U.S. Cotton Outlook
The U.S. outlook for 1998/99 is nearly unchanged from last month. The 1998/99 cotton production estimate was raised 114,000 bales to reflect updated ginning data and now stands at 13.91 million bales. Domestic mill use remains at 10.4 million bales, exports remain at 4.2 million bales, and imports remain at 350,000 bales. With the higher production, stocks are now forecast to end the year at 3.5 million bales.
World Cotton Outlook
The 1998/99 world outlook this month includes marginally lower production, consumption and ending stocks. Lower production estimates for Pakistan, Australia and India, were partially offset by an increase in the United States. World consumption was reduced by 290,000 bales with reductions in Pakistan, Germany, Russia, and Italy, being partially offset by an increase in South Korea. World exports are relatively unchanged this month with marginal reductions in Australia and India. World ending stocks were lowered by 259,000 bales due primarily to lower production estimates in Australia, Pakistan, and India.
A Index: The A Index is a principle measure of international cotton prices and represents an average of the five lowest quotas of cotton for delivery to Northern European ports. The 1998/99 Cotlook A-Index averaged 56.73 cents per pound during March, a .57-cent increase from Februarys 56.16 cents per pound average. On March 4th, the A-Index was 56.18 cents per pound and by March 25th it increased to 56.99 cents per pound. The Uzbekistan quote was the lowest in the Index over the four week period, averaging 55.00 cents per pound for the month, while the quote for Paraguay, the highest in the Index, averaged 61.00 cents per pound.
Futures Prices: U.S. cotton futures prices represent the current price of U.S. cotton for delivery at a future date. U.S. cotton futures prices closed higher on Tuesday, April 6th with the May 99 cotton contract closing at 60.81 cents per pound, and the December 99 ending at 59.69 cents per pound. Speculative trading along with information of significant rains in Australia and cooler weather in California provided some positive sentiment and support to the market.
Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in February amounted to 40,323 bales (480-lb), compared with Januarys level of 40,346 bales. A total of 825,098 bales were consumed during four weeks in February, compared with 1.014 million bales in January (5 weeks). The seasonally adjusted annualized consumption rate for the month of February was 10.48 million bales, up from Januarys rate of 10.49 million bales. Domestic mill buying in February was moderate. Consumer sales of housewares and apparel were good, while sales of denim apparel, infant wear and womens casuals were moderate. Mill sales of upholstery and specialty yarns were moderate. Most mills operated on a four-day work week.
Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of February totaled 608,869 bales (480-lb), up from 585,992 bales in January. Stocks held in public storage and at compresses totaled 7.76 million bales, down from 8.68 million in January. Active spindles in place in February 4.86 million, of which 2.62 million were dedicated to 100-percent cotton, compared with 5.2 million and 2.6 million, respectively, in February 1998. Cotton's share on the cotton spindle system was nearly 80 percent in February.
Cotton Exports: For January 1999, U.S. cotton exports totaled 156,000 480-lb bales, down 85 percent from the previous months exports of 1.027 million bales, and 79 percent lower than January 1998 exports of 734,000 bales. The leading markets in January were Mexico, Japan, South Korea, Canada, and Indonesia.
Cotton Imports: U.S. cotton imports in January totaled 5,063 bales, down from last month when 19,989 bales were imported, and up from January 1998 when zero imports were recorded. The leading suppliers of U.S. cotton imports in January were Egypt, Greece, and Spain.
Australia: The cotton production estimate for 1998/99 was reduced by 200,000 bales this month to 3.2 million. The reasons for this decline include lower area as well as yield loss due to heavy rains in the major cotton growing areas of northeast New South Wales. Reports indicate that this area received from 1 to 7 inches of rain over the Easter weekend and that severe damage was inflicted on exposed crops. Reports indicate that nearly 70 percent of the cotton crop in this area was exposed to the rain and that crop grades will likely be impacted.
India: Production for 1998/99 was reduced by 100,000 bales to 12.9 million bales based gin arrivals from northern areas through mid-March that are 23 percent behind last year's levels. Imports have been raised up by 50,000 bales to 400,000 bales, although the Indian government's recent decision to impose a 5.5 percent duty on cotton imports may dampen prospects for additional contracts. However, the impact of the new duty on existing contracts may be limited because some of these contracts are with export-oriented mills which are exempt from the duty for value-added yarn exports.
Pakistan: Production for 1998/99 was reduced by 400,000 bales to 6.5 million bales, based on data indicating that cotton gin arrivals are lagging about 13 percent behind last year's levels through mid-March, which suggests that late-season production losses are greater than expected. This is the lowest production since the 1994/95 season of 6.25 million bales, and is 500,000 bales less than last season. USDA has reduced its initial production estimate of 7.5 million bales over the past 3 months by a total of 1 million bales, as reports have confirmed crop disease and insect problems. The production shortfall will be met in part by imports, which are estimated up by 200,000 bales.