World & U. S. Situation
World cotton production for MY 1997/98 is forecast at 90.9 million bales, up 768,000 bales from last month's forecast. Increased 1997/98 production estimates for China, the United States, and Syria were partially offset by reductions in Pakistan. U.S. cotton production for MY 1997/98 is forecast at 18.98 million bales, up 158,000 bales from last month's forecast.
World cotton production for MY 1996/97 is estimated at 89.2 million bales, up 75,000 bales from last month's estimate, due to an increase in Syria. 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 89.2 million bales, down 450,000 bales from the previous month's projection. Decreases in the consumption forecasts for Brazil, Pakistan 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 88.5 million bales, up 165,000 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 26.4 million bales, down 290,000 bales from the previous month's projection, as decreased export forecasts for Pakistan, Uzbekistan, and India were partially offset by the increases for Syria and the United States. U.S. cotton exports for MY 1997/98 are forecast at 7.3 million bales, up 200,000 bales from last month's forecast to reflect the competitive pricing of US cotton and greater demand from Mexico.
World cotton exports for MY 1996/97 are estimated at 26.5 million bales, down 100,000 bales from last month's estimate, due to a reduction in Syria. 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 38.3 million bales, up 1.3 million bales from last month's projection, and nearly 5 percent above the beginning level, mainly due to increases in China and the United States. U.S. cotton ending stocks for MY 1997/98 are forecast at 4.3 million bales, unchanged 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.
The 1997/98 Cotlook A-Index averaged 74.48 cents/lb. during December, down from November's average of 77.22 cents/lb. The A-Index which began the month at 76.90 cents/lb. ended December 31 at 73.15 cents/lb. The African quote was the lowest in the Index, averaging 73.24 cents/lb. During December, the California/Arizona and Memphis Territory quotes were above the A-index by an average of 4.18 cents/lb. and 2.16 cents/lb., respectively. March '98 futures prices on the New York Cotton Exchange fell in December. The March contract which began the month at 70.13 cents/lb. closed December 31 at 67.07 cents/lb.
The seasonally adjusted daily rate of U.S. cotton consumption in November amounted to 44,522 bales (480-lb), above October's level of 44,061 bales. A total of 889,477 bales (480-lb) were consumed during four weeks in November, compared with 905,365 bales in October (4 weeks). The seasonally adjusted annualized consumption rate for the month of November was 11.62 million bales, up from October's 11.50 million bales. Domestic mills purchased a light volume of cotton for December and later delivery. Most mills had their needs covered through the first quarter of 1998 with cotton contracted earlier in the year. Demand for fine count yarns was strong, while coarse count yarn demand was considered fair. Most mills operated on a five day work week, except during Thanksgiving week, when two to three day work weeks were reported.
Cotton stocks on hand in consuming establishments at the end of November totaled 589,994 bales (480-lb), up slightly from 588,798 bales in October. Stocks held in public storage and at compresses totaled 10.72 million running bales, up from 6.51 million in October. Active spindles in place in November 1997 totaled 5.3 million, of which 2.7 million were dedicated to 100-percent cotton, compared with 5.5 million and 2.6 million, respectively, during the same period in 1996. Cotton's share on the cotton spindle system approached 80 percent.
U.S. cotton exports for October totaled 400,000 bales, above the 299,000 bales in September and 31-percent above October 1996 exports, according to the U.S. Bureau of the Census. The leading markets in September were Mexico, China, Korea, Indonesia, Canada and Turkey.
U.S. cotton imports for October totaled 415 bales compared with 24,000 bales in October 1996, according to the U.S. Bureau of the Census. Russia was the only source for cotton imports in October.
According to Cotton Council International (CCI), the price of domestic cotton in China still remains 5 to 7 cents/lb. above that of imported cotton, thereby hindering China's attempts to reduce cotton imports. Recent news wires have reported that, effective January 1, 1998, new quotas and import licensing procedures are being put in place, as part of the government's effort to encourage greater consumption of domestic cotton. Trade contacts of the agricultural attaché in Beijing observe that the regulations are not new, but merely a renewed attempt to enforce and strengthen regulations already in effect. The attaché adds that the regulations would apply only to state-owned mills and not to wholly-foreign owned and joint venture mills.
China is the world's largest cotton consumer and producer, for the current marketing year. During 1996/97, China imported 3.6 million bales, of which US cotton accounted for 49 percent. However, China is trying to reduce cotton imports in MY 1997/98 due to surplus cotton stocks and a larger than expected harvest, estimated by USDA at 19.5 million bales. Beginning in August 1997, China began offering incentives and reduced prices for purchasing domestic cotton. USDA currently projects that China will import a total of 2.2 million bales during MY 1997/98, the lowest import level since MY 1993/94.
India is the world's third largest producer and second largest consumer of raw cotton. Because of the significance of the textile sector in the economy of India, government policy is designed to ensure an adequate supply of domestic cotton. An export quota of 550,000 480-lb bales was allowed by the government for 1997/98. Production for the current marketing year is now expected to reach a high level of 12.80 million bales, a million bales below the bumper crop was produced in 1996/97 when 13.78 million bales were produced. Exports in 1996/97 were 1.27 million bales.
Consumption is estimated to reach 13.2 million bales, an increase of 200,000 bales from MY 1996/97. Despite the increased consumption of cotton over the past 10 years, cotton's share of mill use in India has decreased from 80% in 1990/91 to a 68% in 1996/97, according to the East India Cotton Association. USDA/FAS projects that cotton's share of mill use in India will continue to decrease, falling to 67% in 1997/98. The decline is attributed to increased use of man-made fibers. The decrease in duty rates of polyester in recent years has made it increasingly competitive with cotton. However, cotton continues to be the dominant fiber in clothing in India.
According to USDA's agricultural counselor in New Delhi, synthetics are gaining market share due to lower import taxes, introduction of new machines which can produce acceptable polyester blends, and changes in consumer preferences. But price is perhaps the most important factor. According to a recent Reuters report buyers are switching to low priced polyester fiber in response to higher than anticipated cotton prices, a trend that is likely to continue in the region.