2002/03 Foreign Cotton Area and Production Expected to Fall Following Lower World Cotton Prices

Foreign cotton area and production for the 2002/03 season depend on several factors. Domestic and world financial conditions influence foreign cotton area along with government policies and weather. For those countries that export cotton, the world cotton price and prices of in-country competing crops play a more crucial role in the area planted to cotton. The Cotlook A-Index is often used by farmers as an indication of the profitability that can be achieved from the production of cotton. The A-index is the daily average of the five lowest-priced quotations of 15 comparable growths offered for sales by cotton-exporting countries. Generally, a direct relationship exists between cotton area and the price index for the previous year ( See Graph) . The price line on the graph shows an average annual market year price beginning in 1990/91, and includes an average price from August-January for 2001/2002. During the first six months of the current marketing year, the price index averaged 22 cents below the same period a year earlier.  This factor alone indicates that foreign cotton area in 2002/03 will be below 2001/02 area. However, area shifts also depend upon such factors as competing crop prices, currency relationships, government policies encouraging or restricting planted area and availability of inputs. With these factors affecting area and production, preliminary indications suggest that foreign cotton area and production should be roughly around 27.0 million hectares and around 72.5 million bales in 2002/03, compared with an estimated 28.4 million and 76.8 million for 2001/02, respectively.  For more detail on country forecast, see ( Agricultural Attachés Cotton Reports for 2002/03 ). The countries highlighted in these reports accounted for approximately 66 percent of the estimated world's foreign area of 28.4 million hectares in 2001/02 on which 70 percent of the estimated 76.8 million bales of cotton were produced. All numbers in this report and in the following table reflect official USDA estimates as of February 2002.

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