The first U.S. Department of Agriculture (USDA) cotton forecast for 2007/08 indicates a slight decrease in global cotton production, while world cotton mill use continues to expand. World production in 2007/08 is forecast to reach 116 million bales, a year-toyear decrease of only 1 million bales from 2006/07. The small decline results from a nearly 3-million-bale reduction from the United States, which was partially offset by a rising total foreign production.
Meanwhile, world mill use is projected to continue rising alongside the robust global economic growth. World cotton mill use is expected to reach 127 million bales in 2007/08, 4 percent above the record estimated for the current season. Similar to recent seasons, the growth continues to come from outside the United States. With global mill use forecast to exceed production, 2007/08 ending stocks are projected to decline to 50.7 million bales, nearly 5 million below 2006/07 and the lowest in 4 years.
Smaller U.S. Cotton Crop Expected in 2007
According to USDA’s first estimate for 2007/08, U.S. cotton production is projected at 18.8 million bales, 13 percent below 2006/07. Based on Prospective Plantings, cotton area in 2007 is forecast at about 12.2 million acres, 20 percent below 2006 and the lowest since 1989. Harvested area, estimated at 11 million acres, is based on the 1997-2006 average abandonment by State and adjusted to reflect favorable soil moisture in the Southwest region. The national yield of 820 pounds per harvested acre is based on the 2004-06 average yields by State. Based on these projections, the 2007 U.S. cotton crop would be the lowest in four seasons. As of May 13th, U.S. cotton plantings were 46 percent complete, compared with 51 percent for both last season and the 5-year average. While planting progress in several States is above average, States in the Southeast, as well as Texas, have notable delays in planting the crop this season.
2007/08 Demand Expected To Rise; Stocks Reduced
Demand for U.S. cotton in 2007/08 is projected to reach 21.9 million bales, a substantial increase from this season’s demand of nearly 18.2 million. U.S. cotton mill use is expected to continue its decline as pressure from imported products continues to reduce U.S. textile and apparel manufacturing. U.S. cotton mill use for 2007/08 is forecast at 4.4 million bales, 500,000 below the current year’s estimate and the lowest in over a century.
On the other hand, U.S. exports are projected to rebound in 2007/08 to 17.5 million bales, nearly 4.3 million bales higher than 2006/07. Supporting the increase next season is the projected rise in foreign cotton mill use coupled with drawdown of foreign stocks this season. Although 2007/08 foreign production is expected to increase, import demand is projected to be the second highest ever and more than offset the rise in the foreign crop. With the increase in exports, the U.S. share of global trade is expected to rise above 40 percent once again after 2006/07’s estimated share of 35 percent.
With U.S. cotton demand expected to exceed production in 2007/08, stocks are forecast to decrease by one-third after the increase experienced in 2006/07. Ending stocks are projected at 6.4 million bales on July 31, 2008, with a stocks-to-use ratio estimated at 29 percent, compared with the current season’s 52 percent.
2006/07 Final Production Estimates Slightly Higher; Demand Lower
In May, USDA released final U.S. cotton area, yield, and production estimates for 2006/07, with only minor adjustments made from the previous estimates. Area estimates were unchanged while the yield was raised 1 pound per harvested acre to 814 pounds. As a result, final production rose slightly to 21.59 million bales. Meanwhile, U.S. cotton demand was lowered in May, with reductions in both mill use and exports. Mill use was lowered to 4.9 million bales, while exports were reduced to 13.25 million bales. With total demand at less than 18.2 million bales and production at 21.6 million, stocks are expected to rise for the third consecutive season. Ending stocks for 2006/07 are estimated at 9.5 million bales, the highest in four decades.
U.S. Textile Trade: Imports Decline in February
In February 2007, U.S. textile imports, at 1.4 billion (raw-fiber equivalent) pounds, were 10 percent below January but slightly above February 2006. Imports of all major fibers and all major end-use products, except apparel, were lower in February, compared with a month earlier. Cotton imports, at 795 million pounds, declined 9 percent from the previous month but were 2 percent above February 2006. U.S. cotton imports from other North American countries rose 16 percent to 187 million pounds in February; these imports accounted for 24 percent of the total. Conversely, February imports from Asian countries decreased 14 percent to 547 million pounds. Imports from China were down 19 percent and represented 38 percent of shipments from Asian countries. Textile imports from Asia accounted for 69 percent of February’s U.S. import total.
U.S. textile exports increased in February to 326 million pounds, up 491,000 pounds compared with the previous month but 15 percent below a year earlier. Larger exports of manmade fibers and wool more than offset small declines in cotton, linen, and silk shipments, compared with January 2007 shipments. Lower exports of apparel and yarn, thread, and fabric occurred in February. Cotton exports, at 159 million pounds, were down 2 percent from January and accounted for 49 percent of the monthly total. Historically, the majority of U.S. cotton textile exports are shipped to other North American countries; this region accounted for 91 percent of the February total. Honduras continued as the leading destination of U.S. cotton textiles, receiving 34 percent of the region’s total. Mexico continued as a major destination, accounting for 26 percent of the total.
World Cotton Production Steady in 2007/08, Consumption Higher
World cotton production is expected to change little in 2007/08 compared with production in 2006/07. Cotton prices were above 2005/06 levels for most of 2006/07 to date, but competing crop prices rose even more. Production outside the United States is expected to rise about 2 percent from 2005/06 as strong yield prospects in China and India sustain interest in cotton planting there. India’s yield prospects particularly favor larger output, as Bt-adoption continues. In China, a new seed subsidy also increased interest in planting cotton. World cotton production in 2007/08 is forecast at 116 million bales, compared with 117 million in 2006/07. If unaccounted cotton supplies are included with production, the year’s volume of new cotton is essentially the same in both years, 122 million bales. In 2007/08, world cotton consumption is expected to continue the nearly unprecedented growth phase that began in 1999/2000. Compared with 2006/07, consumption in 2007/08 is expected to be 4 percent higher, at a record-high of 127 million bales. Over a 5-year period, this would be an average annual rate of 5.3 percent. This was the same 5-year rate estimated for 2006/07, and a level last seen in 1986/87.
China Dominates World Consumption and Trade Growth in 2007/08
Unlike the 1980s, the current global surge in cotton consumption is primarily in China. China’s consumption is expected to increase 8 percent in 2007/08, while the rest of the world grows by 1.2 percent. Similarly, the 5-year growth rate of cotton consumption in the world, excluding China, is forecast at 1.3 percent. In 1986/87, this rate reached a post-1960 record of 5.8 percent. Since 1999/2000, China’s investment in spinning capacity and infrastructure has driven its textile exports to increase by as much as 5 million bales annually. China’s economy has also been the world’s fastest growing for much of this time, boosting the domestic textile consumption of its 1.3 billion citizens.
World cotton trade is expected to rebound in 2007/08 as China’s cotton imports also recover closer to their 2005/06 peak. Like China’s imports, world trade is expected to grow by 4 million bales in 2007/08. World trade is expected to reach 42 million bales, with the United States accounting for 42 percent of world trade. U.S. exports were unusually low in 2006/07 relative to world trade, giving the United States a 35-percent share. Changing exports to China were a large factor in the 4.8-millionbale year-to-year export decline estimated for the United States in 2006/07. China’s reduced import demand accounted for some of this change, as did increased competition from India, and adjustments by the U.S. cotton industry to the termination of the Step 2 program and other policy changes.
World ending stocks are expected to decline by nearly 5 million bales in 2007/08, to 51 million bales. China’s ending stocks are forecast to be unchanged, and the ratio of world ending stocks outside of China to world total consumption is expected to fall from 32 percent in 2006/07 to 27 percent in 2007/08. This would be the lowest such ratio since 1995/96. In 2002/03 to 2006/07, the ratio’s average was 32 percent.
source: Leslie Meyer, Stephen MacDonald, and Robert Skinner
Economic Research Service, USDA
