only source for cotton imports in September. Limited Demand for U.S. Organic Cotton Spurs Innovation According to a recent New York Times story, demand for organic fruits and vegetables in the U.S. has created a $2.5 billion market, though domestic organic cotton producers have been struggling to secure reliable markets for their product. While organic cotton acreage is on the decline, that may change if several of this country's largest apparel manufacturers continue an unusual experiment. Rather than trying to market clothing made from 100 percent organically grown cotton, which has not attracted strong consumer interest, these companies are purchasing a limited amount of organic cotton and blending it with other products. This initiative has been undertaken to enable these companies to highlight their commitment to the "green cause" and promote a less pesticide intensive agriculture. Levi Strauss plans to purchase 2,300 bales of organic cotton this year for blending into existing lines of jeans and khakis, which is triple the amount that it purchased last year. Nike purchased 1,000 organic bales this year for blending into Nike t-shirts that will have 3 percent organic cotton content. The Patagonia company, a strong supporter of the organic cotton industry, buys 3,000 organic bales per year. The initiative of U.S. apparel makers may provide a boost to U.S. organic cotton production, but the overall impact is small, as organic cotton currently accounts for less than 1 percent of U.S. production. (Andrew Levin; (202) 720-9488) International Highlights Republic of Korea The depreciation of the Korean Won is the most recent development in the Asian currency crisis, which is causing regional financial and liquidity difficulties. These problems are especially difficult for the textile sector of the Republic of Korea, which has been suffering from dull economic conditions since 1988. Five mills have closed in recent weeks and the remaining mills are suffering from financial crisis as well as chronic problems such as outdated facilities and machinery, high wages, and the severe shortage of skilled manpower. As a result of the most recent economic crisis, many Korean mills face problems obtaining foreign exchange and credit. The foreign exchange complications should ease in the near future due to the International Monetary Fund (IMF) loan granted on November 5, 1997. Korea's long-term financial situation should benefit greatly from the IMF-mandated reform program aimed at reducing the current-account deficit. USDA is estimating Korea's MY 1997/98 consumption will decrease 18 percent, to 1.25 million bales. Credit difficulties, the increased cost of imported raw cotton and reduced overall economic growth are factors contributing to the decline. With the devaluation of the Won, Korea's value-added cotton exports are more competitive. However, demand has not increased significantly because this market is partially comprised of other Southeast Asian countries experiencing similar financial difficulties. On a brighter note, the USDA attache in Seoul suggests that soft economic conditions will likely encourage millers to maintain operations in Korea, rather than continuing to move operations offshore. Though Korea's cotton imports are expected to decrease in MY 1997/98, it is still expected to be a major market for US cotton. Korea's cotton commitments reached 535,000 bales by November 27, already a significant market share increase over the United States' 38 percent market share for MY 1996/97. (Jon Ann Flemings; (202)690-1546) Pakistan Despite an increase in cotton production of 200,000 bales from the 1996/97 level, USDA estimates that Pakistan's 1997/98 cotton consumption will be unchanged from last year's level of 7.0 million bales. The lack of increase in cotton consumption is due in part to the increased use of man-made fibers. According to USDA's agricultural attache in Islamabad, the reasons for this trend include the decreased price of man-made fiber by 25-40 percent, increased price of domestic cotton, and efforts by the Pakistani textile industry to develop export markets for cotton blended products. Recently, the All Pakistan Textile Mills Association, a spinners' trade association, urged the government to restrict cotton exports until the end of January, due to their concern over a shortage of and increased prices for high quality cotton. The Association also demanded duty free import of polyester fiber to compensate for higher domestic cotton prices. Pakistan generally produces sufficient cotton to meet its domestic demand, and exports the surplus to Indonesia and other mostly Asian markets. However, Pakistan also imports a modest amount of high quality cotton from the United States, Iran and other countries. In 1996/97, Pakistan imported 279,000 bales, and is forecast to import 100,000 bales in 1997/98. According to Cotton Council International (CCI), U.S. Pima exports to Pakistan should continue at 40,000-50,000 bales per year. CCI notes that there is potential for U.S. exports of medium and shorter staple cotton, but success will depend on increased education of Pakistani spinners on spinning characteristics of upland cotton, and the degree to which spinners shift to production of higher quality goods. (Andrew Levin; (202) 720-9488) CORRECTION: Page 51 of the November 1997 issue of Cotton: World Markets and Trade had erroneous numbers for the Republic of Korea. We apologize for any inconvenience this may have caused.
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