COTTON AND WOOL YEARBOOK -- SUMMARY November 23, 1998 November 1998, CWS-0698 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete text of COTTON AND WOOL Yearbook will be available within 3-4 weeks following this summary release. --------------------------------------------------------------------------- U.S. and Foreign Cotton Production and Consumption To Decline in 1998/99 Based on November 1 crop conditions, U.S. cotton production in 1998 is forecast at 13.23 million bales, 30 percent below last season's 18.8 million and the lowest since 1989. Although planted area fell nearly 1 million acres to 12.9 million, higher abandonment this season is expected to lead to the smallest harvested area in a decade. Harvested area is estimated at 10.4 million acres and the national average yield is forecast to decline 68 pounds from last season to 612 pounds per harvested acre. U.S. cotton exports in 1998/99 (August/July marketing year) are projected to fall 3 million bales (40 percent) from last season to 4.5 million bales, due to the small U.S. crop and larger foreign exportable supplies. U.S. cotton has been less price competitive overseas this year as evidenced by the slow pace of early-season export sales. During the first 3 months of 1998/99, U.S. export commitments have reached only 3.3 million bales. And with a decrease in world cotton trade this season, the U.S. share of the global market is projected to fall to 18 percent, compared with last season's 28.5 percent. U.S. mill use of cotton in 1998/99 is also projected to decline 750,000 bales (7 percent) from last season to 10.6 million bales. A slowdown in U.S. economic growth and the surge in U.S. cotton textile imports this year are expected to limit mill consumption. In 1998, cotton textile exports are expected to advance for the 14th consecutive year, reaching the equivalent of 4.1 million bales. On the other hand, cotton textile imports will rise for the 10th year in a row, and could reach the equivalent of 12.5 million bales, further widening the cotton textile trade deficit. Meanwhile, total domestic cotton consumption (mill use plus net textile trade) could approach a record 9.4 billion pounds, with per capita consumption surpassing last year's 32.5 pounds. The U.S. cotton supply in 1998/99 is expected to include a significant volume of imports, unlike the previous season, as abundant foreign supplies and the declining U.S. crop have kept U.S. prices well above world prices. And with funding to end shortly for the "Step 2" provision of the cotton competitiveness program, the gap between U.S. and world prices will likely trigger the "Step 3" import quotas 10 weeks after Step 2 funds are exhausted. However, even with imports, the total U.S. supply is estimated at only 17.4 million bales, more than 5 million below a year earlier. Meanwhile, total use is forecast at 15.1 million bales, 20 percent below 1997/98. Based on these supply and demand estimates, U.S. ending stocks for 1998/99 are projected at 2.3 million bales. With U.S. stocks expected to fall substantially this season, the stocks-to-use ratio is estimated at 15 percent, 3 percentage points below the 5-year average. World cotton production in 1998/99 is forecast to decline to 83.7 million bales, 7.5 million below last season's outturn. Foreign production, projected at 70.4 million bales, accounts for one- quarter of the decrease. Lower yields in China account for most of the decline in foreign production. In addition to China, lower production is anticipated in Uzbekistan and Egypt. Output in India and Pakistan is expected to rise. World consumption is projected to decline to 86.4 million bales in 1998/99, its second consecutive decline. In addition to lower use in the United States, consumption in China and India (the world's two largest consumers) is forecast to decline 1 million and 100,000 bales, respectively. Russia, Brazil, and Turkey are also expected to consume less cotton due in part to the repercussions of Asia's financial problems. World cotton exports in 1998/99 are expected to decline 5 percent to 25 million bales. Foreign exports are forecast up from last season to 20.5 million bales, as China becomes a net exporter for the first time since 1992/93. Australia is also projected to export more cotton, while Uzbekistan is expected export substantially less. With the large decline in world cotton production, world stocks are projected to decline 2.8 million bales, to 37.3 million. Both U.S. and foreign stocks are expected to fall in 1998/99, but lower foreign stocks are entirely attributable to China. Excluding China, foreign stocks are expected to increase 900,000 bales. China is forecast to hold 40 percent of the world's cotton stocks at season's end, down from 42 percent in 1997/98. U.S. raw wool production in 1998 is estimated near 27 million pounds, clean, 6 percent below last year and about half the production of the early 1980's. Wool imports, however, are projected to rise to 80 million pounds due to the smaller production and despite lower mill use. Mill demand is forecast at 120 million pounds this season, 24 million below 1997. As a result, carryover supplies are forecast to increase to 46 million pounds, similar to 1996. This issue of the Cotton and Wool Yearbook contains two special articles: "Factors Affecting the U.S. Farm Price of Upland Cotton" and "China's Cotton Sector Under Stress." Printed copies of the Cotton and Wool Yearbook will be available in about 2 weeks. For more information, contact Leslie Meyer (202) 694-5307. Text of the full report will also be available via the ERS website at www.econ.ag.gov. END_OF_FILE