The 1997 U.S. cotton crop was increased to 18.4 million bales in September, nearly 4 percent above August indications and only 3 percent below last season's crop. Upland production is estimated at 17.87 million bales (645,000 bales above last month) while the extra-long staple (ELS) crop is forecast at 544,000 (down 10,000 bales). Historical differences between the September forecast and final production indicate that chances are two out of three that the 1997 cotton crop will range between 17.3 and 19.6 million bales. The national cotton yield rose 21 pounds per harvested acre from August and is currently estimated at 658 pounds. The higher yield resulted from increased production in the Southwest and the Delta. Meanwhile, this season's ginnings totaled 365,900 running bales prior to September 1, compared with 342,400 ginned by the same date in 1996.

While the progress of the 1997 U.S. cotton crop remains later than normal, the average condition of the crop remains slightly better than last season. As of September 7, only 34 percent of the cotton crop had bolls opening, compared with 49 percent in 1996 and a 5-year average of 42 percent. In contrast, the condition of the U.S. crop indicates that 60 percent of the area is rated “good” or “excellent” in early September, while only 11 percent is rated “poor” or “very poor.”

The largest production increase this month occurred in the Southwest. The crop is estimated at 5.6 million bales, 430,000 above the August forecast. A 400,000-bale increase in Texas accounted for most of the change. Data from the objective yield survey for Texas indicated the third highest large boll count during the past 10 years, and small bolls and squares rank fourth and fifth, respectively. The yield in Texas rose 35 pounds from August to 489 pounds per harvested acre. Overall, the region's yield is forecast at 490 pounds.

In the Delta, production is forecast at 5.0 million bales, 240,000 above the initial forecast. The largest increases occurred in Arkansas and Mississippi, where the production potential rose a combined 190,000 bales due to increased yields. Smaller increases were reported in Missouri and Louisiana. The Delta yield rose 26 pounds above August to 704 pounds per harvested acre.

In the Southeast and the West, production declined marginally. For the Southeast, the crop was reduced only 5,000 bales to 4.2 million, with a projected yield of 670 pounds per harvested acre. In the West, production was reduced 20,000 bales to 3.1 million, with a yield of 1,163 pounds per acre.

The forecast for 1997/98 foreign production was raised 850,000 bales this month, to 70.4 million, while the consumption forecast was raised 800,000 bales, to 78.3 million. The forecast for 1997/98 foreign ending stocks fell 600,000 bales, to 31.5 million, but lower beginning stocks accounted for two-thirds of this change. Also, revisions for China's stocks more than accounted for the net changes in the foreign totals, indicating that the estimates for foreign stocks outside of China actually rose slightly this month.

China's 1997/98 production forecast was raised 500,000 bales to 17.5 million. Conditions have been good for cotton in China this year, outside of the North China Plain (NCP). While drought across much of the NCP has raised concerns about prospects for grain, cotton area in the region has been decreasing fairly steadily since the beginning of the 1990's, and the region is no longer the bellwether for cotton that it once was. Weather in one respect has even been more beneficial in China during 1997/98 than in 1996/97, since flooding on and near the Yangtze river has been much reduced. Finally, most Chinese officials and media characterize this year's crop as likely close to last year's 19.3 million bales, suggesting that USDA might be more accurate forecasting a smaller decline of 1.8 million bales.

India's 1996/97 production estimate was raised 400,000 bales, to 13.5 million. based on a revision by the East India Cotton Association (EICA) in its perception of the crop. India's 1997/98 production forecast was also raised, up 300,000 bales, to 12.8 million. This increase is based on higher yield expectations due to the upward revision in the 1996/97 estimate and continued favorable weather and growing conditions.

Pakistan's 1997/98 crop forecast was raised 300,000 bales to 8 million due to reports that weather and other circumstances have held white fly and leaf-curl virus to low levels this year.

Foreign consumption in 1997/98 is forecast higher this month almost entirely due to a revision for China. China's State Statistical Bureau (SSB) has released mid-year yarn production totals for 1997 that indicate upward revisions in their estimates since the initial publication of their individual monthly figures between January and June. Textile exports have reportedly done well during this period, and USDA's estimated cotton consumption numbers for China in 1996/97 and 1997/98 were revised upwards. Consumption in 1996/97 was raised 800,000 bales to 21 million, while consumption in 1997/98 was raised 700,000 to 21.2 million.

The forecast for China's imports in 1997/98 is unchanged this month at 2.7 million bales. Press reports from China indicate the government is publicly considering various measures to promote greater consumption of domestically produced cotton. While the specific measures discussed in some reports–delayed VAT refunds, and price cuts–may not prove decisive, additional efforts are possible. Since USDA's August forecast of China's 1997/98 imports already represented a 700,000-bale, or 23 percent, decline from 1996/97 imports, no further adjustment seemed necessary at this time.

U.S. cotton mill consumption data for the first 11 months of 1996/97 were revised upward in the latest report released by the Census. Data for establishments not previously included represented about 2.2 percent of total cotton consumption or approximately 200,000 bales. Based on these revisions and July's preliminary consumption estimate, U.S. cotton mill use during 1996/97 reached 11.117 million bales, nearly 4.5 percent above 1995/96. Meanwhile, manmade fiber use on the cotton system increased a similar percentage, leaving cotton's share unchanged from 1995/96 at 78.1 percent.

As a result of the mill use revisions, cotton ending stocks were lowered from last month's estimate. Stocks on July 31, 1997 were revised to 3.82 million bales. While lower than a month ago, ending stocks increased 1.2 million bales from 1995/96's relatively low level. Final July 1997 consumption and stocks will be released later this month.

U.S. Cotton Demand Raised, Stocks Lowered for 1997/98

U.S. cotton demand was increased 2 percent from last month in response to the revisions in 1996/97 mill use and the larger crop estimate for this season. Cotton mill consumption is projected to expand to 11.3 million bales in 1997/98 as demand for U.S. cotton textile exports is expected to surpass 3.5 million bale-quivalents in 1997, 15 percent above 1996. However, a continued rise in cotton textile imports may limit the potential for mill use in 1997/98. U.S. exports, on the other hand, are currently projected at 7.2 million bales, as plentiful supplies are expected to be available for export and foreign stocks outside China are relatively tight. Sales have also been strong this season, particularly to several major buyers such as Mexico, Japan, and Korea. In addition, sales-to-ate to China are similar to last season despite the uncertainty surrounding their imports this season.

Based on these projections, U.S. cotton demand is estimated at 18.5 million bales, the highest since 1994/95. Coupled with total supplies projected at 22.3 million bales, ending stocks for 1997/98 are placed at 3.7 million bales, 100,000 below the beginning level and a stocks-to-use ratio of 20 percent.

Revised textile trade data indicated that imports rose for the third consecutive month to a record 811 million pounds in June. Textile imports were 10 percent above May and nearly 26 percent higher than June 1996. Overall, larger shipments of all fibers except linen occurred in June. Imports of all end-use categories except yarn, thread, and fabric rose above a month earlier with apparel products accounting for most of the gain (up 18 percent). Cotton textile imports, at 439 million pounds, were up 12 percent from May and 28 percent above June 1996 shipments. Cotton imports from Asia declined slightly to 182 million pounds, while shipments from North America rose to 160 million pounds, up 41 percent from a year ago.

Textile exports rose in June to a record 374 million pounds. Total June exports were 4 percent above May and 31 percent above a year earlier. Exports of all major fibers and end-use categories except yarn, thread, and fabric were higher than May shipments. Cotton textile exports, at 157 million pounds, were 5 percent above a month earlier and 14 percent above June 1996. Cotton textile shipments to North America increased nearly 4 million pounds to 160 million, with Mexico accounting for 42 percent of the total.

Overall the textile trade deficit continued to increase during the first 6 months of 1997. The deficit reached 2.24 billion pounds at the end of June, compared with 1.92 last year. Cotton accounts for the largest share (63 percent) as the deficit totaled 1.41 billion pounds, or the equivalent of 2.9 million bales of raw cotton. Despite stronger exports, the textile trade deficit will likely widen this year.

September 15, 1997 Economic Research Service

USDA, Washington, D.C.

Consensus National Futures and Financial On Line Index

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