World and U.S. Cotton Situation & Outlook
1998/99: U.S. Production Lowered Again While Slower World Demand Dampens Trade
The U.S. outlook for 1998/99 is for lower production, mill use, exports and ending stocks when compared to last month's estimates. The 1998/99 crop is projected down 275,000 bales from last month to 13.3 million bales, with higher abandonment in Texas and lower yields in Alabama, Georgia, Louisiana, Missouri, and California. The U.S. harvest is the smallest since 1989/90 and the abandonment percentage is the highest since 1933. Tight U.S. stocks and abundant foreign exportable supplies are likely to result in imports of 300,000 bales. Decreased supplies in the United States and lower world import demand have lowered the U.S. export estimate. Weak demand and reduced supplies have also lowered the consumption forecast by 100,000 bales, to 10.6 million bales.
The world outlook estimates this month for 1998/99 feature lower production, consumption and trade. In addition to the lower production estimate for the U.S., Egypt was reduced by 175,000 and Syria by 50,000. World consumption is reduced approximately 1.4 million bales. This sharply lower mill use results from generally slower demand and rising world inventories of yarn and textiles. The estimates for Brazil, India, Turkey, Russia and the United States show the effects of weaker demand. For China, weaker demand and the government's mill restructuring program have caused reductions in estimates for mill use, while Brazil and Russia are limited by both economic and financial sector difficulties. Net world trade is reduced. The 600,000 bale decline in import demand is the result of lowered estimates for Brazil and Turkey. Total world exports are reduced by 500,000 bales and are projected lower for China, Uzbekistan, and the United States and higher for India. World stocks are raised by 700,000 bales from last month to 38.5 million bales.
The 1997/98 Cotlook A-Index averaged 65.81 cents/pound during September, a 2.35-cent decrease from August's 68.16 cents/pound average. On August 28 the A-Index was 67.60 cents/pound and by October 1 it had declined to 63.55 cents/pound. The Chinese quote remained the lowest in the Index, averaging 63.60 cents/pound for the month of September.
Step 2 payments averaged 7.23 cents in August and 9.27 cents in September. The October '98 futures prices on the New York Cotton Exchange began the month at 73.40 cents/pound and declined to 71.40 cents/pound on September 30. The December '98 futures rose .12 cents during the month to close at 73.57 cents/pound on September 30.
The seasonally adjusted daily rate of U.S. cotton consumption in August amounted to 40,908 bales, (480-lb), compared with July's level of 43,596 bales. A total of 861,354 bales were consumed during four weeks in August, compared with 799,529 bales in July (4 weeks). The seasonally adjusted annualized consumption rate for the month of August was 10.68 million bales, down from July's 11.38 million bales. Domestic mill buying in September was light for prompt to fourth quarter 1999 delivery. Demand remained light as many mills cotton needs were reportedly covered through second quarter 1999. Mill sales of sales yarn were light to moderate, while speciality yarns remained light. Consumer demand for denim products ranged from very good to excellent. Demand for housewares strengthened through the month, becoming the top seller. Most mills operated on a five day work week, except around the Labor day holiday, when some mills shortened to three to four day workweeks and a few even closed.
Cotton stocks on hand in consuming establishments at the end of August totaled 721,490 bales (480-lb), up from 759,919 bales in July. Stocks held in public storage and at compresses totaled 2.63 million bales, down from 3.27 million in July. Active spindles in place in August 1998 totaled 5.14 million, of which 2.65 million were dedicated to 100-percent cotton, compared with 5.33 million and 2.64 million, respectively, during the same period in 1997. Cotton's share on the cotton spindle system exceeded 78.5 percent in August.
U.S. cotton exports for July totaled 571,000 480-lb bales, below June's 574,000 bales, but above July 1997 exports of 501,000 bales, according to the U.S. Bureau of the Census. The leading markets in July were Mexico, Japan, Korea, Turkey, Canada, and Indonesia.
U.S. cotton imports for July were 337 bales, which is triple from last months imports and approximately half of last year July's imports, according to the U.S. Bureau of the Census. India and Turkey were the two sources of cotton imports in July.