COTTON AND WOOL OUTLOOK — SUMMARY November 22, 2004 November 2004, ERS-CWS-2004 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 report will be available electronically about 1 week following this summary release. ----------------------------------------------------------------- 2004/05 World Cotton Stocks To Rise As Record Production Forecast World cotton stocks at the close of 2004/05 (August/July marketing year) are forecast at nearly 44.6 million bales, more than 9 million bales above a year earlier and the highest level since 2001/02. The significant increase from last season is attributable to the tremendous jump in world production in 2004/05, despite another record for global demand. Foreign cotton stocks are also expected to be the highest since 2001/02, with gains in a number of countries, including China. Meanwhile, stocks in the United States are expected to more than double from 2003/04 and are forecast marginally above the 2001/02 season. Global cotton production in 2004/05 is projected at a record 111.7 million bales, 18 percent above last season and 13 percent above the previous high set in 2001/02. Production is forecast higher in most countries this season, with the largest increases expected in China (7.2 million bales higher), the United States (4.3 million), and Pakistan (1.5 million). These three countries are forecast to account for over 75 percent of the gain in 2004/05 world cotton production. Other major producers indicate smaller gains, while Brazil is expected to produce a crop equal to last season. Total foreign cotton production in 2004/05 is forecast at 89.2 million bales, or about 17 percent above last season. World cotton consumption is projected at a record 102.9 million bales in 2004/05, nearly 4.5 percent above last season. Likewise, foreign consumption is expected to reach a high of 96.8 million bales, while U.S. mill use continues to decline. Among foreign consumers, the largest increases are anticipated in China (4.0 million bales higher), India (0.7 million), and Pakistan (0.4 million). China is expected to account for 90 percent of the 2004/05 global consumption increase and, at 36 million bales, China’s share of world cotton consumption will reach 35 percent. Global trade in raw cotton is forecast to decline nearly 3 percent from 2003/04 to 32.2 million bales, as production gains in many consuming countries are expected to limit their import needs this season. While U.S. cotton exports are forecast to decline from 2003/04, foreign shipments are projected to rise 2 percent to 19.7 million bales, or 61 percent of world trade in 2004/05. Foreign imports are forecast at 32.4 million bales, nearly 5 percent below the 2003/04 record of 34 million. U.S. cotton production in 2004/05 is forecast at a record 22.5 million bales, a remarkable 23 percent above last season and 2.2 million above the previous high established in 2001/02. This season's outstanding crop is mainly attributable to a record national yield, although area was 2 percent higher than a year ago. U.S. cotton planted area rose to nearly 13.8 million acres this season, but remained the second lowest since 1998/99. Excellent crop conditions throughout the 2004 growing season delivered a record yield despite a lower-than-normal abandonment. Planting occurred on time or ahead of schedule across the Cotton Belt this season, while crop development and harvest progressed normally. Abandonment, expected near 4 percent this year, is the lowest in 7 years, while harvested area, estimated at 13.2 million acres, is 1.2 million above last season and the highest in 3 years. The national cotton yield is projected at a record 818 pounds per harvested acre. U.S. cotton exports in 2004/05 are projected to reach 12.5 million bales, down from last season’s record of nearly 13.8 million. Although large U.S. supplies of exportable cotton are available again this season, competition from a larger foreign crop likely will limit U.S. shipments in 2004/05. In addition, a reduced import demand will keep global exports below a year earlier. As a result, the U.S. share of global trade is expected at 39 percent, modestly below 2003/04. U.S. cotton mill consumption is forecast at only 6.1 million bales in 2004/05, 400,000 bales below the previous season and the lowest since 1984/85. The dramatic growth of U.S. cotton textile and apparel imports, which have risen over 80 percent since 1997, continues and has forced the U.S. textile manufacturing industry to significantly reduce its capacity. And with the remaining apparel quotas lifted in January 2005, the U.S. industry will face continued pressure from imported products. U.S. cotton stocks at the beginning of 2004/05 were estimated at 3.5 million bales. And with a record crop forecast this season, total U.S. cotton supply in 2004/05 is projected 10 percent higher at 26.1 million bales. Meanwhile, U.S. cotton demand is forecast below production for the first time in three seasons, with total demand projected at 18.6 million bales. As a result, based on these supply and demand estimates, U.S. ending stocks for 2004/05 are forecast to rise dramatically, increasing 4 million bales to 7.5 million, a stocks-to-use ratio of 40 percent. 1 1