COTTON AND WOOL YEARBOOK December 2, 1997 November 1997, ERS-CWS-1997 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 20036-5831. This release contains only the text of the COTTON AND WOOL YEARBOOK -- tables and graphics are not included. Printed copies of this yearbook will be available from the ERS-NASS order desk in about 3-4 weeks. Call toll-free, 1-800-999-6779 and ask for stock # ERS- CWS-1997, $21. ERS-ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- Based on November 1 crop conditions, U.S. cotton production in 1997 is forecast at 18.85 million bales, slightly below last season's 18.9 million and the fourth largest on record. While planted area to cotton fell 5 percent to 13.9 million acres, lower abandonment this season is expected to result in harvested area above 1996. Harvested area is estimated at 13.4 million acres, 4 percent higher, but the national average yield is forecast to decline 34 pounds from last season's near record to 673 pounds per harvested acre. U.S. cotton exports in 1997/98 are forecast to rise 2 percent from last season to 7 million bales despite larger foreign supplies and reduced import demand by China. U.S. cotton has been more price competitive overseas this year as evidenced by the strong early-season export sales. During the first 3 months of 1997/98, U.S. export commitments have already surpassed 5 million bales. And, with a slight increase in world cotton trade this season, the U.S. share of the global market is projected to rise to 26 percent. U.S. mill use of cotton in 1997/98 is also projected to rise 2 percent above last season to 11.4 million bales. Abundant supplies at lower prices early in the season, coupled with an improving domestic demand for denim and rising cotton textile exports, are expected to support mill consumption. In 1997, cotton textile exports are expected to advance for the 13th consecutive year, reaching the equivalent of 3.6 million bales. On the other hand, cotton textile imports are anticipated to rise for the 9th year in a row. In 1997, these imports could reach 0-million-bale equivalents and thus widen the cotton textile trade deficit after last year's decline. Meanwhile, total domestic cotton consumption (mill use plus net textile trade) will likely surpass 8 billion pounds, with per capita consumption remaining near 30 pounds. U.S. cotton supplies in 1997/98 are not expected to include a significant volume of imports, unlike the previous two seasons, as adequate supplies of U.S. cotton were available at the beginning of the season and U.S. prices are closer to world prices. However, U.S. total supplies are estimated at 22.8 million bales, 4 percent above a year earlier. Meanwhile, total use is forecast at 18.4 million bales, 2 percent above 1996/97. Based on these supply and demand estimates, U.S. ending stocks for 1997/98 are projected at 4.4 million bales. With U.S. stocks expected to rise modestly this season, the stocks-to-use ratio is estimated at 24 percent, 4 percentage points above the 5-year average. World cotton production in 1997/98 is forecast to increase to 90.2 million bales, 1.1 million above last season's outturn. Foreign production, projected at 71.3 million bales, accounts for all of the increase in world production in 1997/98. Higher yields account for the rise in foreign production. Although larger production is anticipated in Pakistan, Uzbekistan, the African Franc Zone, and Southern Hemisphere countries, 1997/98 output in India is expected to fall significantly. World consumption is projected to rise slightly to 89.8 million bales in 1997/98, with foreign consumption expected to increase for the third consecutive season. Consumption in China and India (the two largest cotton consumers) is forecast to expand 2 percent to 21.5 and 13.2 million bales, respectively. Gains in the European Union, New Independent States (formerly referred to as the former Soviet Union), and Eastern Europe are also anticipated this season, while Southeast Asia's consumption declines. This is the first significant decrease in Southeast Asia's consumption since 1980/81 and is a direct result of the region's financial difficulties. World cotton exports in 1997/98 are expected to gain 1 percent to 26.9 million bales. Foreign exports are forecast up slightly from last season to 19.9 million bales, as foreign beginning stocks were the highest in 5 years, permitting higher exports by a number of countries. Australia, Argentina, Pakistan, and the African Franc Zone countries are projected to export more cotton in 1997/98, while India and Uzbekistan are expected to reduce their exports. With the rise in world cotton production and consumption, world stocks are projected to remain near last season's 36.4 million bales. However, as the United States builds stocks in 1997/98, foreign stocks are forecast to decline nearly 500,000 bales to 32 million. While many foreign countries' stocks will increase in 1997/98, a large decline is expected in China, with lower ending stocks also forecast for India. China will hold 38 percent of the world's cotton stocks at season's end, down from 41 percent in 1996/97. U.S. raw wool production in 1997 is estimated at 28 million pounds, clean, 7 percent below last year and about half the production of the early 1980's. Wool imports also are projected down this year, at 60 million pounds, due to weaker mill demand. Mill demand is forecast at 110 million pounds this season, 11 percent below 1996. Carryover supplies are forecast to decline to 36 million pounds, the lowest in over 25 years. U.S. Cotton Situation and Outlook U.S. Cotton Review, 1996/97 The 1996/97 cotton season began with U.S. stocks at a relatively low 2.61 million bales, similar to a year earlier but the smallest in 5 years. Unlike the previous year, the 1996 crop was the first produced under the Federal Agricultural Improvement and Reform (FAIR) Act, a more market-oriented farm program. The FAIR act allows producers to respond more to the marketplace with total planting flexibility and rely less on the fixed government payments which are not affected by either planted acreage or market prices. At planting time, cotton producers did respond to market prices as competing crop prices for grains were at or near record levels. Cotton acreage was lower in each region in 1996, compared with 1995, as lower cost grain crops enticed many producers to plant more grain. In 1996, only 14.6 million acres were planted to cotton in the United States, compared with 16.9 million in 1995. In addition, weather-related problems, particularly in Texas, forced the national abandonment rate to 12 percent, the highest since 1992. Harvested cotton area totaled only 12.9 million acres while the national average yield soared to 707 pounds per harvested acre, second only to 1994. As a result, 1996 cotton production totaled 18.9 million bales, the third largest crop on record. With higher 1996 production and lower demand expectations than in the previous season, average farm prices dropped below those of a year earlier. In addition, over 350,000 bales of raw cotton were imported in the first 2 months of 1996/97 as a result of low beginning stocks and high U.S. prices relative to world prices. And for the entire season, imports reached 403,492 bales, slightly below 1995/96. Similar to the previous season, 80 percent of 1996/97 imports came from Uzbekistan and Argentina. In 1996/97, U.S. cotton demand failed to exceed production after 3 consecutive years of doing so. Although total demand for U.S. cotton was a relatively high 18 million bales in 1996/97, production was still nearly 1 million bales higher. U.S. mill consumption last season reached 11.1 million bales, 4.5 percent above 1995/96 and the second highest in over 50 years. The higher demand for U.S. cotton products, both here and abroad, was due in part to the expanded trade under the North American Free Trade Agreement (NAFTA). In contrast to mill consumption, U.S. raw cotton exports fell in 1996/97 to 6.9 million bales, 10 percent below the previous season. A lack of competitively priced exportable supplies early in the season, coupled with a decline in world trade in 1996/97, combined to reduce U.S. cotton exports. Despite the decline, the U.S. share of world trade approached 26 percent. With a U.S. cotton supply of 22.0 million bales in 1996/97 and total demand at 18.0 million, stocks at the close of the season rose by 50 percent. Ending stocks were placed at nearly 4.0 million bales, the highest in 4 years but a stocks-to-use ratio of only 22 percent. As a result of the higher stocks, producer prices declined. In 1996/97, the average upland farm price was 69.3 cents per pound, compared with 75.4 cents in 1995/96, while the extra-long staple (ELS) price was $1.07 per pound, compared with $1.228 in 1995/96. Supply Outlook for 1997/98 U.S. cotton supplies at the beginning of 1997/98 were 4 million bales, their highest since the 1993 season. At planting time, cotton prices were below the previous 2 years, and the attractiveness of net returns for competing crops pulled additional acreage away from cotton in 1997. U.S. cotton area fell 5 percent from 1996 to 13.9 million acres. Upland acreage this season is approximately 13.7 million acres, compared with 14.4 million last season. ELS area also declined from 258,000 acres in 1996 to 250,000 this season. Despite the reduction in total cotton area in 1997, the national average abandonment rate is forecast well below last season. Based on November estimates, the rate is forecast at only 3.4 percent, or nearly 500,000 acres. With the lower abandonment, 1997 harvested area is estimated at 13.4 million acres (table A). This season, cotton crop conditions have been relatively favorable, despite rain which caused planting and harvesting delays across the Cottonbelt. Based on November 1 conditions, the 1997 U.S. cotton crop is estimated at 18.85 million bales, slightly below last season's final crop estimate and the fourth largest cotton crop on record (figure 1). Compared with 1996, this season's production estimate is based on higher harvested area and lower yields. The national average yield is currently projected at 673 pounds per harvested acre, 34 pounds below 1996. Upland production is forecast at 18.3 million bales in 1997, with the average yield estimated at 666 pounds per harvested acre. Expected production is lower this year in all regions except the Southwest, where an increase in harvested area pushed the upland crop there more than 1 million bales higher. ELS production, on the other hand, is forecast at 548,000 bales, 4 percent above 1996. The rise in the ELS crop is the result of a higher national yield more than offsetting lower area harvested. California continues to dominate ELS production, accounting for nearly 75 percent of the area. The ELS yield is estimated at 1,056 pounds per harvested acre, the highest average yield on record for ELS cotton. By mid-November, over 70 percent of the total U.S. cotton crop had been harvested, similar to the 5-year average. Unlike the previous 2 seasons, 1997/98 U.S. cotton supplies are not expected to include a significant volume of raw cotton imports, as adequate U.S. supplies were available at the beginning of the season and U.S. prices are closer to world prices. However, total U.S. cotton supply in 1997/98 is projected at 22.8 million bales, about 900,000 bales above last season. Demand Outlook for 1997/98 The U.S. cotton demand outlook points to a rebound in total cotton offtake in 1997/98. This season, total demand is projected at 18.4 million bales, 2 percent above 1996/97, with both exports and mill use expected to contribute to the increase. U.S. exports are projected to rise as U.S. cotton prices are more competitive overseas than a year ago. Early last season, A Index prices were nearly 9 cents per pound below the comparable U.S. price quote, while this season, the difference is closer to 3 cents. In addition, prices in the United States have fallen 3-5 cents as well (table B). And the "Step 2" User Marketing Certificate Program, which opened July 10 for the first time since November 1994, has contributed to the competitiveness of U.S. exports. From July 10 through mid-November, the weekly "Step 2" rate available on export shipments has averaged nearly 1.5 cents per pound. Currently, 1997/98 U.S. exports are projected nearly 2 percent above last season at 7 million bales. While upland shipments are expected to expand this season to nearly 6.6 million bales, ELS exports are forecast lower at 425,000 bales in response to competition from Egypt in 1997/98. With world cotton trade projected to improve only slightly, the U.S. share of world trade will likely remain near that of 1996/97. As of November, the U.S. share of world trade is estimated at 26 percent in 1997/98, compared with 25.7 percent last season (figure 2). Based on U.S. Export Sales data through mid-November, 1.3 million statistical bales of upland cotton has been shipped, compared with 800,000 bales in 1996/97. In addition, sales "on the books" are running 1 million bales above a year earlier. Upland commitments (shipments plus outstanding sales) for 1997/98 have surpassed 5 million bales thus far, compared with 3.5 million a year ago. ELS commitments are 10 percent ahead of those in 1996/97, approaching 390,000 bales by mid-November. U.S. cotton mill consumption is projected to also rise 2 percent to 11.4 million bales. The current estimate is 300,000 bales above last season (figure 3). Abundant supplies at lower prices this year, coupled with an improving demand for denim and rising textile exports, should result in increased U.S. cotton mill consumption. Upland mill use is projected at 11.3 million bales, while ELS consumption is expected to approach 110,000 bales. Based on the first 3 months of data from the Department of Commerce, the seasonally adjusted annual rate of cotton consumption averaged 11.4 million bales. Actual cotton mill use for August through October 1997 reached 3 million bales, compared with 2.9 million a year earlier. Although manmade fiber use of the cotton system has also risen from a year ago, cotton consumption has increased faster during the first 3 months of 1997/98. As a result, cotton's share has averaged 78.7 percent, compared with 78.2 percent for the entire 1996/97 season. Based on these projections of U.S. cotton supply and demand, ending stocks for the 1997/98 season are estimated at 4.4 million bales. With stocks expected to increase 400,000 bales from the beginning level, the ratio of stocks-to-use is projected at 23.9 percent, compared with 22.1 percent last season (figure 4). U.S. Textile Trade and Domestic Consumption The overall volume of textile trade in 1997 has risen significantly from 1996, and the trade deficit for textiles will widen in calendar year 1997 as the increase in imports outpaced the rise in exports. In 1996, the textile trade deficit was reduced 3.5 percent from 1995. Textile exports during the first 9 months of 1997 expanded to 3.2 billion (raw-fiber equivalent) pounds, compared with 2.5 billion in 1996. However, textile imports through September 1997 surged to nearly 7.2 billion pounds, compared with 5.9 billion in 1996. As a result, the textile deficit for all fibers through the first 9 months of 1997 has approached 4 billion pounds, 18 percent above the same period in 1996. Similarly, cotton textile trade for January through September 1997 has increased. Cotton textile exports are running about 21 percent ahead of last year, surpassing 1.3 billion pounds by September. Meanwhile, cotton textile imports have also jumped dramatically, rising 22 percent to nearly 3.8 billion pounds during the first 9 months of 1997. For calendar 1997, cotton textile exports are expected to rise for the 13th consecutive year while imports expand for the 9th year in a row. Exports for the 12 months will likely approach 3.6 million-bale-equivalents (1.7 billion pounds), 15 percent above 1996. On the other hand, cotton textile imports could reach 10 million-bale-equivalents (4.9 billion pounds), 18 percent higher than 1996. With the quantity of imports rising faster than exports, the cotton textile trade deficit is expected to expand in 1997, after a 2-percent reduction last year, to the equivalent of 6.5 million bales of raw cotton (figure 5). In addition, total U.S. fiber mill use is also expected to increase from 1996. Mill use of all fibers could exceed 17 billion pounds in 1997, compared with nearly 16 billion the last 2 years. And, although U.S. cotton mill use expands in calendar 1997, manmade fiber use will increase faster. As a result, manmade fiber's share of total fiber mill use is likely to increase slightly, at the expense of cotton, to capture two-thirds of the market. Total domestic consumption (mill use plus net textile trade) of all fibers is projected to increase after 2 years of decline. Based on data for the first 6 months, domestic consumption of all fibers totaled nearly 10.9 billion pounds. Cotton accounted for 38 percent of the total, or approximately 4.1 billion pounds, while manmade fibers contributed 58 percent, or 6.3 billion pounds. By year's end, domestic consumption of cotton is expected to surpass 8 billion pounds, a new record. However, the per capita consumption of cotton will likely remain near 30 pounds. In 1996, per capita cotton consumption was 29.7 pounds, with 19.7 pounds of the total produced in U.S. mills (figure 6). Foreign Cotton Situation and Outlook Foreign Cotton Production and Consumption Production of cotton outside the United States is forecast to rise 1 percent in 1997/98 to 71.3 million bales, with a slightly larger increase of about 2 percent foreseen for consumption. Furthermore, foreign imports are expected to fall 5 percent as China institutes an array of policies to encourage use of its domestic cotton, particularly from Xinjiang province (table C). Adding China's expected net imports to the total gap forecast between consumption and production in all other countries besides the United States and China in 1997/98 gives a total of 5.8 million bales. This is well below the previous year's level of 9.0 million bales, and below the average of the preceding 10 years, 7.9 million. U.S. exports averaged 7.1 million bales during these 10 years, only slightly higher than the 1997/98 forecast of 7.0 million. During the past decade, U.S. exports have corresponded with the foreign demand-supply gap calculated above, either in the same year or with a lag of one year. Factors that determine whether there is such a lag or not include the relative importance of China, the availability of U.S. supplies, and supplies in competing countries. Reduced Chinese imports--from 3.6 million bales to 2.2 million--account for much of the foreign gap's 1997/98 decline, and is a factor that favors a shorter lag. On the other hand, major competitors--Uzbekistan, Pakistan, and Turkmenistan--began the 1997/98 season with relatively reduced supplies following crop reductions, a factor that supports a longer lag. As a result, U.S. cotton exports in 1997/98 are expected to rise marginally from 1996/97's 6.9 million bales. World Consumption Prospects Foreign cotton consumption is forecast to grow for the third consecutive year in 1997/98, up 1.5 percent to 78.4 million bales, as unusually weak demand by Southeast Asia offsets gains in other regions (figure 7). Consumption in the New Independent States (NIS) is expected to increase, as is China's and Eastern Europe's. These are all regions where consumption has fallen more often than risen in the 1990's. On the other hand, Southeast Asia's consumption is expected to fall in 1997/98, its first significant decline since 1980/81. As a result, world consumption (excluding the NIS, China, and Eastern Europe) is expected to increase relatively slowly, 1.1 percent, compared with a 1986-96 average of 2.2 percent (figure 8). The continued currency devaluations in Southeast Asia and the associated financial disruptions in those countries, have reduced prospects for consumption and imports of cotton in the region in 1997/98. A 4-percent decline in consumption and a 10-percent decline in imports is foreseen compared with the year before. The largest declines are foreseen in Thailand, where consumption and imports are forecast down, respectively, 13 and 29 percent. The Impact of Exchange Rates and Interest Rates The impact of the devaluations and financial disruption in Southeast Asia on the region's consumption of raw cotton by textile mills can be broken down into two broad categories, income and price. The price effects can be further broken down into three categories, and of these four categories of impacts, three are negative. The single positive impact--increased export competitiveness for textiles--is also likely to have the longest lag. The net impact on 1997/98 cotton consumption and imports is therefore negative. The consensus in the economic literature on price and income effects on trade is that income effects have shorter lags than price effects. Southeast Asian incomes in 1997 and 1998 are now expected to be lower than consumers forecast at the beginning of the marketing year. Clothing is a semi-durable good, and consumers will decrease their purchases more than they will of food and other immediately consumed products. According to the International Cotton Advisory Committee (ICAC), about 60 percent of Southeast Asia's mill consumption of cotton is for domestic end-use (spinning and weaving mills in the region may actually export a larger share of their output, but imports of yarn and cloth are partly offsetting). This domestic end-use consumption will also be reduced by the increased price of textiles produced with imported fibers, but with a lag, because of fiber that was imported or purchased before the devaluation. Also, fiber roughly accounts for half the cost of final textile goods, with the remaining costs derived from domestic value-added. Domestic costs will rise substantially less than imported inputs, so the cost of textiles will probably rise by less than half of the increase for imported fiber. Also, Southeast Asian countries produce manmade fibers, so the increased cost of textiles can be further decreased by substituting other fibers. Thailand and the Philippines have to import feedstock for producing manmade fibers, so opportunities for reducing costs through substitution will be smaller than in Indonesia and Malaysia. One price effect expected to be more immediate is the increase in the cost of capital in the region. Some industrial fiber users may find the cost of capital prohibitive for a brief period as financial institutions regroup, and may consume less fiber for a short period. When consumption resumes, there is no reason to expect an acceleration of use to make up for this slowdown before the end of the 1997/98 marketing year. The third price effect is the reduced dollar cost of Southeast Asia's value-added, which could boost textile exports of final goods. Intermediate textile products could also benefit, with respect to imports as well as exports, but by a lesser amount, since value-added is lower. Exchange rate effects are not exactly the same as price effects, and typically lags between exchange rate changes and trade volume changes can extend well beyond one year. Realization of the full effect has been estimated to take several years for some countries. Two factors suggest that the lags for Southeast Asia should be shorter than those experienced by other countries such as the United States. One is that since Southeast Asian exchange rates were fixed rates, the direction and relative permanence of the change in exchange rates is clear: there will be no lag while producers and consumers gradually adjust their expectations for currency costs in response to a trend. Another is that since Southeast Asian exchange rates were fixed, trade expenditures were probably not hedged in foreign exchange markets, as they typically are for countries with floating exchange rates like the United States. Therefore, importers and exporters will feel the effect more rapidly and respond more rapidly. Nonetheless, a longer lag is likely for any expected cotton consumption gains stemming from improved textile trade balances in Southeast Asia than is likely for the negative effects of economic disruption. A short-term decline in the region's cotton consumption is therefore likely. Risks to the Analysis USDA's estimates are a mid-point of possible outcomes, and there are risks that the estimates could be too high or too low. The income response of domestic textile end-use in Southeast Asia could be larger than USDA has estimated. Some estimates of income elasticity for textile products approach or exceed 1.0. But it is possible that textile consumers in Southeast Asia will respond particularly strongly to the drop from their incomes' growth rates of the last 5 years. Also, exchange rate devaluations tend to reallocate income away from the non-trading sectors of the economy to sectors producing for export or for import competition. The workforce in the non-trading sector is less likely to have savings to draw upon to maintain consumption. Finally, domestically produced manmade fibers may prove a particularly attractive substitute for imported cotton. Cotton consumption could be higher in the region than USDA has forecast if textile trade balances improve more quickly than forecast. There are additional reasons why textile trade's response to these exchange rate changes would be faster than the averages observed for total exports in other countries. Textile trade would respond more quickly to price changes than food trade since textile consumption is more price elastic, and textile trade would respond more quickly than trade in capital goods because of shorter cycles for ordering and production. Since many studies of the timing of exchange rate response are aimed at projecting aggregate balance of payments effects, they examine trade in aggregate, and textiles may respond more quickly than average. Finally, trade responses to exchange rate changes could be faster than estimates derived from historical data because of rapidly improving global communication and transportation. Larger Foreign ELS Production and Use According to the ICAC, foreign ELS production is expected to be about unchanged at 2.4 million bales in 1997/98. Larger crops in India and Central Asia will be offset by smaller crops in Egypt, Sudan, and a few other countries. ELS consumption in foreign-producing countries is expected to grow slightly, from 1.7 million bales in 1996/97, to 1.8 million. Egypt accounts for virtually all the expected increase, with a smaller expected increase in Central Asia exactly offset by a decline in India (table D). Egypt also accounts for much of an expected 200,000-bale increase in foreign-producer exports in 1997/98, drawing upon substantially larger beginning stocks compared with a year earlier. Central Asia, the second largest exporter, is also expected to increase its exports, while India's decline. Total ending stocks in foreign-producing countries are expected to be about unchanged in 1997/98, compared with a year earlier, at 1.1 million bales. U.S. Wool Situation and Outlook Wool Production and Use Continues Decline The U.S. sheep and wool industry continued to contract during 1997. Sheep stock on January 1, 1997 were 5.9 million head, down 5 percent from a year earlier (table E). Sheep shorn during 1997 are expected to decline to near 7 million head, compared with 7.3 million last year. Production is estimated at 28 million pounds, clean (53.4 million, greasy), for the 1997 marketing year. Lower sheep numbers, combined with a slight reduction in expected yield to 7.6 pounds per head, resulted in a decline in production of nearly 7 percent from 1996. Expected production this year would be the lowest on record and significantly below production in the late 1980's (figure 9). During 1996, U.S. raw wool imports totaled 75.4 million pounds, clean, 15 percent below a year earlier (table F). Despite declining production this year, imports are projected at 60 million pounds, the lowest since 1980. Shipments through the end of August have reached 47 million pounds, compared with 58 million last year. Imports of fine wool accounted for 63 percent of total 1997 shipments. Imports of unimproved and other grades not-finer-than 46's were 18 million pounds through August. Shipments from New Zealand represented 80 percent of these grades while Australia accounted for 83 percent of the finer wools. Total U.S. supplies are estimated at 151 million pounds, clean, 12 percent below 1996 and the lowest since 1977. Raw wool mill consumption is forecast at 110 million pounds, 11 percent below 1996. Mill use during the first 6 months of 1997 totaled 61 million pounds. Apparel wool, at 55.5 million pounds, was 14 percent below 1996 consumption. Carpet wool mill use was nearly 1 million pounds above 1996 at 6.7 million pounds (table G). The woolen system used 25 million pounds and the worsted system used 30.5 million pounds during January through August of this year. Wool top production in the first 8 months of 1997 totaled 29 million pounds, compared with 33 million in 1996. Raw wool exports during the first 8 months of 1997 were nearly 4 million pounds, clean, compared with 3.3 million in the corresponding period of 1996. Shorn wool shipments were 2 million pounds and not-shorn (pulled) exports were 239,193 pounds. Carbonized wool exports totaled 1.7 million pounds through August. The majority of shorn wool exports went to Germany, United Kingdom, Belgium, and Italy. Exports of not-shorn wool went primarily to Canada, United Kingdom, Spain, and the Philippines. Almost all carbonized wool shipments went to Mexico. Exports of wool top during January through August were 5 million pounds, 31 percent below a year earlier. The average price received was $2.83 per pound, compared with $2.58 last year. The value of wool top shipments totaled $14 million. The majority of shipments went to Korea, China, Mexico, Canada, and Hong Kong. Top imports were 1.4 million pounds, 48 percent below January-August 1996. Australia was the largest source, accounting for 45 percent of wool top imports. Other major suppliers were Germany, United Kingdom, and New Zealand. U.S. prices for clean, mill-delivered territory raw wool, finer grades 64's and 62's moved higher during the first 6 months of the year, averaging $2.55 and $2.17 per pound, respectively, in June. Between June and October, the 64's continued to average $2.55 per pound, while the 62's rose to $2.20 in July. The 62's have averaged $2.20 per pound through October. The 60's and 58's also have followed a similar trend as the finer grades, increasing throughout the year, averaging $1.85 and $1.72 per pound, respectively, between June and October. The 50's and 54's rose during the season, averaging $1.50 and $1.30 per pound during summer and early fall. Domestic prices of Australian raw wool 80's and 70's increased each month through July. The 80's averaged $3.88 per pound and the 70's averaged $3.38. Prices declined since July, with the 80's averaging $3.53 and the 70's averaging $2.83 in October. The 64's established a seasonal high in June of $2.87 per pound. Since then prices have weakened, averaging $2.50 in October. Grade 58's prices have been relatively stable during the 1997 season, averaging about $2.00 per pound in October. Foreign Wool Situation and Outlook Weak Wool Demand, Stable Prices Depict 1996 Season Following several years of declining sheep population and production, foreign wool output increased slightly in 1996. Foreign production totaled 3.2 billion pounds, clean, and sheep numbers increased 2 million head to above 1 billion. Australian production, at 1 billion pounds, was virtually unchanged from 1995. Larger production occurred in China, New Zealand, and Uruguay. However, production in the New Independent States (former Soviet Union) continued to decline. In 1996, wool production in the NIS totaled 220 million pounds, clean, down 19 percent from a year earlier and less than half of 1992 production. Foreign exports of raw wool, at 1.5 billion pounds, clean, increased nearly 10 percent above 1995 shipments. Larger exports occurred for all the major wool-producing countries except South Africa. Australian wool exports increased 13 percent to 940 million pounds, clean, the highest level since the 1993 season. Despite increased trade in raw wool, world wool consumption declined for the fifth consecutive year in 1996. Raw wool consumption, at 3.1 billion pounds, clean, was 5 percent below 1995. Although wool mill use declined in 1996, world carryover supplies dropped for the sixth consecutive year. World carryover at the end of the 1996 season is estimated at 630 million pounds, clean. However, a substantial percentage of stocks is owned by Wool International and will continue to be sold off through the 2000 marketing year. Wool International has sold over 3 million bales of Australia's stockpile since the 1990 season. At the end of the 1996 season the stockpile totaled 1.6 million bales, greasy. With weaker mill consumption during 1996, world wool prices moved lower at the beginning of the season before increasing in early 1997. The Australian market indicator (a weighted average index of 15 categories) averaged A600 cents per kilogram during July and August 1996, then fell to A540 cents in September. The Australian market rose between January and June to A725 cents per kilogram. For the season, the market indicator averaged A615 cents per kilogram, 4 cents below 1995. The New Zealand market indicator followed a similar pattern as Australia's. It ranged between NZ412 and NZ475 cents per kilogram, averaging NZ451 cents for the season. The South African market indicator increased between August and June, averaging SA2,264 cents per kilogram during the 1996 marketing year. Manmade Fibers The manmade fiber industry in the third quarter of 1997 declined from the second quarter but was up from a year ago. Total shipments in third-quarter 1997 were 2.58 billion pounds, 1 percent less than the second quarter but 1.4 percent more than a year earlier. Production, at 2.61 billion pounds, was unchanged from the second quarter but 2.0 percent more than a year ago (appendix table 42). Domestic shipments by fiber producers, 2.38 million pounds, declined 0.4 percent from the second quarter but were 1.1 percent above a year earlier. Third-quarter stocks in fiber producers' plants, at 0.76 million pounds, were 1.4 percent above the second quarter and 14 percent greater than last year. Third-quarter 1997 domestic shipments of noncellulosic filament fibers, at 1.37 billion pounds, were 0.4 percent more than the second quarter and 2.9 percent above a year ago. Nylon domestic filament shipments were 478 million pounds, polyester filament shipments were 378 million, and olefin filament shipments were 514 million. Noncellulosic staple domestic shipments, at 927 million pounds, were 0.8 percent below the second quarter but 0.3 percent above a year earlier. Polyester staple shipments were 562 million pounds, nylon staple shipments were 189 million, olefin staple shipments were 100 million, and acrylic staple shipments were 76 million. The carpet market continues to consume more fibers in facing and backing uses than other fiber markets (appendix table 43). In second-quarter 1997 (the latest data available), this market took 936 million pounds, 0.4 percent less than the first quarter and 3.9 percent below a year earlier. Noncellulosic carpet use accounted for more than 40 percent of total noncellulosic fiber domestic shipments. Nylon dominates the carpet market, constituting 52 percent of the total second- quarter use of noncellulosic carpet fibers. Nylon staple carpet fibers were 93 percent of nylon staple domestic shipments, while nylon filament carpet fibers were 65 percent. Preliminary data for the third quarter indicate that about 497 million pounds of nylon were used in carpets, 2 percent above the second quarter but 4 percent below a year earlier. The use of olefin fibers in facing and backing in the second quarter was 395 million pounds, 0.7 percent more than the first quarter and 1 percent above a year ago. Olefin fibers constitute 42 percent of the noncellulosic fibers used in carpets. Carpeting is the most important use of olefin fibers at 65 percent. Woven textile production remained the second largest market for noncellulosic fibers, taking 24 percent of the second quarter domestic shipments. The woven market used 499 million pounds, 4.6 percent more than the first quarter and 14 percent above a year earlier. Two fibers made up almost 91 percent of this market: polyester, 76 percent; and olefin, 15 percent. The knit market took 343 million pounds, 7.6 percent more than the first quarter and 11 percent above 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 223 million pounds, constituted 65 percent; nylon, at 67 million, equaled 20 percent; and acrylic, at 53 million, totaled 15 percent. The price of benzene (a precursor to many chemicals) began 1997 at a 2-year high of $1.13-$1.16 per gallon, reflecting higher costs and demand. Beginning in March with increased supply, the price declined to $0.84-$0.85 in June and July. With increased demand, the price rose to the $0.96-$0.99 level during August-October (figure 10). The price of cyclohexane, a basic chemical used in nylon production, somewhat follows the price of benzene. It averaged $1.32-$1.34 per gallon during January-May, but since then, declined to $1.18-$1.20. The price of paraxylene, a precursor to polyester fibers began first-quarter 1997 at $0.205 per pound, then gradually rose to a year's high of $0.225 in the third quarter, before dropping to $0.215 (table H). The price of polymer grade propylene, a precursor for acrylonitrile (a raw material for acrylic fibers) and olefin fibers, remained flat during March-September at $0.215 per pound. In October, the price declined to $0.205 due to weak global demand. The price of acrylonitrile listed at $0.53 per pound all year, however, it was reported 25-30 percent discounted to domestic and overseas customers. The price of ethylene glycol (a raw material used to make polyester fibers), was $0.27 per pound in the first quarter. During the second and third quarters, the price jumped to $0.38 in September and October, reflecting a tight supply. The price of caprolactam (a raw material used to make nylon fibers) remained in the $0.93-$0.96 per pound range until June when slow demand softened the price to $0.90-$0.93. LIST OF TABLES Text Tables A. U.S. cotton supply and use, 1995/96-1997/98 B. World and U.S. cotton prices, August 1996 to Present C. World cotton supply and use, 1995/96-1997/98 D. ELS cotton supply and use in foreign producing countries, 1995-98 E. Wool supply and disappearance, clean content, 1993-97 F. U.S. imports of raw wool for consumption, clean content, 1993-97 G. U.S. mill consumption of raw wool, clean basis, quarterly, 1993-97 H. Reported prices of raw materials for manmade fibers, November 1996-October 1997. Appendix Tables 1. U.S. cotton supply and use, 1960/61-1997/98 2. U.S. Upland cotton supply and use, 1960/61-1997/98 3. U.S. ELS cotton supply and use, 1960/61-1997/98 4. Upland cotton: Planted acreage, by State, 1960/61-1997/98 5. Upland cotton: Harvested acreage, by State, 1960/61-1997/98 6. Upland cotton: Lint yield per harvested acre, by State, 1960/61-1997/98 7. Upland cotton: Production, by State, 1960/61-1997/98 8. ELS cotton: Planted and harvested acreage, by State, 1960/61-1997/98 9. ELS cotton: Production and yield, by State, 1960/61-1997/98 10. U.S. Cotton supply and disappearance of all kinds, by months, 1993/94-1996/97 11. Upland cotton farm, spot, and mill prices, 1970/71-1996/97 12. Fiber prices: Landed Group B mill points, cotton prices, and manmade staple fiber prices at f.o.b. producing plants, actual estimated raw fiber equivalent, 1960-97 13. Index of prices of selected growths of qualities, and price per pound of U.S. cotton c.i.f. Northern Europe, 1988/89-1997/98 14. Index of prices of selected growths and qualities of U.S. cotton, c.i.f. Northern Europe, annual, 1960/61-1996/97 15. World cotton supply and use, 1960/61-1997/98 16. Foreign cotton supply and use, 1960/61-1997/98 17. Cotton exports, major foreign exporters, 1960/61-1997/98 18. Cotton imports, major importers, 1960/61-1997/98 19. New Independent States cotton supply and use, 1960/61-1997/98 20. Brazil cotton supply and use, 1960/61-1997/98 21. Turkey cotton supply and use, 1960/61-1997/98 22. China cotton supply and use, 1960/61-1997/98 23. India cotton supply and use, 1960/61-1997/98 24. Pakistan cotton supply and use, 1960/61-1997/98 25. U.S. fiber consumption: Total and per capita, by type of fiber, 1989-97 26. Per capita domestic cotton consumption, 1975-96 27. Cotton and manmade staple fibers: Mill consumption on the cotton spinning system, 1960-96 28. U.S. wool supply and use, 1975-97 29. U.S. imports of raw wool for consumption, clean yield, 1960-96 30. U.S. raw wool imports by country of origin, clean yield, 1992-96 31. U.S. mill consumtion of raw wool, scoured basis, annually, 1960-96 32. U.S. raw wool exports by country of destination, clean yield, 1994-96 33. U.S. trade in wool tops, 1993-96 34. Shorn wool prices: U.S. farm price, Australian offering prices, graded territory shorn wool prices, 1978-96 35. U.S. consumption on the woolen system and worsted combing, annual, 1985-96 36. World wool supply and disappearance, 1987/88-1997/98 37. Sheep population, wool production, and wool exports, major producing foreign countries, 1990/91-1997/98 38. World wool trade by major importing and exporting countries, 1990/90-1996/97 39. Wool sales and government-owned stocks, major foreign exporters, 1987/88-1996/97 40. International wool prices, 1987/88-1997/98 41. U.S. mohair, clean, exports by country of destination, 1991-96 42. Manmade fiber production and capacity, 1996-99 43. Domestic shipments of manmade fibers by major category, 1995-97 44. World textile fiber production, 1980-96 45. Raw fiber equivalent of textile manufactures, 1960-97 46. Raw-cotton-equivalent of U.S. imports for consumption of cotton-containing textile manufactures, 1994-97 47. Raw-cotton-equivalent of U.S. exports for consumption of cotton-containing textile manufactures, 1994-97 48. Raw-linen-equivalent of U.S. imports for consumption of linen-containing textile manufactures, 1994-97 49. Raw-linen-equivalent of U.S. exports for consumption of linen-containing textile manufactures, 1994-97 50. Raw-wool-equivalent of U.S. imports for consumption of wool-containing textile manufactures, 1994-97 51. Raw-wool-equivalent of U.S. exports for consumption of wool-containing textile manufactures, 1994-97 52. Raw-silk-equivalent of U.S. imports for consumption of silk-containing textile manufactures, 1994-97 53. Raw-silk-equivalent of U.S. exports for consumption of silk-containing textile manufactures, 1994-97 54. Raw-manmade-equivalent of U.S. imports for consumption of manmade-containing textile manufactures, 1994-97 55. Raw-manmade-equivalent of U.S. exports for consumption of manmade-containing textile manufactures, 1994-97 END_OF_FILE