May 10, 2002

Summary

World cotton production for 2002/03 is forecast at 91.0 million 480-pound bales, well short of the estimated 98.0 million 480-pound bales of 2001/02, reflecting the erosion of the world’s cotton A-index price from an average of 51.2 cents a pound last April, to an average of 41.4 cents per pound for April, this year.  For the first half of 2001/02, prices have averaged a recent historical low of 41.2 cents.  As a result, farmers in the Northern Hemisphere are planting at a time when cotton prices in nominal terms are at their lowest levels since the early 1970’s.  World area for 2002/03 is forecast at 33.0 million hectares, 1.0 million lower than last season while yield at 600 kilograms per hectare is down from 628 kilograms.   

Discussion

Cotton Outlook's A-Index price is the daily average of the five-lowest-priced quotations of 16 comparable growths offered for sale by cotton-exporting countries.  The A-index for the current 9-month period (August 2001- April 2002) averaged 41.4 cents, 20.2 cents below the preceding year and 8.1 cents below that of 1999/2000.

Production for 2001/02 has exceeded use; as a result, ending stocks have risen in contrast to the two pervious seasons (See Chart 1).  Consumption supported increasing cotton prices (See Chart 2) during the first half of 2000/01 marketing year and this, together with lower competing crop prices, encouraged the expansion of cotton, raising output to an estimated 98.0 million bales for 2001/02.  Prices for the first six-months of 2001/02 have fallen about one-third from the same period last season.  The price situation has set the stage for a likely sharp drop in world production, offsetting much of the  net stock gain of 2001/02.  The world's two largest cotton producers, China and the United States, are both expected to make significant reductions in production.  In the spring of 2001, Chinese government policies insulated producers from falling world prices and area rose nearly 20 percent.  This year's lower prices are likely to reverse the trend.  For the U.S., the National Agricultural Statistics Service is projecting planted area at nearly 6.0 million hectares and with average abandonment the area harvested drops to 5.4 million hectares.   Assuming average yields, the U.S. crop would be 17.8 million bales.

World Cotton Area, Yield, and Production

For more information, contact Ron Roberson with the Production Estimates and Crop Assessment Division at (202) 720-0879.

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