U.S. Cotton Outlook
The U.S. outlook for 1998/99 is for slightly lower production and lower ending stocks when compared to last month's estimates. The 1998/99 U.S. crop is projected down 57,000 bales from last month's estimate to 13.23 million bales. Yields were lowered when compared to last month for Georgia, Mississippi, Missouri, and Louisiana; raised for Arkansas, North and South Carolina, and Alabama; and unchanged for Texas and California. When compared to last year, the U.S. crop in 1998/99 can be characterized by high abandonment in Texas and lower yields in Arkansas, Georgia, North and South Carolina, Louisiana, Mississippi, Missouri, Tennessee, and California. The U.S. harvest is the smallest since 1989/90 and the abandonment percentage is the highest since 1933. U.S. imports in 1998/99 are expected to reach 300,000 bales, unchanged from the October estimate. Upward pressure on U.S. imports is expected due to tight U.S. stocks and abundant foreign exportable supplies. U.S. exports in 1998/99 are forecast to reach 4.5 million bales, unchanged from the October estimate. Lower U.S. supplies and a decline in world import demand are likely to keep exports lower in 1998/99. U.S. consumption is expected to total 10.6 million bales in 1998/99, down 6.5 percent from last year, due to weak demand and reduced supplies.
World Cotton Outlook
The 1998/99 world outlook estimates this month feature lower production and lower stocks. In addition to a lower production estimate for the United States, production was reduced in Uzbekistan, Sudan, Argentina, Azerbaijan, Tanzania, Iran and Paraguay. World consumption is marginally lower at 86.45 million bales, 190,000 bales lower than last month's estimate. Consumption in Turkey was reduced while increases were made in Indonesia, Korea, and Thailand.. The lower mill use is a result of a generally slower demand and rising world inventories of yarn and textiles. This month's import forecast is down 75,000 bales from last month to 25.19 million bales due mainly to a lower estimate for Turkey. Total world exports are reduced by 195,000 bales and are projected lower for Sudan, Argentina, and Uzbekistan, and higher for Australia. The world stock estimate was lowered by 1.1 million bales from last month to 37.34 million bales.
The 1997/98 Cotlook A-Index averaged 60.29 cents/pound during October, a 5.52-cent decrease from September's 65.81 cents/pound average. On October 8 the A-Index was 62.76 cents/pound and by October 29th it had declined to 59.04 cents/pound. The Chinese quote was the lowest in the Index for three weeks, averaging 59.41 cents/pound for the month of September, while the Central Asia quote fell below the Chinese quote the last week in October, averaging 59.40 cents/pound for the month of September. Step 2 payments averaged 9.27 cents in September and 10.45 cents through October . The December '98 futures declined 5.41 cents during the month to close at 67.77 cents/pound on October 30.
Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in September amounted to 40,845 bales, (480-lb), compared with August's level of 41,231 bales. A total of 1.05 million bales were consumed during five weeks in September, compared with 868,492 bales in August (4 weeks). The seasonally adjusted annualized consumption rate for the month of September was 10.66 million bales, down from August's 10.76 million bales. Domestic mill buying in September was light to moderate for prompt to second quarter 2000 delivery. Mill sales of sales yarn were light to moderate. Consumer demand for denim products and housewares continued to be good. Most mills operated on a five-day work week.
Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of September totaled 665,546 bales (480-lb), down from 722,235 bales in August. Stocks held in public storage and at compresses totaled 2.91 million bales, up from 2.63 million in August. Active spindles in place in September totaled 5.14 million, of which 2.66 million were dedicated to 100-percent cotton, compared with 5.63 million and 2.64 million, respectively, during the same period in 1997. Cotton's share on the cotton spindle system exceeded 79 percent in September.
Cotton Exports: For August 1998, U.S. cotton exports totaled 402,000 480-lb bales, below July's 571,000 bales as well as 1997 exports of 458,000 bales, according to the U.S. Bureau of the Census. The leading markets in August were Mexico, Korea, Japan, Turkey, Canada, and Indonesia.
Cotton Imports: U.S. cotton imports in August were 0 bales, down from last month's imports and last year August's imports which were 1.4 bales, according to the U.S. Bureau of the Census.
China: The China State Statistical Bureau published a 1997 yearbook which included yarn production data. Based on estimates of cotton fiber's market share, the data indicates that cotton consumption for 1996/97 should be revised upward to 21.35 million bales. In 1997/98, the decrease in cotton fiber's market share offset the increase in Aug-Dec yarn production data, so no change was made.
Indonesia: Import data from the Central Statistics Agency for Apr 98 -Jun 98 indicates that Aug 97 - Jun 98 imports totaled 1.735 million bales, down 12 percent from a comparable period one year ago. Imports in May 98 dropped by 24 percent from the previous month, which may reflect the disruption due to the political problems occurring at that time. However, the 3-month average exceeds 150,000 bales, indicating that imports for 1997/98 may have reached 1.90 million bales.
Sudan: Cotton production for 1998/99 in Sudan is forecast to total 300,000 bales. This reflects a 200,000 bale drop in the estimate from last month and is 100,000 bales lower than production last year. Intense rainfall in August and September severely reduced the area planted to cotton by nearly 25 percent when compared to 1997/98. Most of Sudan's cotton production goes into exports. Consequently, the lower production level is expected to push exports down in 1998/99 by 17 percent to 250,000 bales.
Thailand: Import data from the Customs Department for Aug 98 of 116,662 bales indicates that, at current levels, 1998/99 imports will be at least equal the level of the previous marketing year. Cotton imports for 1997/98 totaled 1.236 million bales. A 50,000 bale decrease in ending stocks and a concomitant increase in domestic consumption in both marketing years was made to reflect decreased stocks held by textile mills due to the credit liquidity problems they faced in financing cotton imports.
Turkey: On September 13, 1998, the Government of Turkey announced a decision to impose a "Mass Housing fund" surcharge of 35 cents per kilogram on cotton imports. This import surcharge would be equivalent to approximately 20 percent ad valorem and would be above Turkey's 8 percent ad valorem WTO binding for cotton. However, on October 8th Turkey agreed to reverse the earlier decision and lower its import duty to the WTO-consistent level of 8.8 cents per kilogram, equivalent to about 5 percent ad valorem. Even though Turkey agreed to lower its import duty on cotton, Turkish cotton is only selling locally for about 43 cents per pound. Economic troubles in Asia and the Russian Federation are having a negative impact on the Turkish economy, particularly the textile sector. Turkey's textile industry relies heavily on exports to these troubled regions. Consequently, the downturn in textile exports is expected to push cotton imports and domestic cotton consumption lower in 1998/99. The current cotton import forecast for Turkey in 1998/99 shows imports dropping to 1.25 million bales, down 200,000 bales from last year. Turkey was the fifth leading export market for U.S. cotton last year with exports of 631,800 bales.