Cotton & Wool YEARBOOK -- SUMMARY November 21, 2006 November 2006, ERS-CWS-2006 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 text of the yearbook will be available electronically about 1 week following this summary release. ----------------------------------------------------------------------------- Global Cotton Consumption Continues Expansion As Stocks Decline in 2006/07 World cotton ending stocks for 2006/07 (August/July marketing year) are forecast at 51.1 million bales, 2.7 million below last season and 3 million bales below the 2004/05 record of 54.1 million. The forecast reduction this season is attributable to the sustained growth in world consumption as global production is estimated only slightly higher in 2006/07. The decline is chiefly due to foreign cotton stocks, with reductions in a number of countries, including China, Pakistan, and Australia. Stocks in the United States in 2006/07 are forecast near 6 million bales for the second consecutive season. World cotton production in 2006/07 is forecast at 115.7 million bales, 1 percent above last season's output of 114.1 million bales. Production is expected to rise this season in a number of the major producing countries, while declining in several others, resulting in a cotton crop similar to last season's. China and India, accounting for more than 40 percent of world production this season, are projected to increase their crops by nearly 4 million and 2 million bales, respectively. Meanwhile, the United States, Pakistan, and Australia are expected to produce smaller crops than in 2005/06. Total foreign cotton production in 2006/07 is estimated at 94.4 million bales, 4 million above last season but approximately 3 million below the record in 2004/05. Global cotton consumption is forecast at a record of nearly 121 million bales, 4 percent above last season. Foreign cotton consumption is expected to reach a high of 115.7 million bales, while U.S. mill use continues to decline further. Foreign mill use is expected to increase for the eighth consecutive season. Among foreign consumers, the largest gains are anticipated in the major producing countries of China (5 million bales higher) and India (1 million). China is expected to account for nearly all of the 2006/07 global consumption increase and, at 50 million bales, China accounts for more than 40 percent of world cotton consumption. Although foreign consumption continues to exceed production, 2006/07 global trade in raw cotton is forecast to decline from last season's record. World cotton trade is expected to approach 41.6 million bales this season, compared with 45.4 million in 2005/06. The United States and most other major exporting countries are expected to export less this season as foreign stocks are drawn down. Foreign shipments are projected to decrease 7 percent to approximately 25.4 million bales, or 61 percent of global trade in 2006/07. Foreign imports are forecast at 42 million bales, 5 percent below a year earlier. U.S. cotton production in 2006/07 is projected at 21.3 million bales, 11 percent below the 2005/06 record of 23.9 million. Although below a year ago, this season's crop is larger than expected, given the below- average growing conditions that were reported earlier in the year. U.S. cotton planted area rose 1 million acres this season to 15.3 million. While area increased, large abandonment, particularly in the Southwest, resulted in a harvested area of nearly 1 million acres below last season. At 12.8 million acres harvested, the abandonment rate is estimated at 16 percent, the largest since 1998/99. The national yield is currently estimated at 798 pounds per harvested acre, below both last season and the 2004/05 record of 855 pounds, but above the 5-year average. U.S. cotton exports are projected to reach 16.2 million bales in 2006/07, 10 percent below the 2005/06 record of 18 million. With foreign cotton imports expected to be their second highest this season, the United States will once again help supply the cotton import demand associated with rising global consumption. As a result, the U.S. share of global cotton trade is forecast to decline slightly to 39 percent. U.S. cotton mill consumption is forecast at 5.2 million bales in 2006/07, 700,000 bales below the previous season and half the level of just a decade ago. Continued competition from cotton textile and apparel imports has forced further reductions in U.S. textile capacity this season. Despite a slower growth projection for imported products in 2006, competition will remain strong and push U.S. cotton mill use to its lowest in 75 years. U.S. cotton stocks at the beginning of 2006/07 were estimated at just over 6 million bales, the largest in 4 years and similar to 2001/02. And with another relatively large crop this season, total U.S. cotton supply in 2006/07 remains one of the largest in recent history at 27.4 million bales. However, U.S. cotton demand, projected at 21.4 million bales, is expected to nearly match this season's production. Consequently, based on these supply and demand estimates, U.S. stocks for 2006/07 are forecast to remain near 6 million bales at season's end, resulting in a stocks-to-use ratio of 28 percent, the highest in 4 years.