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COTTON AND WOOL OUTLOOK
U.S. 2000 Cotton Production Lowered
(December 13, 2000) The December Crop Production report from the U.S. Department of Agriculture (USDA) estimated the 2000 U.S. cotton crop at 17.4 million bales, 100,000 bales below last month but 400,000 above 1999/2000. Upland production is forecast at 17 million bales, while the extra-long staple (ELS) crop is projected at a 5-year low of 410,000 bales. During the previous 20 years, the December forecast has been below final production 11 times and above 9 times. And, past differences between the December forecast and the final production estimate indicate that chances are two out of three for the 2000 U.S. cotton crop to range between 17.1 and 17.7 million bales. Meanwhile, the Cotton Ginnings report indicated that 13.7 million running bales had been ginned as of December 1, compared with about 13.4 million at this time last year.
Compared with last season, upland production is projected to rise in three of the four regions of the Cottonbelt, while the Southwest crop is expected to fall below a year ago. In the Southwest, upland production is forecast at nearly 4.3 million bales, nearly 1 million below last season. As a result of this seasons drought, the Southwest yield is expected to reach only 410 pounds per harvested acre, the lowest since 1995.
In the Southeast, the upland crop is estimated to increase 17 percent from 1999/2000 to nearly 4.2 million bales, with Georgia and North Carolina accounting for over 3 million bales of the total. The average yield for the region in 2000 is projected at 629 pounds per harvested acre, 100 pounds above last season, but slightly below the 10-year average for the Southeast.
For the Delta region, upland production is projected to approach 5.4 million bales, or 5 percent above 1999. The increase this season is the result of larger area, as a 5-pound decrease in yield in the region is reported. While the Delta yield of 662 pounds per harvested acre is below the 5-year average, the production estimate equals the average for the last 5 years.
In the West, upland output is expected to approach 3.1 million bales, the highest in 3 years. Larger area and an estimated record yield of 1,305 pounds per harvested acre in the region pushed production above 3 million bales once again and close to the 10-year average. In addition to upland, ELS production in the West is expected to decline dramatically (40 percent) as California producers moved area out of ELS cotton this season. California continues to dominate ELS production and is projected to account for 88 percent of the ELS crop in 2000, similar to last season.
Total planted area to cotton remains estimated at 15.5 million acres and abandonment is projected at a relatively high 13 percent. As a result, cotton area to be harvested is forecast at 13.5 million acres, slightly above last season and the highest since 1995. Based on the harvested area, the national yield is estimated at 619 pounds per acre, 12 pounds above 1999 but below the 5-year average of 629 pounds.
U.S. Demand To Offset Production; Stocks Unchanged
U.S. cotton demand in 2000/01 is forecast to marginally exceed production, leaving stocks virtually unchanged from the previous season. Based on the December production forecast and carryin stocks estimated at 3.9 million bales, total U.S. cotton supplies for 2000/01 are forecast to reach 21.4 million, 400,000 above last season. However, total use of U.S. cotton is also projected to increase 500,000 bales this season to 17.5 million, 3 percent above 1999/2000 and slightly above the 5-year average of 17.4 million bales.
For 2000/01, U.S. raw cotton exports are projected to rebound to their highest level since 1995/96. The current forecast--at 7.6 million bales--is 850,000 bales above last season. Supporting
U.S. exports this season are the expected record world cotton use and the decreases from 1999/2000 forecast for foreign production and stocks. In addition, the larger U.S. supplies are aiding this season's expectations. As of the end of November, the Export Sales report indicated that 4.5 million bales have been committed this season, with 1.6 million shipped. This compares with commitments of 4.9 million bales a year ago and shipments of 1.2 million. Although shipments are ahead of last season's pace, U.S. exports need to average about 175,000 bales per week to reach the current estimate. Based on the current projections of U.S. and world trade, the U.S. share of global exports is estimated at 28 percent, up from about 25 percent in 1999/2000.
For 2000/01, U.S. cotton mill use is projected to decline slightly once again. Mill use is currently estimated at 9.9 million bales, 3 percent below the final 1999/2000 estimate of 10.2 million. While U.S. demand for all fibers is expected to grow slowly in 2000--after 2 consecutive years of decline--U.S. cotton mill demand is losing ground.
The continued growth of U.S. cotton textile and apparel imports has placed tremendous pressure on the U.S. spinning industry over the last several years and is expected to continue this season. In addition, the slowdown in the exceptional growth seen in the U.S. economy over the last several years is expected to play a role in the amount of raw cotton consumed by U.S. mills. While the North American Free Trade Agreement (NAFTA) has increased cotton textile trade over the past 6 years, the strength of the dollar has also encouraged extensive foreign shipments to the United States, leading to the third consecutive year in which the raw-fiber equivalent of cotton textile imports exceeds the quantity consumed by domestic mills. For calendar 2000, cotton textile imports could reach the equivalent of 16 million bales. Based on these U.S. cotton supply and demand projections, ending stocks for 2000/01 are projected to remain near the beginning level of 3.9 million bales. As a result of larger use, the implied stocks-to-use ratio for the season is currently near 22 percent, marginally below last season's 23 percent.
Foreign 2000/01 Production And Consumption About Unchanged In December
Foreign cotton production in 2000/01 is forecast at 69.2 million bales, virtually the same as forecast a month earlier, and 1.6 percent lower than in 1999/2000. Foreign consumption in 2000/01 is forecast at 82.4 million bales, virtually the same as forecast a month earlier, and 0.9 percent higher than in 1999/2000. World trade is forecast slightly higher in 2000/01 than a month earlier--at 26.9 million bales--but is forecast to be 1.3 percent lower than in 1999/2000. World ending stocks in 2000/01 are forecast slightly higher than a month earlier, as are foreign ending stocks. Both world and foreign ending stocks are increased nearly 1 percentage point as a share of consumption this month--from 38 to 39 percent. World 2000/01 ending stocks are forecast at 35.7 million bales, and foreign ending stocks at 31.8 million.
Offsetting Changes In Foreign Production
While there was little total month-to-month change in the 2000/01 foreign production forecast, there are a number of significant offsetting changes in individual countries. Expected smaller crops in India, Uzbekistan, Australia, and Africa are offset by better production prospects for Syria, Turkey, Brazil, and Argentina. There are no changes in the forecasts for China and Pakistan.
USDA's forecast for Indian cotton production is reduced 400,000 bales from the month before in December, to 11.9 million bales. Arrivals in India are flagging, and previously optimistic area expectations are being downgraded. USDA's attache is now forecasting a decline in India's cotton area in 2000/01 compared with the year before. Until recently, most industry estimates suggested area was expected to increase.
The cotton prices in India during 1999/2000 were more consistent with a decline in area during 2000/01 than an increase: cotton prices in India declined about 3.5 percent from the year before during the 1999/2000 harvest (the average percent decline of India's four main cotton varieties), while the market price of rice rose 6 percent during the marketing year. The direction of change in India's average cotton price has successfully predicted the direction of change in India's cotton crop during 5 out of the last 6 years. The exception, 1996/97, may have been influenced by 2 years of extraordinary price increases preceding the slight decline in 1995/96. India's output during 2000/01, on the other hand, is likely to be influenced by price declines in both 1999/2000 and 1998/99. Thus, with a second year of poor precipitation in Gujarat--rather than the previously expected return to normal precipitation--rebounding yields in Gujarat cannot be expected to offset area declines elsewhere in India, and India's cotton crop is likely to be smaller than the year before in 2000/01.
Uzbekistan's crop forecast is reduced 200,000 bales to 4.3 million, and Uzbekistan's output is now expected to be 900,000 bales lower than in 1999/2000. Rainfall during harvest damaged the crop more than previously expected, and Uzbekistan's Government announced the completion of the harvest with only 3 million tons of seed cotton harvested. Late season rainfall compounded the damage the crop suffered earlier in the year due to reduced irrigation supplies.
Rainfall also reduced Australia's 2000/01 production outlook by 100,000 bales, as flooding damaged fields, necessitating replanting in some cases, and damaging yield prospects in others. In Africa, USDA's estimate of Franc Zone production in 2000/01 is lower for the fifth consecutive month, as additional reports of weather damage arrive and indications grow that farmers elected to divert resources to other crops. Mali's expected output is reduced 100,000 bales, and it has become evident that farmer dissatisfaction also put a dent in Chad's output, forecast 50,000 bales lower than in November.
Larger output is forecast for Syria and Turkey following optimistic government reports from these countries, and Syria's 2000/01 forecast is increased 325,000 bales, and Turkey's 200,000 bales. Evidence of larger than previously expected plantings in Mato Grosso resulted in a 300,000-bale increase in Brazil's 2000/01 crop, now forecast to be 19 percent larger than in 1999/2000. Similarly, Argentina's planted area estimate for 2000/01 is also increased--following improved weather--and expected 2000/01 output in Argentina increased by 75,000 bales.
In Pakistan, the pace of gin arrivals--which were 17 percent ahead of a year ago as of December 1--remained consistent with a 2000/01 crop only slightly below its 1999/2000 level. While the extent to which this year's arrivals exceed last year's has been shrinking, and the repeal of the 15 percent sales tax has likely boosted reported gin arrivals this year, the trend in 2000/01 arrivals is consistent with only a slight decline in production compared with 1999/2000. At 8.3 million bales, Pakistan is expected to produce 3 percent less cotton than in 1999/2000. This estimate is consistent with both a falling pace of recorded gin arrivals for the rest of the season, and a falling share of unrecorded production compared with last year, and is the same as USDA's November estimate.
Offsetting Changes In 2000/01 Foreign Consumption
While USDA's December forecast of 2000/01 foreign consumption is nearly the same as its November forecast--170,000 bales lower, at 82.4 million bales--there were a number of largely offsetting increases and reductions. Less optimistic prospects for textile trade in India and Mexico resulted in a 200,000-bale reduction in expected 2000/01 consumption in each country. Historical revisions for Brazil and Russia suggested 2000/01 should be forecast from a higher base, and 2000/01 consumption is 150,000 bales higher for Brazil in December than in November, and 100,000 bales higher in Russia. There is no change in China's 2000/01 consumption, since reports of rising yarn stocks there suggest that yarn output will not be able to sustain strong year-to-year gains in coming months.
Mexico's consumption reduction to 2.3 million bales in 2000/01 leaves expected consumption 100,000 bales below its 1999/2000 level, due mainly to the impact of the strong peso on textile trade. This would be the first annual decline in Mexico's cotton use since 1992/93. Mexico's imports in 2000/01 are still expected to be above year-ago levels, due to a reduced Mexican crop, but the forecast is 200,000 bales below its November level. While revisions to 2000/01 foreign consumption in December are largely offsetting, 1999/2000 foreign consumption is estimated 630,000 bales higher in December than in November. India, Turkey, Brazil, Russia, and Indonesia all consumed more cotton during 1999/2000 than USDA estimated in November, and only Burkina Faso is revised downwards. Foreign 1999/2000 cotton consumption is now estimated at 81.7 million bales, 9 percent above its 1998/99 level. This annual rate of increase slightly exceeds the 8.5-percent level achieved during 1986/87.
Textile Trade Declines In September
Textile imports fell to 1.3 billion pounds in September, nearly 10 percent below a month earlier but 9 percent above a year ago. Imports of all major fibers and all major end-use categories declined in September compared with a month earlier. Cotton textile imports, at 658 million pounds, were down 11 percent from August. However, cotton imports were 8 percent above September 1999 shipments. On a regional basis, most of the September decline occurred from countries in Asia and North America.
Textile exports in September also dropped from the previous month to 470 million pounds, a 5-percent decline. Exports of all major fibers were lower than August. Also, decreases in all major end-use categories occurred in September. Cotton textile exports, at 214 million pounds, were 6 percent below a month earlier, but 27 percent above a year ago. U.S. cotton textile exports to North America declined to 194 million pounds.
Overall, the September textile trade deficit was 784 million pounds, with cotton accounting for 57 percent of the total. The September deficit was slightly above a year earlier when it reached 775 million pounds. The deficit for the first 9 months of 2000 was 6.3 billion pounds, compared with 5.8 billion a year ago. The cotton textile trade deficit reached 3.8 billion pounds during January-September, up 12 percent from 1999.
December 13, 2000 Economic Research Service USDA, Washington, D.C. 202-219-0515
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