The 1997 U.S. cotton crop forecast was virtually unchanged in October at 18.4 million bales, and remains 500,000 bales below last season. Upland production is estimated at 17.86 million bales (10,000 bales below last month), while the extra-long staple (ELS) crop is estimated at 546,000 bales (up 2,000). The national cotton yield in October remains unchanged at 658 pounds per harvested acre. Cotton ginnings totaled 1.3 million running bales prior to October 1, compared with 2.1 million ginned by the same date in 1996.

As of October 5, only 18 percent of the cotton area was harvested, compared with 24 percent for both last year and the 5-year average. However, the condition of the crop is similar to last season. As of early October, 57 percent of the area is rated “good” or “excellent,” while only 11 percent is rated “poor” or “very poor.”

While the U.S. cotton production estimate for October was similar to a month ago, several offsetting adjustments occurred in the Southeast and Delta regions. In the Southeast, production declines in Georgia and the Carolinas lowered the region's expected output to 4 million bales (200,000 below last month). On the other hand, Delta production is expected to rise about 200,000 bales to 5.1 million during 1997/98. Production estimates for all Delta States were increased this month. Meanwhile, the upland production forecasts for the Southwest and the West were unchanged in October at 5.6 and 3.1 million bales, respectively.

Foreign cotton production in 1997/98 is forecast 1 million bales higher than last month, and imports are forecast 600,000 bales lower. While the forecast for foreign consumption was raised 550,000 bales, the reduction in import prospects and the crop gains for several competitors led to a 300,000-bale reduction in the U.S. export forecast. Foreign production in 1997/98 is now forecast at 71.5 million bales, consumption at 78.8 million, and imports at 27.3 million. World imports in 1997/98 are now forecast to be the lowest since 1992/93.

Turkmenistan's production in 1997/98 is forecast at 1 million bales, up 300,000 from the September forecast, and up 400,000 from 1996/97. Reliable information on agricultural production in Turkmenistan has been sparse in recent years, and it was unclear how much of the 48 percent decline reported for Turkmenistan's cotton crop in 1996/97 was due to Central Asia's poor weather and how much was a response to government policy. A number of sources now indicate that production has rebounded this year, suggesting that either weather was the primary culprit in the previous year's debacle, or that measures announced earlier this year have revived growers' enthusiasm for cotton in 1997/98. Turkmenistan's export forecast was raised 200,000 bales compared with a month earlier, to 900,000 bales.

Argentina's 1997/98 production is forecast at 2.1 million bales, up 250,000 from the September forecast, and up 600,000 from 1996/97. Argentina's yields were the lowest in a decade during the 1996/97 harvest, and producer prices rose compared with the year before. Increased area during 1997/98 had already been expected, but now as planting gets underway, area now appears likely to reach a record 1 million hectares. Argentina's export forecast was raised 100,000 bales from a month earlier, to 1.4 million bales.

India's 1997/98 crop was revised up 300,000 bales to 13.1 million, largely due to a recent redefinition of how the East India Cotton Association (EICA) measures Indian production. USDA has relied on EICA estimates in determining Indian cotton production, and in turn, the EICA has relied on reported pressings of cotton into bales. However, the EICA now acknowledges that not all cotton is pressed and that not all pressed cotton is reported, and that Indian production has been understated for a number of years. USDA had previously incorporated some of this information in its estimates for 1996/97 and 1997/98, so these estimates were raised only 300,000 bales. The only other year revised this month, 1995/96, was raised 600,000 bales.

India's larger 1997/98 forecast of domestic supplies suggested weaker import prospects there, and the 1997/98 import forecast was reduced 100,000 bales. Similarly, an increased crop forecast for Brazil also reduced its 1997/98 import forecast by 100,000 bales. Taiwan's import forecast was also reduced 150,000 bales, due to smaller expected consumption.

However, the largest change was a 300,000-bale decline in China's 1997/98 imports, to 2.4 million bales. During 1996/97, China's imports climbed to 3.6 million bales as China's joint-venture mills turned to imports at falling prices rather than fixed-price domestic cotton. As domestic cotton stocks have risen in China, policy-makers have responded by lowering all domestic prices 6 percent, and prices for cotton from Xinjiang by 10 percent. Textile made from Xinjiang cotton will also qualify for a full rebate of the 17 percent tax on the value-added from processing, compared with 9 percent for all other cotton. In addition, the use of imported cotton will be more closely monitored to ensure all resulting products are exported, rather than consumed in China. While the details of how these policies will be implemented are still not completely clear, and undoubtedly the nature of the implementation will evolve over the year, it is clear that the Chinese government is at least willing to publicly attempt to construct policies aimed at reducing imports. Because this is the most concrete signal in this direction in years, the outlook for China's imports has been revised downward as the details of these policies have emerged.

Based on final estimates by the Census Bureau for mill use, exports, and stocks, total demand for 1996/97 is lowered slightly and stocks increased from the previous estimate. U.S. cotton supply last season totaled 21.95 million bales, including 403,000 bales of raw cotton imports. Final demand slipped marginally to 17.99 million bales, attributable to a decrease in exports. Final U.S. cotton exports reported by the Census for 1996/97 totaled 6.87 million bales, about 11 percent below 1995/96. Meanwhile, revised July mill use pushed 1996/97 consumption to 11.13 million bales, 4.5 percent above 1995/96. Based on these revisions, 1996/97 U.S. ending stocks equaled 3.97 million bales, 50 percent above the beginning level but a stocks-to-use ratio of only 22 percent.

Total 1997/98 demand for U.S. cotton was reduced nearly 2 percent from September, with U.S. exports responsible for the decline. The export forecast was lowered 300,000 bales in October in response to higher production forecasts in several competing countries and lower foreign import demand. U.S. exports are currently forecast at 6.9 million bales, similar to 1996/97 shipments. Although exports to China are expected to be lower in 1997/98, sales to other major buyers have been particularly good this season.

U.S. mill use was left unchanged this month at 11.3 million bales, 2 percent above 1996/97's 11.1 million. Preliminary August 1997 data from the Department of Commerce indicate that U.S. mills used cotton at a seasonally adjusted annual rate (SAAR) of nearly 11.2 million bales in August. This compares with an August 1996 SAAR of 11 million bales.

Based on these projections, U.S. cotton demand is estimated at 18.2 million bales, 1 percent higher than in 1996/97. However, with total U.S. cotton supplies at 22.4 million bales, 2 percent higher than a year ago, ending stocks for 1997/98 are forecast to rise 200,000 bales from the beginning level to 4.2 million. Based on these supply and demand estimates, the implied stocks-to-use ratio would rise to 23 percent.

July textile imports of all fibers rose 150 million pounds from a month earlier to a record 962 million pounds. Imports increased for the fourth consecutive month and were 19 percent above June and nearly 23 percent higher than July 1996. Larger shipments of all fibers and all major end-uses occurred in July with cotton and manmade apparel products accounting for most of the gain. Cotton textile imports, at 511 million pounds, were up 16 percent from June and 23 percent above July 1996 shipments. Cotton imports from Asia totaled 274 million pounds and accounted for 54 percent of total shipments. Larger shipments from major suppliers such as China, Hong Kong, Indonesia, and Pakistan were responsible for most of the increase.

Textile exports, at 328 million pounds, declined to the lowest level in 5 months. Total July exports were 12 percent below June, but 44 percent above a year earlier. Exports of all major fibers and end-use categories, except home furnishings, were lower than June shipments. Cotton textile exports, at 135 million pounds, were 14 percent below a month earlier. Lower U.S. exports to North American countries accounted for over three-fourths of the monthly drop.

During the first 7 months of 1997, the textile trade deficit was the largest in the past few years. The overall deficit rose to 2.9 billion pounds at the end of July, compared with 2.4 billion in 1996, and 2.8 billion in 1995. Historically, cotton textiles have accounted for the largest share of the trade deficit. Through July, cotton imports exceeded exports by 1.8 billion pounds, representing 62 percent of the total deficit. The deficit in manmade textiles reached 690 million pounds and accounted for 24 percent of the total. Despite significantly larger exports of manmade and cotton textiles, the annual trade deficit will likely exceed the 1995 record of 4.7 billion pounds this year.

October 14, 1997 Economic Research Service, USDA

USDA, Washington, D.C.

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