U.S. Cotton Outlook
The U.S. outlook for 1998/99 is for lower disappearance and higher ending stocks when compared to last months estimates. Domestic mill use and exports were both reduced by 100,000 bales, raising ending stocks by 200,000 bales. Weaker domestic mill use reflects the effect of extended December holiday closings due to excess inventories. Exports were reduced based on limited sales since the expiration of Step 2. U.S. production for 1998/99 is forecast at 13.796 million bales, unchanged from last months estimate.
World Cotton Outlook
The 1998/99 world outlook this month features lower consumption and higher ending stocks. Production was reduced marginally as decreases in Pakistan and Franc-Zone Africa more than offset increases in Turkey and Australia. World consumption was reduced to 84.61 million bales, 1.04 million bales lower than last months estimate as the worlds financial difficulties continue to erode textile demand. Consumption was reduced 400,000 bales in Turkey, 300,000 bales in India, and 100,000 bales each in Portugal, the United States, and Uzbekistan. This months global import forecast for 1998/99 is 24.50 million bales, down 250,000 bales from last month as lower imports in Turkey and Portugal more than offset increases in India and Pakistan. Total world exports were reduced by 510,000 bales as lower exports for China, India and the United States, more than offset increases in Australia and Uzbekistan. The world stock estimate was adjusted and raised 991,000 bales from last month to 41.6 million bales.
The 1998/99 Cotlook A-Index averaged 55.78 cents per pound during January, a .25-cent decrease from Decembers 56.03 cents per pound average. On January 7th, the A-Index was 55.93 cents per pound and by January 23rd it decreased to 55.47 cents per pound. The Greek quote was the lowest in the Index over the four week period, averaging 54.99 cents per pound for the month, while the Chinese quote averaged 55.49 cents per pound. Step 2 funding officially expired on December 15th. Data through February 1st indicates that Step 2 payments to exporters averaged about 10.28 cents per pound for MY 1998/99, compared to 4.47 cents per pound for MY 1997/98. Futures prices closed lower on February 3rd with the March 99 contract closing at 59.98 cents per pound.
Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in December amounted to 39,261 bales (480-lb), compared with Novembers level of 39,255 bales. A total of 826,019 bales were consumed during five weeks in December, compared with 786,838 bales in November (4 weeks). The seasonally adjusted annualized consumption rate for the month of December was 10.21 million bales, unchanged from November. Domestic mill buying in December was light. Consumer sales of cotton apparel items continue to decline. Consumer demand for fleece, denim products and housewares were moderate to good. Most mills operated on a four to five-day work week.
Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of December totaled 572,123 bales (480-lb), up from 559,035 bales in November. Stocks held in public storage and at compresses totaled 9.03 million bales, up from 8.54 million in November. Active spindles in place in December totaled 5.02 million, of which 2.67 million were dedicated to 100-percent cotton, compared with 5.2 million and 2.6 million, respectively, during the same period in 1997. Cotton's share on the cotton spindle system exceeded 80 percent in December.
Cotton Exports: For November 1998, U.S. cotton exports totaled 795,000 480-lb bales, above Octobers 265,000 bales as well as November 1997 exports of 581,000 bales. The leading markets in November were Mexico, Korea, Japan, Hong Kong, and Canada.
Cotton Imports: U.S. cotton imports in November totaled 2,606 bales, up from last month when 100 bales were imported, and up from October 1997 when imports totaled 249 bales. The leading suppliers of U.S. cotton imports in November were Uzbekistan, Egypt, and Turkey.
Pakistan: Cotton production for 1998/99 has been reduced by 300,000 bales to 6.9 million, a reduction of 4 percent from the previous year, due to the adverse effect of fog on boll opening and insect damage in the main growing region of Punjab. Imports were increased by 100,000 bales to 300,000. The All Pakistan Textile Mills Association recently stated that cotton imports could reach twice this amount, and that nearly 80,000 bales of mostly Central Asian cotton had already been landed. The United States has sold 16,000 bales of Pima cotton this marketing year to Pakistan. Cotton brokers indicated that imports were likely to be encouraged due to the Governments recent move to reduce the cash margin for importers opening letters of credit from 20 to 10 percent. Increased cotton imports are needed to fuel textile exports; cotton fiber and textile exports provide 60 percent of the countrys foreign exchange earnings. However, Pakistan has lost market share in yarn to India in its traditional South Asia and Far East Asia markets due to price. Pakistan government statistics indicate that textile exports fell by 14 percent to $2.43 billion during the period July 1997 through December 1998. Cotton textile exports (yarn, thread and fabric) to the United States reached the equivalent of approximately 783,000 bales in 1998 (11 months), and Pakistan now ranks second after Mexico.
Paraguay: As the cotton harvest in Paraguay approaches, an assessment of the acreage under cotton was revised by the FAS attache. The attache report indicates that plantings are down because of a scarcity of both credit and seed available to small growers. The production estimate for MY 1998/99 has been reduced by 50,000 bales to 250,000 bales, a reduction of 100,000 bales from the previous year.
Portugal: Attache reporting from Portugal indicates that raw cotton imports have decreased in recent months due to competitively-priced imports of cotton, polyester, and cotton-synthetic blend yarns. Demand for raw cotton has slowed considerably and smaller textile spinners are facing financial difficulties. For MY 1998/99 imports and consumption of raw cotton have each been reduced by 100,000 bales to 700,000 bales. This is their lowest level in fifteen years.
Turkey: Cotton production for MY 1998/99 has been increased by 240,000 bales to 3.94 million, consumption reduced by 400,000 bales to 4.0 million, and imports reduced by 550,000 bales to 350,000 bales. The consumption and import changes are based on revised estimates by the National Cotton Advisory Board and reflect the economic downturn in domestic and export markets. Mills of all sizes are reported to be scaling back production. State Statistics Institute records indicate that textile manufacturing fell by 43 percent in 1998 (11 months). Some 11,100 metric tons of cotton yarn and 38.45 million meters of cotton fabric were produced in 1998 (11 months), whereas 18,700 metric tons of cotton yarn and 63.27 million meters of cotton fabric were produced in the same period in 1997. U.S. cotton exports for the current marketing year (August - January) have reached only 60,000 bales, a decline of 67 percent from the same period one year ago.