U.S. Cotton Outlook
This months 2001/02 U.S. projections include higher production and lower domestic mill use. The production forecast is increased 400,000 bales to 19.2 million bales, based on the June 29 USDA Acreage report, partially offset by higher estimated abandonment due to adverse weather conditions in Texas. Domestic mill use is reduced 300,000 bales to 8.5 million, as recent mill use rates and additional mill closings have resulted in diminished expectations. Resulting ending stocks of 7.3 million bales are 700,000 bales above last month's forecast. The export projection is unchanged at 9.0 million bales.
For 2000/01, U.S. ending stocks are unchanged. Consumption is lowered 100,000 bales this month as reductions in mill use continue. This is offset by a 100,000 bale increase in exports based on strong export volume during recent weeks.
The 1999/2000 season is unchanged.
World Cotton Outlook
World 2001/02 estimates reflect larger supply and slightly lower consumption relative to last month. World production is projected to be 1.1 million bales higher than last month based on indications of favorable planting progress for the season to date. Beginning stocks are nearly 200,000 bales higher. World consumption is reduced marginally primarily due to a decrease for the United States. With these changes, ending stocks are now projected at 40 million bales, up 4.2 percent from last month.
The 2001/02 consumption forecast is 1.1 percent above the 2000/01 estimate. As noted on the cover consumption in China for 2001/02 is forecast unchanged from 2000/01. U.S. consumption is forecast down 4.5 percent. Recoveries in consumption are forecast for Turkey, up 500,000 bales, and India, up 300,000 bales, following decreases in 2000/01. Continued growth is forecast in Pakistan, up 300,00 bales, and Indonesia and Thailand, each up 100,000 bales. Consumption is expected to be flat in Russia, due to the effects of the imposition of a VAT on imports of cotton.
Trade levels in 2001/02 are forecast up over 2 million bales from the previous year. Most of the increase in exports is expected from the United States. Exports from Franc-zone countries are also forecast up due to higher production.
This month's 2000/01 estimates are largely unchanged but reflect higher trade and slightly higher consumption and production. Indonesia's imports were increased by 250,000 bales to reflect trade data showing significantly higher import levels from a year-ago. Exports were increased in the United States, Australia and several Franc-zone countries.
For 1999/2000 only minor changes were made. Guinea has been added to the database with information going back to 1987/88.
Cotlook A Index: The A-Index, a principal measure of international cotton prices, is an average of the five lowest quotes of cotton for delivery to Northern European ports. During June, quotes from Syria, Uzbekistan, African Franc Zone, Greece, and Paraguay were included in the index. The index averaged 47.46 cents per pound during the period, a 2.37-cent decrease from Mays 49.83 cents per pound average. Concerns about the bearish U.S. supply situation and concerns about foreign demand help lower prices. The Greek quote was the lowest in the index during the four-week period, averaging 45.86 cents per pound.
Futures Prices: Nearby July 2001 futures prices in June averaged 41.01 cents per pound, down 3.21 cents per pound in May. The October 2001 contract averaged 42.82 cents per pound, a decrease of 4.15 cents from the previous month.
U.S. COTTON HIGHLIGHTS
Cotton Consumption: The seasonally adjusted daily rate of U.S. cotton consumption in May was 30,955 (480-lb.) bales, compared with Aprils level of 32,078. A total of 645,488 bales were consumed during the four weeks in May, compared with 664,229 in the four weeks of April. The seasonally adjusted annualized consumption rate for the month of May was 8.08 million bales, down from 8.4 million in April.
Domestic mills: Domestic mills purchased a very light volume of 2001-crop cotton for January to April 2002 delivery. Demand was best for color 41 and better, leaf 4 and better, staple 35 and longer, mike 40-46, strength 27 and better. A few mills have rolled contracts for 2000-crop cotton over to 2001-crop cotton. Others have agreed to run 2000-crop cotton further into fourth quarter 2001. Interest in ring-spun yarn was moderate to good, and interest in open-end yarn was light to moderate. Demand for fine count yarns was good and coarse count yarns was light. Sales of domestic denim fabrics, greige cloth, sales yarn, upholstery, print cloth and industrial fabric were moderate; mill sales of specialty yarns were very light. Most mills operated a five to six day workweek. A few mills continued to seek ways of improving operational efficiency.
Cotton Stocks: U.S. cotton stocks on hand in consuming establishments at the end of May were 464,400 bales (480-lb), down from 477,685 in April. Stocks held in public storage and compresses in May totaled 6.9 million bales, down from 8.2 million in April. Active spindles in May totaled 3.6 million, of which 1.95 million were dedicated to 100 percent cotton, compared with 4.43 million for the same time last year, with 2.4 million dedicated to 100 percent cotton. Cotton's share on the cotton spindle system was 78.3 percent.
U.S. cotton exports in April 2001 totaled 568,000 (480-lb.) bales, 152,000 bales below March 2001 exports of 720,000 and 140,000 bales below April 2000 exports of 708,000 bales, according to the U.S. Bureau of the Census. The leading markets in April were Mexico, Indonesia, Korea,
Turkey, Canada and Taiwan
U.S. cotton imports in April 2001 were 100 bales, 900 bales lower than the previous months imports. Imports for the same month last year were 8,200 bales.
Turkeys current financial and political situation, its impact on the countrys cotton and products industry and potential for U.S. cotton exports By Pauline Simmons
Since November 2000, Turkey has undergone both economic and political uncertainty. Inflation is averaging around 53 percent in 2001, interest rates are skyrocketing - currently averaging about 55 percent, and over the past six months, the Turkish Lira has fallen by about 60 percent. The unstable financial situation led to the failure of at least ten banks and an exodus of wary foreign investors. Moreover, Turkeys financial woes have been exacerbated by new political uncertainty surrounding the survival of the current government.
The current political and financial situation is having a profound impact on Turkeys cotton and textile industry. Cotton textiles and ready-to-wear products accounted for 40 percent of the countrys total exports in 2000. However, cotton imports for 2000/01 decreased by 900,000 bales to 1.5 million compared with 2.4 million in 1999/00. Despite the decrease in imports this season, imports for 2001/02 are forecast to rebound by 300,000 bales to 1.8 million bales. In 1999/2000, Turkey was the United States second largest cotton export market after Mexico and the U.S. gained an import market share of about 33 percent. For MY 2001/02, USDA forecasts Turkeys domestic use at 5.4 million bales, up 500,000 bales from the previous season based on the assumption that several mills, which currently produce at lower capacities, will rebound with an improvement in the countrys economic and political situation. Though Turkey is one of the worlds largest producers of cotton, imports play a vital role in the survival of the countrys textile industry. USDAs cotton production forecast for 2001/02 is 3.8 million bales, an increase of 300,000 bales from 2000/01. This increase reflects the dissatisfaction of farmers for prices of alternative crops such as soybeans and raisins, and changes in the governments agricultural reform policy. Under the policy, subsidies will be provided directly to farmers instead of financial support to cotton cooperatives, who supply farmers with inputs such as seeds and chemicals. This subsidy includes an additional 90,000 Lira/kg for cotton lint in 2000/01 in addition to previous payments of 400,000 Lira/kg. Alternatively, if the subsidy is not provided, or if the amount of subsidy is reduced and prices for alternative crops increase, cotton production could fall
Despite Turkeys current political and economic scenario, the potential for U.S. cotton exports continues to show opportunities for growth given that demand for cotton products will continue to grow in the long term. In 1980, Turkey exported about $777 million of cotton and products. By 1998, the value of these exports had increased to $10.46 billion, with a slight decrease to over $10.0 billion last season. An improvement in the economies of major textile consuming countries as well as the stabilization of the country's economy will result in an increase in cotton consumption, which could lead to an increase in U.S. cotton exports. Further, if cotton prices remain low, cotton products will maintain their competitive edge over micro fibers and synthetics, which compete with cotton products in major markets. This is important because Turkey has the sixth largest capacity for synthetics in the world, with most raw materials for synthetic fibers and yarns produced locally.