U.S. Cotton Outlook
The U.S. outlook for 1998/99 is for higher production and significantly larger ending stocks when compared to last months estimates. The 1998/99 U.S. crop is projected up 344,000 bales from last months estimate to 13.796 million bales. Overall yield in the United States is 618 pounds per acre, down from last months 621 pounds per acre. States with the most significant production increases were Texas and Georgia. The import estimate is reduced to 350,000 bales as a result of larger U.S. production and the recent decline in U.S. prices relative to foreign prices. Domestic mill use is reduced slightly to reflect textile imports rising share of retail consumption. These changes leave ending stocks up nearly 15 percent from last month at 3.2 million bales, equal to 21.6 percent of disappearance.
World Cotton Outlook
The 1998/99 world outlook this month features higher production, lower consumption and much higher stocks. In addition to a higher production estimate for the United States, a 1.0-million bale increase in China and a 50,000-bale increase in Cote d Ivoire more than more than offset a 300,000-bale reduction in Pakistan, a 100,000-bale reduction in Argentina, and a 80,000-bale reduction in Chad. World consumption was reduced to 85.65 million bales, 185,000 bales lower than last months estimate. Consumption was reduced 100,000 bales in Pakistan, 100,000 bales in Russia, 100,000 bales in the United States, and 35,000 bales in Argentina. This months global import forecast is 24.75 million bales, up 80,000 bales from last month due to higher estimates for Indonesia and Pakistan. Total world exports are reduced by 125,000 bales and are projected lower for China by 200,000 bales, Pakistan by 100,000 bales, and Chad by 75,000 bales. The export forecast was raised for Argentina by 100,000 bales, Australia by 100,000 bales, and Cote d Ivoire by 50,000 bales. The world stock estimate was adjusted and raised 1.30 million bales from last month to 40.6 million bales.
The 1997/98 Cotlook A-Index averaged 56.03 cents/pound during December, a .36-cent decrease from Novembers 56.39 cents/pound average. On December 3rd , the A-Index was 55.91 cents/pound and by December 31st it increased to 56.05 cents/pound. The Central Asian quote was the lowest in the Index over the five week period, averaging 55.0 cents/pound for the month of December. The Chinese quote in December averaged 55.49 cents/pound, while the Greek quota averaged 55.36 cents/pound. Step 2 funding officially expired on December 15th. Data through January 11th indicates that Step 2 payments to exporters averaged about 12.9 cents per pound. March 99 futures closed lower on January 7th at 58.84 cents/pound in reaction to large cancellations in USDAs export sales report.
Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in November amounted to 39,205 bales (480-lb), compared with Octobers level of 41,556 bales. A total of 786,598 bales were consumed during four weeks in November, compared with 860,081 bales in October (4 weeks). The seasonally adjusted annualized consumption rate for the month of November was 10.23 million bales, down from Octobers 10.85 million bales. Domestic mill buying in November was light. Mill sales of yarn were light to moderate. Consumer demand for fleece, denim products and housewares continued to be good. Many mills operated on a five-day work week, while a few remained closed through mid-January.
Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of November totaled 556,554 bales (480-lb), down from 584,421 bales in October. Stocks held in public storage and at compresses totaled 8.54 million bales, up from 6.71 million in October. Active spindles in place in October totaled 5.03 million, of which 2.67 million were dedicated to 100-percent cotton, compared with 5.05 million and 2.66 million, respectively, during the same period in 1997. Cotton's share on the cotton spindle system exceeded 79 percent in November.
Cotton Exports: For October 1998, U.S. cotton exports totaled 265,000 480-lb bales, below Septembers 280,000 bales as well as October 1997 exports of 400,000 bales. The leading markets in October were Mexico, Korea, the EU, Columbia, and Canada.
Cotton Imports: U.S. cotton imports in October totaled 100 bales, down from last month when 600 bales were imported, and down from October 1997 when imports totaled 400 bales. The leading supplier of U.S. cotton imports in October was India.
Mexico: According to a USDA Agricultural Attache report from Mexico, cotton growers continue to complain about U.S. cotton purchased by Mexican mills. They protest that U.S. cotton benefits from an export subsidy. According to producers, there are 85,000 bales of Mexican cotton in storage in La Laguna district (between Durango and Coahuila) and no interested buyers because Mexican mills have built up inventories of U.S. cotton which entered while Step 2 was in effect. The Mexican growers also complain that the Mexican government has not done enough to support domestic cotton. In response to a request from several Mexican farm organizations which called for a three-year suspension of NAFTA, the Mexican agricultural secretary Romarico Arroyo said that the lack of agricultural investment and supports for Mexican growers is not due to NAFTA. Farmers indicate that the area planted to cotton will be reduced in coming years. Shipments of U.S. cotton to Mexico through the last week of December reached 854, 360 bales. The total import estimate for Mexico, from all sources, is 1.45 million bales.
Pakistan: The production forecast for MY 1998/99 was reduced by 300,000 bales to 7.2 million bales due mainly to prolonged dense fog which hampered harvest, and may have resulted in a 10 percent yield loss in the country's primary cotton growing region of Punjab. The adverse weather may also limit picking from three times to only two times this season. Cotton imports are estimated up 100,000 bales to 200,000 bales.
Taiwan: Cotton imports account for 100 percent of cotton consumption in Taiwan. In 1998/99, Taiwans cotton imports are forecast to reach 1.25 million bales. The United States typically is the leading supplier of cotton to the Taiwanese market with a market share of almost 20 percent. However, for the 1998/99 marketing year, Taiwanese imports from the United States are expected to be lower than in past years. Taiwanese cotton millers have reportedly decided to purchase mostly Australian cotton. Australia supplied approximately 3 percent of Taiwans cotton imports in 1996. The primary reasons being given for this shift in suppliers include the smaller U.S. crop, reports that the U.S. exportable supplies of higher quality cotton are lower than normal, and expectations that the Australian crop will be larger than normal.
Russia: Cotton imports and consumption have fallen since the August ruble devaluation. Imports for the first quarter of the marketing year are at a record low of 8.5 tons (39,000 bales) in contrast with the same time period last year when imports were 46,000 tons (211,000 bales). The Russian textile sector is not expected to recover quickly. The severity of the economic crisis has curtailed even Uzbek companies with arrangements to supply Russian mills with cotton for processing. A Russian-Uzbek barter agreement for cotton lapsed, leaving a void in the mechanism by which Uzbek cotton entered Russia for the last 3 to 4 years. Uzbekistan now wants pre-payment on cotton shipments. Russian consumer spending on food has taken priority over textile expenditures. Asian countries including China have provided tough competition for textile products, discouraging Russian attempts to sell textiles in international markets.