COTTON AND WOOL YEARBOOK November 24, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- COTTON AND WOOL YEARBOOK is published annually by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. CWS-1995. Please note that this release contains only the text of the COTTON AND WOOL YEARBOOK --tables and graphics are not included. Printed copies of this yearbook are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #CWS-1995, $15. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Contents Page Summary U.S. Cotton Situation and Outlook Foreign Cotton Situation and Outlook U.S. Wool Situation and Outlook Foreign Wool Situation and Outlook Mohair Manmade Fibers List of Tables Situation coordinator Leslie A. Meyer (202) 501-8528 Principal contributors John V. Lawler (202) 501-7162 Stephen MacDonald (202) 219-1179 Robert Skinner (202) 219-0767 Statistical Assistant Mae Dean Johnson (202) 501-6600 Electronic Word Processing Erma McCray Approved by the World Agricultural Outlook Board. Summary released November 17, 1995. Summaries and full text of Situation and Outlook reports may be accessed electronically. For details, call (202) 219-0515 Summary Based on November 1 crop conditions, U.S. cotton production in 1995 is estimated at 18.8 million bales, down from last season's record 19.7 million. Planted area increased 23 percent in 1995 to 16.8 million acres, the largest since 1956. The higher acreage reflects this season's zero-percent acreage reduction requirement for upland cotton and high prices at planting time. Harvested area is estimated at 15.9 million acres, resulting in an abandonment rate of 5 percent. The national average cotton yield is forecast at 567 pounds per harvested acre, down 20 percent from last season's record and the lowest since 1986. U.S. mill use of cotton in 1995/96 is projected at 11 million bales, 200,000 below last season. Higher cotton prices and a slowdown in consumer demand are expected to weigh on domestic mill consumption this season. Despite the sluggish mill activity, cotton textile exports are expected to rise for the eleventh consecutive year and support U.S. mill use. In 1995, these exports are estimated to reach the equivalent of nearly 2.8 million bales of raw cotton. On the other hand, cotton textile imports also continue upward. In 1995, imports could approach 9 million bale equivalents and thus widen the cotton textile trade deficit further. However, domestic cotton consumption (mill use plus net textile trade) remains on the rise. In 1995, per capita domestic cotton consumption will likely surpass the 30 pounds recorded in 1994 and be the highest since 1946. U.S. cotton exports in 1995/96 are forecast to fall from the extraordinarily high level in 1994/95. This season, U.S. exports are projected at 6.8 million bales, 2.6 million below last season but similar to 1993/94 shipments. A larger foreign crop and greater competition in the export market account for this decline. In addition, China's import demand, of which the United States is a major supplier, is forecast lower this season. Nevertheless, the U.S. share of world trade is forecast at a healthy 25 percent. Based on these supply and demand projections, U.S. ending stocks for 1995/96 are estimated at 3.7 million bales. Although a million bales above last season, stocks are projected at only 21 percent of use in 1995/96, up from last year's low 13 percent. U.S. total supplies are estimated at 21.5 million bales, while total use is forecast at 17.8 million. World cotton production in 1995/96 is projected to increase to 89.3 million bales, 4 percent above last season's outturn. Foreign production is estimated at 70.5 million bales, up 7 percent from last year's crop. Larger foreign production is attributable to a 7-percent increase in planted area to 70.1 million acres and slightly higher expected yields. Among major foreign cotton producers, 1995/96 output is expected to significantly increase in Pakistan, with smaller increases occurring in India, Brazil, and the African Franc Zone countries. However, China's production, at 19.5 million bales, is projected to decline about 2 percent from last season. World consumption is projected to increase to 86 million bales in 1995/96, up 2 percent from last season and the third largest on record. Larger consumption is forecast for several of the major cotton producing countries. In China, consumption is expected to rise 4 percent to 20.5 million bales, the first increase in 3 years. Consumption in India is projected up 2 percent to a record 10.5 million bales, the fourth consecutive annual increase. Similarly, after 12 years of steady increases, Pakistan's domestic use is forecast at a record 6.8 million bales. World cotton exports in 1995/96 are expected to fall 5 percent from a year ago to 27.5 million bales. However, foreign exports are projected up 6.5 percent from last season to 20.7 million bales, as larger foreign production will be available for world markets. Pakistan and India are expected to regain export market share lost during the past 2 years. With relatively small gains in world consumption and reduced trade prospects forecast, world carryover supplies in 1995/96 are expected to reach 32.8 million bales, the largest in 3 years. China is expected to increase stocks by 900,000 bales (representing nearly 50 percent of the increase in foreign supplies) and hold 34 percent of world stocks at season's end. World and U.S. cotton prices reached historic levels last season. However, with increased acreage in 1995/96 and prospects for larger production, world prices have been lower this season. In addition, the United States is not as competitive on the world market as in 1994/95. Last season, the U.S. cotton farm price averaged 73 cents per pound, the highest since 1980/81 when the price level was similar. U.S. raw wool production in 1995 is estimated moderately lower at 32 million pounds. Imports are also projected below 1994, at 85 million pounds, as demand is estimated to decline slightly this year. Total raw wool demand is projected at 152 million pounds. While domestic mill consumption is expected to fall 5 percent to 145 million pounds, exports of raw wool are forecast to more than double to 7 million. Ending stocks are expected to decline from beginning levels of 52 million pounds to 37 million. U.S. Cotton Situation and Outlook Acreage Up, Production Down in 1995/96 U.S. cotton production totaled a record 19.7 million bales in 1994, up 22 percent from the 1993 crop. Harvested area in 1994, at 13.3 million acres, was only 4 percent above the previous year's acreage, but the national yield averaged a record 708 pounds per harvested acre. Ideal growing conditions during last season resulted in record yields and production in several States across the Cotton Belt. Despite large cotton supplies during the 1994 season, near record domestic mill use and exports lowered year-ending stocks to only 2.65 million bales, the lowest since the 1990 season. The implied stocks-to-use ratio fell to 12.8 percent, indicating carryover supplies represented only a month-and-a-half of use at current rates. As a result, U.S. and world prices rose to reach near record levels during the season. With tight stocks and high prices, the upland and extra-long staple cotton acreage reduction programs were set at zero and 10 percent respectively, as larger area and production were needed to meet 1995 demand and rebuild stocks. In 1995, 16.8 million acres of cotton were planted, up 23 percent from last season, and the largest area since 1956. In addition, the national abandonment rate is forecast below the historical 10-year average of 7 percent. Based on November 1 estimates, the abandonment rate is estimated at 5.3 percent. With lower abandonment, harvested acreage, at 15.9 million acres, is the largest since the 1955 season. With the larger acreage, early-season production estimates reached a high of 21.8 million bales last August. However, since then weather and insect problems have significantly reduced yield and production prospects across the entire U.S. Cotton Belt. Based on November 1 conditions, the 1995 U.S. cotton crop is forecast at 18.8 million bales, 4 percent below 1994 and nearly 16 percent below estimates made earlier this season (figure 1). The national average cotton yield is currently estimated at 567 pounds per harvested acre, down 141 pounds from 1994 and the lowest since 1986. Lower upland production accounted for nearly all of the reduction in the 1995 crop (table A). Upland production is estimated at 18.5 million bales. Yields are lower than in 1994 in all States except New Mexico. Expected yields in Alabama are the lowest since 1977, while yields in most Delta States are the lowest since the mid-1980's. By mid-November, 71 percent of the crop had been harvested. Extra-long staple (ELS) production is forecast at 357,000 bales, up nearly 20,000 from the 1994 crop, but 4 percent below the October estimate (table B). Yields are expected to average 877 pounds per harvested acre, down 97 pounds from last year. Yield reductions are forecast for all States. Harvest remained behind normal in California as producers wait for late bolls to open. Some fields will receive a second picking due to slow maturing plants and current price levels. In Texas, harvest is complete in the Winter Garden area and is beginning in the Trans-Pecos area. Mill Use Expected Lower in 1995/96 U.S. cotton mill consumption is projected to decline this season as relatively high cotton prices and a slowdown in consumer demand has continued to stifle textile mill activity. The latest estimate places 1995/96 domestic mill consumption at 11 million bales, down 200,000 bales (2 percent) from last season (figure 2). Upland mill use in 1995/96 is projected at 10.9 million bales, while ELS consumption is expected to fall to 85,000 bales. For ELS, limited supplies, not demand, account for the decrease. Based on the first 2 months of data from the Department of Commerce, the seasonally adjusted annual rate of cotton consumption averaged 10.7 million bales. Therefore, consumption will need to improve during the remaining 10 months to reach the current estimate. Actual cotton mill use for August and September 1995 totaled 1.9 million bales, compared with 2 million a year earlier. Mill-delivered cotton prices have varied greatly over the past 12 months (figure 3). In October 1994, raw-fiber equivalent cotton prices were 81 cents per pound, subsequently rising to $1.31 by June 1995. Prices have since declined and were around $1 per pound in October, slightly above those for polyester staple. Despite this, cotton's share of fiber use on the cotton system is above last season. During the first 2 months of 1995/96, cotton's share averaged 77.8 percent, compared with 77.3 percent a year ago. For the entire 1994/95 season, the share averaged 77.0 percent. The final estimate for U.S. cotton mill use in 1994/95 totaled 11.198 million bales, nearly 7.5 percent above 1993/94, and the highest in over 50 years. Upland consumption reached 11.096 million bales, the largest since 1942. Similarly, ELS consumption expanded to 102,000 bales in 1994/95, the highest since 1969 and the largest supply of domestic ELS cotton ever used in U.S. mills. Exports To Tumble U.S. cotton exports are projected to drop this season from 1994/95's exceptional level. Major foreign producers are expected to compete vigorously with the United States in a shrinking export market this season. The current estimate for 1995/96 U.S. exports is 6.8 million bales, 2.6 million (28 percent) below last season (figure 4). Upland exports are projected to fall to 6.5 million bales, while ELS shipments are estimated at 300,000 bales. Despite the decline, U.S. exports during 1995/96 are projected similar to 1993/94 shipments. Although a decline in world cotton import demand is expected this season, the U.S. share of world trade is estimated to remain at a relatively strong 25 percent (table C). Although below 1994/95's 33 percent, it is near the 5-year average. In addition, U.S. export shares to the major importers are projected to remain similar to last season's. The United States is expected to supply more than half the import demand of Japan, Korea, China, and Mexico. Based on U.S. Export Sales data through early November, approximately 965,000 statistical bales of upland cotton had been shipped, compared with 1.4 million a year earlier. However, commitments (shipments plus outstanding sales) for 1995/96 are currently 640,000 bales above the pace of last season. ELS shipments, on the other hand, have reached nearly 50,000 bales, compared with 38,000 in 1994/95. ELS commitments are also higher this season. As of early November, commitments are 40 percent above last year. Despite a smaller than previously expected U.S. cotton crop, foreign production and available exportable supplies will be the key determinants of U.S. exports as greater competition abounds in 1995/96. In 1994/95, U.S. exports benefitted from production shortfalls experienced in several major producing/exporting countries. Available supplies in the United States adequately covered the raw cotton demand of foreign importers. As a result, U.S. cotton exports skyrocketed to 9.4 million bales, 37 percent above 1993/94 and the highest since the 1926 season. Likewise, the U.S. share of world trade jumped to nearly 33 percent, the highest since 1960/61. Cotton Prices Down from Historic Levels Although below the historic prices seen in 1994/95, world and U.S. cotton prices began the 1995/96 season nearly 10 cents above a year ago (table D). Prices moved higher in September before falling slightly in October. The only exception was the adjusted world price (AWP) which rose marginally in October. The A Index averaged 91 cents per pound in October, compared with 74 cents a year ago. In 1994/95, the United States was consistently among the five cheapest offerings. However, that is not the case this season. Moreover, the cheapest U.S. quote is currently 10 cents above the lowest offering in the A Index. Domestically, nearby futures and spot prices began this season around 79 and 86 cents per pound, respectively. However, both prices averaged about 85 cents per pound in October. The AWP began 1995/96 near 71 cents per pound, the lowest in 9 months. The price quickly jumped though, and in October, averaged about 77 cents. Stocks To Rise Based on current projections of U.S. cotton supply and demand, ending stocks for the 1995/96 season are estimated at 3.7 million bales (figure 5). Although a million bales above 1994/95, stocks are projected at only 21 percent of use this season, up from last year's low 13 percent. Total supplies are estimated at 21.5 million bales, down 7 percent from last season. However, total use is projected to fall nearly 14 percent to 17.8 million. Upland stocks account for 99 percent of the total cotton inventories, or approximately 3.66 million bales. Total upland supplies are estimated at 21.1 million bales, while total use is projected at 17.4 million. The upland stocks-to-use ratio equals 21 percent, shy of the 29.5-percent legislative target. Although upland stocks are below their target, ELS ending stocks are considerably tighter at only 9 percent of use. ELS stocks at the close of 1995/96 are projected at 36,000 bales, 39 percent below beginning stocks and the lowest on record. U.S. Textile Trade and Domestic Consumption U.S. textile trade continues to grow in 1995, due in part to the North American Free Trade Agreement and the General Agreement on Tariffs and Trade. Textile imports for the first 8 months of 1995 approached 5.4 billion (raw-fiber equivalent) pounds, compared with 4.9 billion for the same period in 1994. Meanwhile, textile exports through August surpassed 2 billion pounds, compared with 1.8 billion a year earlier. With total textile imports rising faster than exports, the U.S. textile trade deficit continues to expand. The deficit reached 3.3 billion pounds through the first 8 months of 1995; this compares with 3.1 billion a year ago. Cotton textile trade accounts for 58 percent of the total deficit at approximately 1.9 billion pounds during January through August 1995. Cotton textile imports continue to rise and reached 2.8 billion pounds by August. A year ago, these imports were 2.5 billion pounds. Likewise, cotton textile exports remain strong as they approached 900 million pounds during the first 8 months, compared with 700 million a year earlier. For calendar 1995, cotton textile imports and exports are both projected to reach new highs (figure 6). Imports for the 12 months will likely approach 4.3 billion pounds, or 13 percent above 1994. At the same time, textile exports could exceed 1.3 billion pounds, 20 percent above last year. If these import and export levels are realized, the cotton textile trade deficit would expand to nearly 3 billion pounds, or the equivalent of about 6.2 million bales of raw cotton. Total domestic consumption (mill use plus net textile trade) of all fibers is expected to rise for the fifth consecutive year in 1995. Based on data for the first 6 months, domestic consumption of all fibers totaled 10.6 billion pounds. Cotton accounted for 39 percent of the total, or about 4.1 billion pounds during the first half of 1995. By year's end, domestic consumption of cotton could expand to 8 billion pounds, or the equivalent of 31 pounds per capita (figure 7). If realized, per capita domestic cotton consumption would be the highest since 1946 (31.5 pounds) when cotton accounted for 74 percent of total domestic fiber consumption. In 1994, per capita consumption reached 30.4 pounds, with 20.1 pounds of the total produced in U.S. mills (table E). Foreign Cotton Situation and Outlook Production Begins Rebound in 1994/95 Foreign cotton area in 1993/94 was the smallest in 40 years following several years of burgeoning yields in China and Pakistan at the beginning of the 1990's, and then a flood of low-priced cotton from the former Soviet Union (FSU) (figure 8). Cotton prices hit record lows in 1992/93 as weakening economies in the developed countries coincided with unprecedented availability of low-cost cotton, driving producers out of cotton across the globe. However, in retrospect, production clearly began to falter in 1993/94 in the same countries previously responsible for much of the apparent oversupply. Pakistan suffered from its second attack of leaf-curl virus in 1993/94, and bollworms drove China's crop well below earlier expectations. Bollworms also affected Pakistan's crop and helped cut India's production 1.3 million bales below its record 1992/93 crop. Foreign production rose 8 percent in 1994/95 following a 20-percent real price increase from the year before (table F). Production partially rebounded in India, Pakistan, and China, but in each case the crops were in some respects disappointing, as they were well below the trends established during the preceding 5 years. Pest problems cut production in each country, suggesting entrenched problems that might affect future production. Furthermore, Central Asia's cotton area continued its relentless decline, despite the reward of rebounding prices, and Australia's production was again hampered by drought. Just as foreign cotton production began to appear limited, consumption received a fresh impetus from recovering economic growth in the industrialized countries, and from a wholly unexpected Chinese demand for imported cotton. Together, these two factors drove world prices in 1994/95 to extraordinary levels, and set the stage for a worldwide surge in plantings in 1995/96 (figure 9). China's Imports Surge Ironically, China's demands on world markets were soaring to nearly unprecedented highs just as China suffered a nearly unprecedented drop in consumption. China's cotton consumption plunged 7 percent in 1994/95, to 19.7 million bales, the largest such decline since 1969/70. Most of this decline occurred in the first half of the year, and was perhaps attributable to the government's difficulties with local cotton procurement. By April 1995, China's yarn production had returned to year-earlier levels. China's import purchases may also have been spurred by difficulties in procuring cotton from farmers, but the scale of these purchases was a shock to world markets. Production in China rose 2.7 million bales in 1994/95, and consumption fell 1.5 million bales. Thus, a 3.8-million-bale increase in net imports did not appear necessary to many outside observers. As China's requirements from world markets surged, shipments from the FSU, the fastest growing supplier of the previous 2 years, faltered. Although consumption in the FSU continued falling in 1994/95, beginning stocks and production there also dropped, and net exports were essentially stagnant. In aggregate, the former East Bloc's (China, the FSU, and Eastern Europe) demand for cotton from the rest of the world rose by 3.5 million bales. Outside the former East Bloc, cotton consumption grew for the 13th consecutive year in 1994/95, climbing 2.8 percent to its highest ever, 60.5 million bales. The United States accounted for nearly half of this increase, with Turkey, Indonesia, and South Korea following. Excluding the United States, foreign cotton consumption outside the former East Bloc rose 900,000 bales. World Trade, U.S. Exports Rose in 1994/95 With prices rising, non-Chinese imports shrank by 700,000 bales in 1994/95 as importers met consumption needs increasingly from stocks rather than trade. Imports by the five largest importers fell in 1994/95. The European Union (EU) and Southeast Asia combined cut their imports 500,000 bales, while Russia--the third largest importer in the world--cut its imports by 900,000 bales. Out of the top 10 importers of 1993/94, only Hong Kong and China--ranked ninth and tenth--increased their imports. China was not the only country increasing its imports in 1994/95, but was in some respects the least surprising of the group. After China, the largest import gains were in Turkey and Pakistan. India and Egypt also imported more. Traditionally, these countries serve as sources of cotton to the rest of the world rather than customers. With many traditional cotton exporters importing in 1994/95, few producers were able to meet the demand for a 2.5-million-bale increase in world imports. World trade relied very heavily on the record 1994/95 U.S. crop and 3.5 million bales of carryin stocks, the largest outside of China in each case. U.S. exports rose 2.5 million bales to their highest since 1926/27. With problems in most other producing countries, the United States, Africa's Franc Zone, and Argentina were virtually alone to supply the surge in import demand. Franc Zone exports rose 500,000 bales higher to a record 2.5 million bales, while Argentina's surged 600,000 bales higher to a record 900,000 bales. Although they exported only slightly more than the year before, Brazil and Mexico helped balance world markets as their higher production helped curtail imports and boost exports. Important exporters that failed to respond in 1994/95 included Paraguay, where financial problems made planting difficult; Australia, where a prolonged drought was depleting reservoirs; and Central Asia, where local policies assured that other crops were increasing at the expense of cotton. Paraguay's exports rose only about 100,000 bales, while Australia's fell 400,000 bales and Central Asia's fell 250,000 bales. Not surprisingly, since imports there were increasing, exports from Pakistan and India fell, about 100,000 bales each. China Builds World Stocks Ending stocks fell as demand outpaced supplies, and the 1994/95 ending stocks/consumption ratio for the world, excluding China, fell to perhaps its lowest ever, 29 percent. China's ending stocks rose more than enough to offset this, however, and total world ending stocks climbed 2.7 million bales, a 35-percent stocks/consumption ratio (figure 10). Since China was apparently building stocks through import purchases while world prices were approaching their highest levels ever, it seemed that perhaps outside observers were misinterpreting events in China. One result was a widespread reappraisal of estimates of stocks in China, on the presumption that these imports were incompatible with the stock levels calculated earlier on the basis of past estimates of trade, production, and consumption. With the large increase in imports, China's stocks are estimated to have increased more than 4 million bales in 1994/95, and the stocks-to-use ratio rose to 51 percent. This is nearly twice the world average for 1994/95, and Argentina is the only significant country with a higher ratio. Experience does suggest that stockholding in China could be higher than in other countries. During the 1980's and during 1990-93, China's stocks-to-use ratio averaged 40.5 percent. Transportation within China is often difficult, and contracts are difficult to enforce, encouraging users to stockpile cotton during periods of availability. Higher imports in 1994 may have been necessary to restore stocks in certain regions, rebuild strategic stocks, or to combat inflation. Higher ending stocks probably helped restrain China's cotton prices in 1994/95, and higher beginning stocks for 1995/96 would be essential for combating inflation if China's 1995/96 crop were to decline. Finally, changes in how joint-venture firms in China acquired cotton also may have boosted imports. Regardless of whether China's stockbuilding was a statistical illusion or a rational response to that country's unique circumstances, the result was that stocks shrank in the rest of the world. With supplies effectively tighter, the A index surged 27 percent higher in 1994/95, even after accounting for inflation. World Area Shifts, Grows in 1995/96 With prices higher in 1994/95, area planted to cotton grew in the United States and overseas in 1995/96, surging to above normal levels. Foreign area grew 4 percent in 1994/95 and then 7 percent in 1995/96 to 28.4 million hectares, about 1 million above the average of the previous 2 decades. However, this global rebound conceals some important shifts. Area has to some extent shifted out of the FSU and China. Loss of farmland and heightened competition with other crops has been a severe constraint on the FSU's and China's cotton area in recent years. The FSU and China have traditionally been major cotton producers, accounting for as much as a third of foreign cotton area at the beginning of the 1990's. However, environmental degradation in Central Asia following years of high-input cotton monoculture began forcing area out of production in the FSU, and the newly independent countries of Central Asia increasingly emphasized production of alternative crops. In China, rapid economic growth has increasingly turned land over to nonagricultural pursuits and robbed agriculture of investment funds for inputs and improvements. Furthermore, soaring grain prices and an increasingly affluent population's demand for a greater variety of foods have increased the area of other crops at the expense of cotton. The apparent inability of these major producers to respond to a growing demand for cotton was one factor behind the massive price gains of the last 2 years. And, in 1995/96, the response has come in the form of near record foreign area outside of China and the FSU. In 1993/94, foreign area excluding China and the FSU was 17.6 million hectares; in 1995/96, it was 14 percent higher at 20.1 million. Area in Latin America rebounded more than 800,000 hectares during this period, Africa's rose 700,000 hectares, and area in South Asia rose 600,000 hectares. The biggest production change in 1995/96 compared with a year earlier is expected in Pakistan. At 8.5 million bales, the expected crop is 2 million higher than in 1994/95. Area in Pakistan jumped 350,000 hectares to a record 3 million as producers responded to higher cotton prices and reduced returns to sugar. Reduced flooding in the Sind also helped reduce the abandonment that led to lower acreage in 1994/95. Expected yields shot to their second highest ever as a shift to resistant varieties cut damage from Leaf-Curl Virus (LCV) and clearer clearer late-season weather helped suppress bollworm attacks. Better late-season weather also helped India's crop reach an expected record of 11 million bales. Early in the season, high prices had been expected to boost area significantly compared with 1994/95 until the late onset of the 1995 monsoon complicated the outlook. The monsoon's recovery and the failure of 1994/95's unusual late-season rains to repeat themselves in the northern states enabled producers to increase plantings and yields to largely sustain earlier gains. Higher area in Turkey is expected to boost production 600,000 bales to a record 3.5 million bales. This marks the first year of increased area in southeast Anatolia under the massive "Guneydogu Anadolu Projesi," or GAP irrigation project. A decade of building dams, tunnels, and canals to increase irrigation in southeastern Turkey is expected to steadily increase Turkey's cotton area during the next decade, with area growing 120,000 hectares across the country in 1995/96. Record production is also forecast for Africa's Franc Zone, a 300,000-bale increase to 3 million bales. In addition to higher prices in world markets, Franc Zone producers are seeing substantially higher local prices following an unprecedented devaluation in the CFA franc. While the devaluation raised domestic prices within the Franc Zone, general inflation and input cost growth in particular has remained less than the currency change, increasing the competitiveness of the region's cotton producers. Higher South American production is foreseen for 1995/96, but difficulties with financing and weather will constrain the increases. Paraguay's banking system has suffered some significant reverses in the last year, compounding the difficulties already faced by poorly capitalized cotton producers. Brazil's tighter monetary policy has increased producers' difficulties arranging financing there as well, and dry weather in Argentina has set back the hopes of some Argentine producers. Weather has also been a concern in Brazil and Paraguay. Together, production in the three countries is expected to climb 400,000 bales to 5.2 million. Production in the FSU is expected to be about unchanged at 9 million bales, while China's expected crop of 19.5 million bales is 2 percent below its 1994/95 outturn. Australia's crop is expected to fall slightly, although the crop there will be largely determined by rains as producers are largely constrained by the availability of water this year. Foreign Consumption Finally Rises While not increasing as fast as production, foreign consumption is expected to grow by nearly 2 million bales in 1995/96 (figure 11). On the one hand, foreign consumption is expected to be up this year, rising 2.6 percent for its first increase since 1989/90. But, on the other hand, this turnaround largely represents an improved outlook for Russia and China. Outside the former East Bloc, consumption growth is weakening as high prices take their toll. Since Russia and Eastern Europe began making the transition to market economies after 1989, cotton consumption by these large importers has been falling, dragging foreign consumption downward year after year. Recently, Russia has shown signs of bottoming out from its prolonged economic decline just as Eastern Europe did a few years earlier. Increased Russian gross domestic product (GDP) and industrial production is foreseen in the coming months and textile production is expected to rebound as well to some extent. Similarly, China's temporary consumption problems seem to be largely behind it and at present rates of yarn production could consume substantially more cotton in 1995/96. Altogether, China, the FSU, and Eastern Europe are expected to consume 1.4 million bales of additional cotton in 1995/96, a 5.8-percent increase. Outside the former East Bloc, economic growth in the EU is expected to shift from investment-led growth to consumption-led. Japan's consumption has also been better than its lagging GDP performance as consumers benefit from falling prices. However, in large part due to surging prices last year and a less robust U.S. economy, 1995/96 is expected to see the slowest growth in foreign consumption since 1991/92, when world economic growth was much weaker. Trade Shrinking, Competition Growing China's stockbuilding drove trade substantially higher in 1994/95 and is not expected to be repeated to the same degree in 1995/96. As a result, China's imports are expected to fall nearly 2 million bales. Furthermore, improved production is expected to cut imports by Turkey, Mexico, Brazil, Pakistan, and India. Better crops will also increase exports by most of these producers, especially Pakistan. Pakistan is expected to shift from a net importer of about 500,000 bales in 1994/95 to a net exporter of 1.1 million bales in 1995/96. Larger production is also expected to result in larger exports from Africa's Franc Zone, the Sudan, Argentina, and a wide variety of other smaller producers. The only significant expected decline for a foreign exporter is the FSU, where the lowest beginning stocks since 1988/89 and the lowest production since 1969/70 have reduced supplies just as consumption is expected to begin picking up. While exports from the Franc Zone, the Sudan, and Argentina are expected to rise by a total of about 600,000 bales, net exports from the FSU are expected to fall more than 800,000 bales. Just as U.S. exports benefitted disproportionately from 1994/95's surge in world trade, as world trade shrinks from almost 29 million bales in 1994/95 to 27.5 million in 1995/96, U.S. exports will account for much of the downward adjustment. After climbing 36 percent to 9.4 million bales in 1994/95, U.S. exports are expected to fall 28 percent to 6.8 million bales in 1995/96. The U.S. share of world trade is expected to fall from 32.6 percent to 24.7 percent, just above the 1986-94 average of 23.6 percent. Lower Foreign Extra-Long Staple Consumption Projected According to the International Cotton Advisory Committee's (ICAC) estimates for foreign producing countries, 1994/95 ELS outturn was the lowest since the late 1970's. Declines in consumption and trade also occurred last season. ELS 1995/96 production is projected to increase 5.5 percent to 2.2 million bales. Several major producing countries are expected to expand production slightly this season (table G). Among foreign producers, consumption during 1994/95 was reported at 1.8 million bales, 22 percent below 1993/94. Projections for 1995/96 indicate usage in these countries will continue to fall to 1.6 million bales. Smaller consumption in China and India account for most of the decline. Based on these estimates, the consumption-to-production ratio for foreign countries is expected to fall from 83.5 percent in 1994/95 to 71.7 percent this season. The export market becomes increasingly important as ELS consumption declines in these countries. In 1995/96, ICAC projects foreign ELS exports to expand slightly this season to 735,000 bales. Although U.S. exports of ELS cotton are projected to decline nearly 28 percent to 310,000 bales, the United States is expected to continue as a major exporter of ELS cotton in 1995/96. The U.S. share of world ELS exports is projected at nearly 30 percent for 1995/96, down from 37 percent last season. U.S. Wool Situation and Outlook Slow Wool Demand The total 1995 U.S. supply of raw wool is estimated at 189 million pounds, clean, 9 percent below last year (table H). Stocks at the beginning of 1995 totaled 52 million pounds. Estimated 1995 wool production, at 32 million pounds, is 17 percent less than last year. U.S. raw wool imports are projected to be 85 million pounds, 7 percent below 1994. Total raw wool demand in 1995 is estimated at 152 million pounds, clean, 2.6 percent less than 1994. Exports of raw wool are forecast to be 7 million pounds, almost 2.5 times 1994. Domestic mill consumption is estimated at 145 million pounds, 5 percent below last year. This lower demand has resulted from smaller retail sales, a relatively mild 1994/95 winter, and the importation of low priced wool coats. Stocks at the end of 1995 are anticipated to be 37 million pounds. U.S. raw wool imports in the January-August 1995 period were 64.8 million pounds, clean, 2.6 percent below a year ago (table I). Imports of the 48's-and-finer grades were 47.8 million pounds, 1.5 percent less than the comparable 1994 period. More than 90 percent came from four countries: Australia, 78 percent; New Zealand and Uruguay, 5 percent each; and Russia, 3 percent. Imports of unimproved and other grades not-finer-than 46's totaled 17.0 million pounds, 2.7 percent above a year earlier. More than 93 percent came from three countries: New Zealand, 68 percent; the United Kingdom, 22 percent; and Canada, 3 percent. In the second quarter of 1995, raw wool mill consumption was 39.9 million pounds, clean, 0.5 percent below the first quarter but 2.2 percent above a year earlier (table J). The woolen system used 17.4 million pounds, 0.5 percent less than the first quarter but 7.2 percent more than a year ago. The worsted system mill consumption was 18.8 million pounds, 4.9 percent below the first quarter and 2.9 percent less than a year earlier. Carpet mill use was 23 percent above the first quarter and 7.6 percent more than a year earlier. Top production in the second quarter was 17.7 million pounds, 5.8 percent below the first quarter and 1.9 percent less than a year ago. Raw wool exports during the first 8 months of 1995 were 5.1 million pounds, clean, almost 1.8 times greater than a year earlier. Overseas shipments of shorn wool amounted to 2.0 million pounds, 1.78 times greater than a year ago. More than 80 percent went to four countries: Mexico, 33 percent; Germany, 29 percent; India, 10 percent; and Italy, 8 percent. Exports of raw wool not-shorn (pulled) were 1.8 million pounds. More than 80 percent went to four countries: Columbia, 37 percent; Turkey, 27 percent; Korea, 10 percent; and Venezuela, 7 percent. Exports of carbonized wool were 1.25 million pounds. Three countries took more than 90 percent: Mexico, 49 percent; Korea, 30 percent; and Japan, 12 percent. Exports of wool top during the first 8 months were 8.37 million pounds, 4 percent below a year earlier. The average price was $3.39 a pound, compared with $2.36 last year. The value of the shipments totaled $28.4 million. Four countries were the destination of more than 95 percent: Korea, 49 percent; China, 35 percent; Mexico, 6 percent; and Hong Kong, 5 percent. Top imports were 3.44 million pounds, 28 percent above January-August 1994. Three countries were the source of more than 95 percent of the 1995 top imports: Australia, 51 percent; Germany, 35 percent; and Mexico, 9 percent. U.S. prices for clean, mill-delivered territory raw wool, finer grades 64's and 62's, had price movements during July-December 1994 and January-October 1995 similar to the Australian market indicator. The 64's rose from an average of $2.38 during July-December 1994, reaching a 1995 peak averaging $2.90 April-June 1995, the highest level in more than 5 years. Since then it has declined each month to $2.13 by October. The 62's and 60's had similar movements. The 62's rose from an average of $1.61 in the first half of the 1994/95 season to a high of $2.60 in May 1995, then weakened in the current season by 26 percent to $1.93 in October 1995. The 60's rose from a $1.61 average for July-December 1994 to $2.29 in May 1995. It dropped 22 percent by October. The 56's and 54's had a more gradual rise. The 56's rose each month during July 1994-May 1995 from $1.28 to $1.88. By October 1995, the price fell to $1.55. The 54's likewise, rose from $1.20 in July 1994 to $1.78 in May 1995 before dropping to $1.44 in October 1995. Domestic prices of Australian raw wool 80's and 70's declined each month during 1995 from the last half of 1994. The 80's went from an average of $5.36 per pound in September-December 1994 to a 1995 low of $2.93 in October. Likewise, the 70's declined from an average of $4.36 in August-December 1994 to $2.53 in October 1995. The 64's rose from $2.43 in July 1994 every month to a 4-year high of $3.08 in June 1995. Since then it declined to $2.42 in October. Grade 58's prices grew from a $1.90 May-June 1994 average to a 5-year average of $2.75 in April 1995. Since then it dropped to $2.14 in October. Grade 56's prices rose from a $1.86 May-June 1994 average to a 6-year high of $2.64 in April 1995. Afterwards it declined to $2.01 in October 1995. Foreign Wool Situation and Outlook Lower Wool Use As measured by the Australian market indicator, the wool business in Australia during the 1994/95 season was considerably (44 percent) better than during the previous season (figure 12). The Australian Market Indicator (a weighted average index of 15 categories) averaged A788 cents per kilogram during 1994/95, ranging from A681c/kg in July to A833c/kg in March. By comparison, the market indicator during the 1993/94 season averaged A547c/kg, ranging from A426c/kg in September 1993 to A626c/kg in June 1994. The value of Australian raw wool exports in the 1994/95 season was 25 percent above the 1993/94 value, while the quantity declined 9 percent. The Australian stockpile declined 18 percent or 663,000 bales during 1994/95, while it declined 7 percent or 282,000 bales during 1993/94. The demand for New Zealand wool during the 1994/95 season was similar to the Australian market. The New Zealand market indicator averaged 34 percent above the previous season. The value of raw wool exports rose 19 percent over the 1993/94 season, while the quantity declined 6 percent. The New Zealand stockpile declined 83 percent during the 1994/95 season, compared with a 51-percent decline during 1993/94 (figure 13). With more than a third of the 1995/96 season gone, the world wool market has been depressed. The Australian market indicator averaged A678c/kg through early November, 14 percent below the comparable 1994/95 average and 16 percent below the 1994/95 fourth quarter. The New Zealand market indicator averaged NZ529c/kg in the August-November 10 period, 4.3 percent below the 1994/95 season average and 7.2 percent below the 1994/95 fourth quarter. Important factors causing this wool consumption slowdown are: smaller exports to China, (a major raw wool importer), a relatively mild 1994/95 northern hemisphere winter; and the growing popularity of "casual" or "relaxed" office dress codes wherein more cotton and manmade fiber apparel are worn than wool apparel. The Australian stockpile by early November declined 8 percent from the end of the 1994/95 season, and 42 percent from the January 1991 peak of 4.766 million bales. The latest Australian estimate for the 1995/96 season places the number of sheep at 123 million, compared with 120 million in the 1993/94 season. Farmers were expected to rebuild their flocks when prices improved in early 1995 and better climatic conditions occurred. Wool production in the 1995/96 season was forecast to be 1.50 billion pounds, greasy, 6 percent below last season. Shorn wool production would be 1.41 billion pounds and pulled wool 0.09 billion. New Zealand sheep numbers at the beginning of the 1995 season were estimated to be 48.6 million, 3.4 percent below last season. They were the lowest in 34 years. Wool production in the 1995/96 season is expected to be 434 million pounds, 6 percent below last season. The wool market in South Africa during the 1994/95 season, generally, moved in a manner similar to the Australian market. The South African market indicator average in the August-November 10 period, SA1742c/kg, was 15 percent below the 1994/95 average and 21 percent below fourth-quarter 1994/95. Mohair U.S. mohair stocks at the beginning of 1995 were 3.6 million pounds, clean (table K). Domestic production in 1995 is estimated to be 8.2 million pounds. Mill use is expected to be 3.0 million pounds and exports 7.2 million for a total use of 10.2 million pounds, leaving year-end stocks at a relatively low 1.8 million pounds. Mohair exports in the first 8 months of 1995 were 2.9 million pounds, 39 percent below a year earlier. The August price was $4.10, which reflected relatively large kid hair sales that month. The January 1995 price, $4.28, was the highest monthly price in 7 years. Reflecting lower demand in 1995, the monthly price declined since then, reaching $1.73 in July. Four countries were the destination of more than 91 percent of the January-August 1995 exports: the United Kingdom, 77 percent; India, 6 percent; and Belgium and China, 4 percent each. Mohair top exports are included in the Harmonized Schedule B category: "Fine Animal Hair, carded and combed." About 1.28 million pounds were exported during January-August 1995, 8.3 percent more than a year ago. About 80 percent of these exports went to four countries: India, 34 percent; Taiwan, 29 percent; the United Kingdom, 11 percent; and Spain, 6 percent. The average price January-August was $5.23, compared with $2.94 a year earlier. During the South African 1994 winter sale (September-December) and the 1995 summer sale (March-June), the price of mohair rose 2 to 3 times above 1993 levels. Average adult hair reached a more than 8-year high during March-June 1995, averaging $30 per kilogram for average adult hair and $78 for fine kid. The principal use for adult hair is in machine knitting yarns for sweaters. Kid hair is used in higher priced suits and coats. The first five sales of the current winter season (August-December) have experienced a significantly lower demand. Average adult hair was about $18 per kilogram and fine kid about $37 during the current selling season. South Africa is a declining source of mohair. Sales are falling while stocks remain low. Sales in 1994 totaled 12.94 million pounds, greasy, while 1995 sales are expected to be 10.94 million. Stocks in November 1995 were 300,000 pounds, unchanged from last January. Manmade Fibers Demand Softens The manmade fiber business in third-quarter 1995 declined from the second quarter and from third-quarter 1994. Total shipments in third-quarter 1995 were 2.44 billion pounds, 2.7 percent below the previous quarter and 2.6 percent less than a year ago. Production, at 2.45 billion pounds, was 3.7 percent below the second quarter and 3.9 percent less than a year earlier. Domestic shipments by fiber producers, at 2.27 million pounds, was 2.3 percent below the second quarter and almost 3 percent below a year ago. Third-quarter 1995 domestic shipments of noncellulosic filament fibers, at 1.27 billion pounds, were 0.2 percent above the second quarter and 0.6 percent above a year earlier. Nylon domestic filament shipments were 43.5 million pounds and polyester filament shipments were 350 million pounds. Olefin filament shipments, at 482 million pounds, were the highest on record, 6.6 percent above the second quarter and 2.6 percent more than a year earlier. Noncellulosic staple domestic shipments, at 902 million pounds, were 5.2 percent below the second quarter and 7.2 percent below a year ago. Nylon staple shipments, at 213 million pounds, were 5.3 percent above the second quarter. Polyester staple shipments, at 499 million pounds, were 10.3 percent below the second quarter. Olefin staple shipments, at 123 million pounds, were 5.4 percent above the second quarter. Acrylic staple shipments, at 66 million pounds, were almost 12 percent less than the second quarter. The carpet market continues to consume more fiber in facing and backing uses than other fiber markets (appendix table 49). In second-quarter 1995, this market took 844 million pounds, 2.8 percent below the first quarter and 10.1 percent less than a year earlier. Noncellulosic carpet use accounted for more than 37 percent of total domestic shipments. Nylon dominates the carpet market, constituting 56 percent of the total second quarter use of noncellulosic carpet fibers. Nylon carpet fibers were 74 percent of nylon domestic shipments. Nylon staple carpet fibers were 93 percent of nylon staple domestic shipments, while nylon filament carpet fibers were 66 percent. Preliminary data for the third quarter indicate that about 490 million pounds of nylon were used in carpets, 4 percent below a year ago. The use of olefin fibers in carpet backing and facing in the second quarter was 325 million pounds, 3 percent less than the first and 8.6 percent below a year earlier. Olefin fibers constitute 38 percent of the noncellulosic fibers used in carpets. Carpeting is the most important use of olefin fibers, at 57 percent. Woven textile production remained the second largest market for manmade fibers, taking 24 percent of the second quarter domestic shipments. The woven market used 553 million pounds, 0.3 percent below the first quarter and 5 percent less than a year earlier. Two fibers made up almost 86 percent of this market: polyester, 63 percent; and olefin, 23 percent. The knit market took 346 million pounds in the second quarter, 0.5 percent above the first quarter and 5 percent more than a year ago. Domestic shipments of manmade fibers to the knit markets were 15 percent of total domestic shipments. Three fibers dominated the knit market; polyester, at 217 million pounds, constituted 63 percent; acrylic, at 55 million pounds, totaled 16 percent; and nylon, at 71 million pounds, equaled 20 percent. The price of benzene ( a precursor to many chemicals) declined from the $1.00-$1.10 level earlier in 1995 to $0.68 in mid-November. The supply exceeded the demand of many benzene derivatives (table L and figure 14). The price of cyclohexane, a basic chemical used in nylon production, follows the price of benzene. It declined in the last half of the year to $1.01-$1.06 per gallon from levels $0.20-$0.30 higher. The price of paraxylene, a precursor to polyester fibers, rose from $0.30 per pound to $0.41 in the fourth quarter because of tight demand. The price of caprolactam remained at $0.93-$0.96 per pound, although some discounting has been reported. The price of polymer grade propylene, a precursor for acrylonitrile (a raw material for acrylic fibers) and olefin fibers rose from $0.1875-$0.23 per pound to $0.2475 mid-year and declined to $0.2125 per pound because of excess supply. Because of strong export demand, the price of acrylonitrile rose from $0.48/pound in the first quarter to $0.53, where it is expected to remain. The price of ethylene glycol ( a raw material used to make polyester fibers) rose from $0.265/pound in the first quarter to $0.32-$0.35 in the remaining quarters. End end end