U.S. Cotton Outlook

The 1998/99 U.S. outlook this month includes no change in production. Consumption, trade and ending stock figures were revised modestly based on Census Bureau year data covering the marketing year.

The 1999/2000 U.S. forecast features lower production, consumption and ending stocks compared to last month. The production forecast was lowered 1.1 million bales to 16.4 million, based on a crop production survey by NASS which indicated lower than expected yields in all regions except the Far West. The consumption forecast was decreased by 200,000 bales to 10.2 million based on sluggish consumption in recent months, due mainly to weakness in demand for denim. The export forecast was also decreased 200,000 bales due to lower available supplies. Ending stocks were reduced 700,000 bales to 4.7 million bales resulting in a stocks-to-use ratio of 29.9 percent.

World Cotton Outlook

The 1998/1999 world outlook this month includes a modest decrease in production and modest increases in consumption and trade. Ending stocks are forecast up 209,000 bales resulting in a world stocks-to-consumption ratio of 49.2 percent.

The 1999/2000 world forecast features modest declines in production, consumption and trade. The decline in U.S. production of 1.1 million bales was partially offset by increases in Egypt, India, Pakistan, Turkey, and Turkmenistan. Ending stocks decreased 155,000 bales resulting in a world stocks-to-consumption ratio of 47.0 percent.

Cotton Prices

Cotlook A Index: The A-Index, a principal measure of international cotton prices, represents an average of the five lowest quotes of cotton for delivery to Northern Europe ports. During the past September, quotes of Greek, Spanish, Uzbekistan, Syrian, and African ‘Franc Zone’ cotton were included in the Index. The Index averaged 49.35 cents per pound during the period, a 1.63-cent decrease from August’s 50.98 cents per pound average. The Greek quote was the lowest in the Index over the four-week period, averaging 49.02 cents per pound. On September 30^th, the A-Index dropped further to 48.15 cents per pound, reflecting weak world demand. On the other hand, the California/Arizona quote strengthened to 60 cents per pound due to prospects for renewal of Step 2 funding and a smaller U.S. crop.

Futures Prices: U.S. cotton futures prices represent the current price of U.S. cotton for delivery at a future date. During September, U.S. cotton futures prices fluctuated somewhat due to the impact of Hurricane Floyd, the prospect for renewal of Step 2 funding, and uncertainty over provisions of the Farm Aid Bill. On September 30^th , the October 99 cotton contract settled at 50.15 cents per pound, and the December 99 at 52.56 cents per pound.

U.S. Cotton Highlights

Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in August amounted to 37,989 bales, compared with July’s level of 38,626 bales. A total of 792,783 bales were consumed during four weeks in August, compared with 704,650 bales in July (four weeks). The seasonally adjusted annualized consumption rate for the month of August was 9.92 million bales, up from July’s 10.04 million bales.

Domestic mills purchased a light volume of cotton for prompt through fourth quarter 2000 delivery. Demand was good for color 41 and better, leaf 4 and better, staple 34 and longer, and mike 35-49. Demand for fine and coarse count yarns was good. Consumer sales of housewares, teen apparel and hosiery were moderate and denim were light. Mill sales of specialty yarns were good, gray cloth was light, domestic denim fabrics and print cloth were light. Most mills operated on a five- to- six day week.

Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of August totaled 588,231 (480-lb) bales, down from 589,010 bales in July. Stocks held in public storage and at compresses in August totaled 2.94 million bales, down from 3.33 million in July. Active spindles in August totaled 4.67 million, of which 2.5 million were dedicated to 100-percent cotton. This compares with 5.13 million active spindles in August 1998, of which 2.7 million were dedicated to 100-percent cotton. Cotton's share on the cotton spindle system was 78.5 percent in August.

U.S. cotton exports for July totaled 261,000 480-lb bales, down 1 percent from June when 264,000 bales were imported but 55 percent below July 1998 exports of 574,000 bales, according to the U.S. Bureau of the Census. The leading markets in July were Mexico, Korea, Japan, Turkey, Taiwan, Canada, and Hong Kong. MY 1998/99 total (Aug-Jul) was 4.344 million bales.

U.S. cotton imports in July totaled 80,600 bales, a slight decrease of 1 percent from June when 81,445 bales were imported. The leading suppliers, according to the U.S. Bureau of the Census were Greece, China, Syria, and Argentina, with modest supplies from Burkina Faso, Mexico, and Mali. MY 1998/99 total imports were 442,700 bales.

World Cotton Highlights

Market reports received from U.S. agricultural attaches posted overseas in the last month note increased production forecasts for Pakistan, Spain and Turkey. In addition, Mexico announced an emergency support program for cotton producers, and Egypt announced lower cotton export prices. These recent reports are available through the FAS homepage.

Argentina - Market Report #AR9067

Egypt - Market Report #EG9032

Pakistan - Market Report #PK9027

Spain - Market Report #SP9056

Turkey - Market Report #TU9042

U.S. Cotton Product Import Trends

Andrew Levin

Since 1991, U.S. cotton product imports into the United States have increased by 113 percent. The growth from Mexico has been greatest among all regions/countries. Since 1993, cotton product imports from NAFTA partners have grown from 350 million square meters to 1.9 billion. Over this period, Mexico has risen from the number 10 to the number 1 source of imports of cotton products.

Imports from CBI countries show a similar trend. CBI and NAFTA partners now represent one-third of all U.S. cotton product imports. Imports from ASEAN countries were boosted in 1997 and 1998 as a result of the Asian currency crisis. In contrast, imports from China reached a peak in 1993.

The significant increase in U.S. cotton product imports in the 1990's has put downward pressure on U.S. domestic cotton consumption which peaked in 1997/98 and is forecast to fall in 1999/2000 to 10.2 million bales.

The source of cotton product imports is a significant factor in the demand for U.S. cotton fiber. Since the U.S. exported only 124,000 bales of cotton to Pakistan, India, and China in 1998/99, the U.S. cotton fiber content of imports from these countries is negligible. By comparison, U.S. cotton fiber exports to the Caribbean, Central America, and Mexico totaled 1.56 million bales.

CBI Country Textile Highlights

Yoonhee Macke

The following information is based on a recent survey by the U.S. State Department on textile and apparel manufacturing and trade in CBI countries.

Dominican Republic: 85 percent of the apparel exports to the United States is made from U.S. fabric. The Ministry of Industry and Trade said the country produces 194.1 million square meters of fabric annually. More than 50 percent of this production (101.2 million square meters) is made from U.S. yarn. Virtually all fabric made from U.S. yarn in the country is used for apparel exported to the United States.

Nicaragua: Approximately 15-18 percent of the nations’s apparel exports are made from U.S. origin fabrics. The remaining 65-70 percent of fabric used in the country’s apparel exports is imported from South Korea, Taiwan, and Hong Kong.

Honduras: In 1998, 77 percent of apparel exports were of fabric, both made and cut in the United States. The Honduran Maquila Association reported that exports in the maquila industry were 74.7 billion dozens (55 billion from fabric manufactured and cut in the United States) in 1997, 84.6 billion dozens (64.7 billion dozens U.S. fabric) in 1998, and 49 billion dozens (39.9 billion made of U.S. fabric) as of June 1999.

El Salvador: Fabric cuts from the United States accounted for 93 percent of the material used by the textile maquila industry during 1998. 15 percent of the yarn processed into fabric by local manufacturers was imported from the United States. During 1998, the country exported US$1,190 million of maquila products of which more than 90 percent were textile products.

Trinidad and Tobago: No fabric used in apparel exports to the United States is manufactured domestically or imported from other CBI countries.

Cotton and Textile Import Trends in the European Union

Pauline Simmons

The European Union (EU) plays a leading role as a cotton importer. From 1994/95 to 1998/99, the EU was the world’s largest importer, accounting for 17 percent of world imports. By comparison, Southeast Asia, the second largest world importer, imported about 14 percent. The USDA forecast for 1999/2000 shows the share of Southeast Asia’s imports increasing slightly to17.5 percent over those in 1998/99 due in part to the recovery from its financial crisis. At the same time, the EU share of world imports remain almost constant at 17 percent.

The decline in EU imports has resulted in a decline in U.S. market share, from a high of 9 percent in 1995/96, to a low of 5 percent in 1998/99. Some of the reasons for the decline of U.S. exports to the EU are the breakup of the Soviet Union and a downsizing of the spinning industry in the EU. The breakup of the Soviet Union has led to higher EU imports of relatively lower priced cotton from Central Asia to the EU. Other sources of EU cotton are Australia, Syria, Mali, and Greece. The EU, however, continues to import most of its Extra Long Staple (Pima) cotton from the United States. The United States exported 38,500 bales of Pima to the EU in 1998/99 and 58,345 bales in 1997/98.

Although France, Germany and Italy, the main cotton consuming countries in the EU, show a growing trend in textile imports, U.S. exports of textile and fabric to the EU over the past 5 years have been characterized by a declining trend, from 302,331 bale equivalents in CY 1995 to 262,331 bale equivalents in CY 1998.

The continuation of this declining trend in U.S. cotton fiber and textile exports to the EU are buttressed by fears of a reduction in market share as EU manufacturing countries relocate facilities to Eastern Europe, Northern Africa and other locations in the quest for cheap labor and raw materials.

U.S. Cotton Exports to the European Union, 1994/95-1998/99

EU and South East Asia Cotton Import Trends, 1994/95-1998/99

US Textile and Apparel Exports to the EU, 1995-1999

Source: USDA/ERS

Note: Trade data are in 1000 480-lb bales; textile data in thousand bale equivalents.

Egyptian Cotton Market Returning to More Stable Situation

James Johnson

During the mid 1990's Egypt had set farm prices and export prices largely independent of each other and world prices. This resulted in a large buildup of stocks, decreased domestic consumption and lower exports. In 1998/99 Egypt’s policies became more market oriented, setting prices based more on market rather than policy conditions.

Egypt’s exports, primarily ELS cotton, for 1990/2000 are forecast at 375,000 bales, down from 450,000 the previous year. This is due largely to the continued realignment of Egyptian policy. At the same time U.S. Pima cotton exports are forecast to increase in 1999/2000 to 480,000 bales, a record high level, up from the 288,000 bales exported, a ten-year low in 1998/99.

Recently announced export prices for Egyptian cotton for the 1999/2000 marketing year are down 10 to 30 percent from last year and are in line with lower world cotton prices. Egyptian ending stocks for 1999/2000 are forecast to be below 400,000 bales, down from more than 880,000 bales two years earlier, with the stock-to-use ratio dropping from 65 percent to 31 percent in that same period. This coupled with the maintained linkage of farm prices to export prices will continue the improvement of the stock-to-use ratio.

The relatively high official export prices set in the mid 1990's decreased Egypt's exports significantly, from over 525,000 bales in 1993/94 to under 90,000 bales in 1995/96. At the same time Egyptian domestic cotton policy supported production. Even though production dropped in 1994/95 and 1995/96 from the record of 1993/94, it remained historically high. Production increased in 1996/97 and 1997/98 when farmer prices were set at relatively attractive levels.

Egyptian mill use has declined as well during this period as the high domestic cotton prices limited export opportunities for value-added products. Delays in liberalization of the Egyptian market along with the nonmarket based pricing and import restrictions reduced the competitiveness of Egyptian mills. The downward trend in consumption has not responded to recent changes in cotton pricing.

As a result of these conditions, stocks climbed from 230,000 bales at the beginning of 1993/94 to over 880,000 bales by the end of 1997/98.

Nearly all Egyptian stocks are the longer staple lengths. The shorter staple lengths are milled every year with few stocks carried over. Thus the overall cotton stock-to-use situation appears slightly more optimistic than the situation in the ELS and LS varieties, which are Egypt’s primary exports. For example, stock-to-use of Giza 70 ELS cotton in 1998/99 was nearly 150 percent.

In 1998/99 farm prices were linked to the export price, which reduced farm prices by nearly 25 percent from the level set in the two previous two years.

As a result of these conditions, stocks climbed from 230,000 bales at the beginning of 1993/94 to over 880,000 bales by the end of 1997/98.

Note: Units are in 1,000 480-lb. Bales or 1,000 hectares.

Last modified: Sunday, March 17, 2013