COTTON AND WOOL February 10, 1995 Approved by the World Agricultural Outlook Board ------------------------------------------------------------------------------ This situation and outlook report is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. CWS-0295. ------------------------------------------------------------------------------ Record 1994 Cotton Production and Offtake The 1994 U.S. cotton crop is estimated at 19.73 million bales (upland-19.39 million and ELS-342,000), compared with 16.13 million in 1993. According to the February Cotton Ginnings report, 19.5 million bales (99 percent of the crop) had been ginned by February 1. Final 1994/95 ginnings, as well as final upland and ELS cotton production, will be released by USDA on May 10. With production all but final, total U.S. cotton supplies this season are placed at 23.26 million bales, the largest since the 1966 season. However, total use (mill consumption plus exports) is projected at a record 20.7 million bales. Based on these estimates, 1994/95 U.S. ending stocks are expected to decline to 2.7 million bales, 830,000 below the beginning level. Mill Demand Solid According to the latest U.S. Commerce Department data, cotton mill consumption remained strong in December despite the normal seasonal slowdown. During the calendar month, preliminary December cotton mill use reached 783,300 bales, compared with 936,800 bales in November. In comparison, however, December 1993 mill consumption totaled only 744,400 bales. On a daily basis, cotton mill use declined from November's 42,600 bales to 35,600. Compared with a year ago, December 1994's daily average was 3,200 bales higher. The solid demand for cotton can also be illustrated by its share of fiber use on the cotton system. In December, cotton's share surpassed 77 percent and has averaged near this level for the season. Cotton has increased its share in an expanding fiber market as a result of the strong demand for denim, as well as cotton apparel and home furnishings. Cotton consumption during the first 5 months of 1994/95 climbed to 4.64 million bales, compared with 4.24 million a year ago. Based on the seasonally adjusted annual rates, mill use for the August-December period averaged 11.1 million bales, equal to the latest USDA estimate. If realized, this cotton consumption level would be the highest since 1942. Foreign Production and Consumption The 1994/95 foreign production estimate is virtually unchanged this month at 64.3 million bales, 6 percent higher than a year earlier. However, the outlook for foreign consumption in 1994/95 is weaker, while imports and ending stocks are revised upward. U.S. exports are also revised upward by 400,000- bales, to 9.6 million bales. If realized, the U.S. export level would be the highest since 1926/27. With world trade at 28.6 million bales, the United States is expected to capture over one-third of world trade, the largest share since 1960/61. In South Asia, gin deliveries have continued to lag earlier expectations, and India's crop is revised down 200,000 bales to 9.8 million. Yields are now estimated lower in India due to damage from pests in the north and excessive rains in central India. However, in Uzbekistan, late-season deliveries have already exceeded earlier expectations, leading to a 150,000-bale increase in estimated 1994/95 production. Earlier reports from Uzbekistan suggested that machinery problems hampered this year's harvest and, apparently, also altered the seasonal pattern of deliveries. Total foreign consumption in 1994/95 is forecast at 73.9 million bales, slightly lower than a year earlier. This month's downward revision is due mainly to China and Russia. Textile production slowed in each country early in the marketing year compared with 1993/94, and 1994/95 cotton consumption is revised down 700,000 and 500,000 bales, respectively. China's consumption slowed early in the year, primarily reflecting widespread efforts to update spinning equipment. In Russia, the disruption of trading patterns and weak consumer demand continue to undercut the viability of Russian textile producers. Foreign imports and ending stocks are revised upward this month, largely because of China and India. In addition to large purchases from the United States this year, trade data from China suggest imports of more than 600,000 bales from other exporters through November. With continued purchases from the United States, and higher than expected imports from other countries, China's expected 1994/95 imports are raised from 1.9 million bales to 3.0 million. Given reduced consumption and increased imports, the forecast for China's ending stocks is up 1.9 million bales. With higher production and imports compared with a year earlier, and lower consumption and exports, China's ending stocks are now forecast to rise nearly 1.5 million bales in 1994/95. China's robust imports in the face of high world prices and lagging consumption presumably reflect efforts to reduce high prices within China and meet regional stockbuilding demands. Transportation within China is difficult even under ideal circumstances, and inflation in excess of 20 percent annually has intensified the reluctance to transfer commodities such as cotton. Cotton Prices Higher in January With the continued tight world supply situation, U.S. and world prices have moved to near historical high levels. The average price received by farmers for upland cotton through mid-January reached 76.2 cents per pound, up 3 cents from December. The January price is the highest monthly average in 14 years. Similarly, both ELS and upland spot prices moved higher in January. The ELS spot price for the San Joaquin Valley averaged near $1.09 per pound, up slightly from a month earlier and the highest since the 1991/92 season. On the other hand, the upland spot price climbed over 6 cents in January to average 88.1 cents per pound, the highest since the Civil War, when prices averaged near a dollar for the season. Mill-delivered cotton prices moved up 8 cents in January to 95.2 cents per pound. January's price was nearly 24 cents above January 1994 and the highest since September 1980. While cotton prices have continued upward, manmade fiber prices have remained relatively stable. Polyester prices increased in January, however, to 82 cents per pound, the highest since May 1990. In addition, the adjusted world price (AWP) remained at historically high levels into early February. For the week of February 10-16, the AWP in effect was 84.40 cents per pound, down slightly from the previous week's record. Likewise, the Northern Europe price continued to rise in January. During the month, the Cotlook A Index averaged nearly 96 cents as the world cotton situation remains tight. By early February, the A Index had reached nearly a dollar, before falling back to the 98-cent level. For the week ending February 9, seven of the 14 styles were quoted, with 8 cents separating the highest and lowest offerings. The 1994 calendar year average price for upland cotton was 68.3 cents per pound. Final deficiency payments for upland producers who participated in the 1994 acreage reduction program have been determined. The final payment totaled 4.6 cents per pound (the difference between the target price and the calendar year average price) for the 1994 crop. An advance payment of 6.45 cents per pound was made available to producers. However, those who received the advance payment will have to repay the difference (1.85 cents) by July 31, 1995. For 1995/96, the projected deficiency payment rate for upland cotton is 3.7 cents per pound. Producers may sign up for the 1995 upland cotton program between January 30 and April 28 and request 50 percent of the estimated deficiency payment. U.S. Textile Trade Declines U.S. textile imports in November 1994 totaled 595 million pounds (raw fiber equivalent), down 13 percent from October and the lowest since May. Imports declined in each major end-use category and for all types of fibers. Cotton imports, at 309 million pounds, accounted for 51 percent of all textile shipments. However, these were the lowest cotton imports since May. Textile imports during January through November were 10 percent above the corresponding period of 1993. Cotton textile imports were up only 5 percent during the first 11 months of 1994. November textile exports, at 240 million pounds, declined 3 percent from a month earlier, the first decline in 4 months. However, November's exports were 13 percent above a year earlier. Declines occurred in all major end-use categories except floor coverings and all fiber types except linen. Cotton textile exports, at 99 million pounds, were 6 percent below October, but 23 percent above a year ago. Overall, the textile trade deficit for the first 11 months of 1994 totaled 4.3 billion pounds, 8 percent higher than a year earlier. The cumulative cotton trade deficit, however, was only 2 percent above the first 11 months of 1993. In addition, cotton's share of the trade deficit has declined from 61.3 to 57.8 percent due to stronger textile export demand. Cotton textile exports should reach a record 1.1 billion pounds (2.3 million bale-equivalents) during 1994, which continues to bolster domestic consumption and limit increases in the total textile trade deficit. The next issue of the Cotton and Wool Outlook will be released on March 10, 1995. For further information, contact Bob Skinner, Leslie Meyer, John Lawler, or Steve MacDonald at (202) 219-0840. U.S. COTTON SUPPLY AND USE ESTIMATES ---------------------------------------------------------------------- 1994/95 --------------------------- Item 1993/94 Dec Jan Feb ---------------------------------------------------------------------- Upland: Million acres Planted 13.25 13.89 13.89 13.56 Program 11.44 11.11 11.11 11.11 Harvested 12.59 13.27 13.16 13.16 Pounds Yield/harvested acre 601 695 707 707 Million 480-lb. bales Beginning stocks 4.46 3.30 3.30 3.30 Production 15.76 19.22 19.39 19.39 Total supply 20.23 22.53 22.69 22.69 Mill use 10.35 10.93 10.93 11.02 Exports 6.56 7.85 8.85 9.23 Total use 16.90 18.78 19.78 20.24 Ending stocks 3.30 3.86 3.07 2.60 Percent Stocks-to-use ratio 19.5 20.5 15.5 12.9 Extra-long staple: 1,000 acres Planted 190 175 169 169 Program 89 84 84 84 Harvested 189 175 166 166 Pounds Yield/harvested acre 938 962 987 987 1,000 480-lb. bales Beginning stocks 206 227 227 227 Production 370 350 342 342 Total supply 576 577 569 569 Mill use 72 75 75 85 Exports 307 350 350 375 Total use 379 425 425 460 Ending stocks 227 142 134 99 Percent Stocks-to-use ratio 59.9 33.4 31.5 21.5 ---------------------------------------------------------------------- Based on USDA estimates. WORLD COTTON SUPPLY AND USE ESTIMATES ---------------------------------------------------------------------- 1994/95 --------------------------- Item 1993/94 Dec Jan Feb ---------------------------------------------------------------------- Supply: Million 480-lb. bales Beginning stocks World 37.34 30.38 29.94 30.14 Foreign 32.68 26.85 26.41 26.61 Production World 76.93 85.82 84.01 84.04 Foreign 60.79 66.25 64.29 64.31 Imports World 28.00 27.85 28.76 29.78 Foreign 27.99 27.84 28.75 29.78 Use: Mill use World 84.85 85.80 86.11 84.99 Foreign 74.43 74.80 75.11 73.89 Exports World 26.76 27.24 27.92 28.64 Foreign 19.90 19.04 18.72 19.04 Ending stocks World 30.14 30.85 28.57 30.22 Foreign 26.61 26.85 25.37 27.52 Stocks-to-use ratio Percent World 35.5 36.0 33.2 35.6 Foreign 35.8 35.9 33.8 37.2 ---------------------------------------------------------------------- Based on USDA estimates. FIBER SUPPLY ---------------------------------------------------------------------- 1994 1993 ---------------------------- Item Oct Nov Dec Dec ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales Ginnings 6,824 6,826 2,904 2,134 Imports since August 1 2.6 2.6 NA 0.6 Stocks, beginning 3,083 8,631 13,810 13,457 At mills 602 591 598 598 Public storage 2,089 6,734 11,450 11,491 CCC stocks 116 940 2,338 2,370 Manmade: Million pounds Production 872.9 810.9 812.4 739.3 Noncellulosic 827.9 772.2 768.1 699.9 Cellulosic 45.0 38.7 44.3 39.4 Total since January 1 7,998.1 8,810.0 9,622.4 8,787.0 1994 1993 ---------------------------- Sep Oct Nov Nov -------------------------------------- Million pounds Raw fiber imports 92.4 94.6 94.0 73.5 Noncellulosic 86.6 88.8 87.4 64.2 Cellulosic 5.8 5.8 6.6 9.3 Total since January 1 706.1 800.7 894.0 857.3 Wool and Mohair: 1,000 pounds Raw wool imports, clean 4,081 5,723 8,116 7,174 48's-and-finer 1,907 3,363 5,346 5,896 Not-finer-than-46's 2,147 2,314 2,388 1,227 Total since January 1 70,564 76,288 84,404 91,892 Wool top imports 428 271 1,087 353 Total since January 1 3,109 3,380 4,467 3,386 Mohair imports, clean 0 53 37 0 Total since January 1 100 153 190 13 ---------------------------------------------------------------------- NA = Not available. COTTON SYSTEM FIBER CONSUMPTION ---------------------------------------------------------------------- 1994 1993 ---------------------------- Item Oct Nov Dec Dec ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales All consumed by mills 1/ 935 937 783 744 Total since August 1 1/ 2,921 3,857 4,641 4,244 SA annual rate 2/ 10,998 11,163 11,120 10,093 SA daily rate 2/ 42.3 42.9 42.8 38.8 Daily rate 44.5 42.6 35.6 32.4 Upland consumed by mills 1/ 928 929 777 741 Total since August 1 1/ 2,899 3,828 4,605 4,220 SA annual rate 2/ 10,909 11,075 11,046 10,050 SA daily rate 2/ 42.0 42.6 42.5 38.7 Daily rate 44.2 42.2 35.3 32.2 Spindles in place 7,398 7,346 7,266 8,046 Active spindles 6,961 6,927 6,859 7,513 100 percent cotton 2,919 2,914 2,913 3,185 100 percent manmade 1,181 1,182 1,169 1,280 Blends 2,861 2,831 2,777 3,048 Cotton's share of fibers 76.8 76.5 77.2 75.8 Manmade: 1,000 pounds Total consumed by mills 1/ 135,427 138,386 111,258 113,822 Total since August 1 1/ 420,917 559,302 670,560 648,870 Daily rate 6,449 6,290 5,057 4,949 Noncellulosic staple 5,492 5,310 4,335 4,131 Cellulosic staple 957 980 722 818 ---------------------------------------------------------------------- 1/ Adjusted to calendar month. 2/ SA = seasonally adjusted. FIBER EXPORTS ---------------------------------------------------------------------- 1994 1993 ---------------------------- Item Sep Oct Nov Nov ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales Upland exports 320 336 695 394 Total since August 1 835 1,171 1,866 1,226 Sales for next season 12 71 2,775 10 Total since August 1 28 100 2,874 143 ELS exports 12.9 4.9 14.8 11.0 Total since August 1 29.0 33.9 48.8 60.3 Sales for next season 0.0 0.0 4.2 0.0 Total since August 1 0.0 0.0 4.2 1.6 Manmade: Million pounds Raw fiber exports 81.1 79.6 83.3 64.7 Noncellulosic 76.6 74.3 75.9 61.3 Cellulosic 4.5 5.3 7.4 3.4 Total since January 1 663.0 742.6 825.9 624.2 Wool and Mohair: 1,000 pounds Raw wool exports, clean 122.7 409.9 6.9 134.2 Total since January 1 2,183.6 2,593.4 2,600.3 2,528.8 Wool top exports 1,357.0 912.4 1,115.3 1,420.6 Total since January 1 10,070.0 10,982.5 12,097.8 9,029.3 Mohair exports, clean 695.7 1,268.0 900.4 623.8 Total since January 1 5,483.7 6,751.7 7,652.1 5,317.3 ---------------------------------------------------------------------- FIBER PRICES ---------------------------------------------------------------------- 1994 1995 1994 --------------- Item Nov Dec Jan Jan ---------------------------------------------------------------------- Domestic cotton prices: Cents per pound Adjusted World Price 63.14 72.09 80.66 54.22 Mar'95 futures 75.57 84.84 91.17 69.05 Dec'95 futures 70.24 72.21 74.42 NQ Upland spot 41-34 72.00 81.92 88.11 66.53 Pima 46-03 101.20 108.83 108.88 88.10 Avg. price received by: Upland producers 69.30 73.20 76.20 62.70 Mill delivered: Cotton Actual 76.91 87.39 95.17 71.51 Raw fiber equivalent 85.46 97.10 105.74 79.46 Rayon staple Actual 104.00 104.00 104.00 104.00 Raw fiber equivalent 108.33 108.33 108.33 108.33 Polyester staple Actual 78.00 78.00 82.00 72.00 Raw fiber equivalent 81.25 81.25 85.42 75.00 Price ratios Percent Cotton/rayon 78.9 89.6 97.6 73.3 Cotton/polyester 105.2 119.5 123.8 105.9 Northern Europe cotton quotes: Cents per pound A Index 77.28 87.06 95.63 69.34 Memphis Territory 80.94 92.15 100.31 73.19 California/Arizona 82.94 96.65 105.06 72.56 B Index 75.98 NQ 96.60 64.42 Orleans/Texas 78.31 90.10 97.56 66.38 Wool prices (clean): Dollars per pound U.S. 56's 1.45 1.45 1.45 1.05 Australian 56's 1/ 2.06 2.17 2.32 1.51 U.S. 60's 1.65 1.65 1.66 1.15 Australian 60's 1/ 2.21 2.27 2.47 1.63 U.S. 64's 2.38 2.38 2.45 1.40 Australian 64's 1/ 2.75 2.81 2.91 2.04 ---------------------------------------------------------------------- NQ = No quote. 1/ In bond, Charleston, SC. 2/ greasy. TEXTILE TRADE ---------------------------------------------------------------------- 1994 1993 ------------------------------- Item Sep Oct Nov Nov ---------------------------------------------------------------------- Imports: 1,000 pounds 1/ Yarn, thread, and fabric 152,636 168,038 158,101 150,402 Cotton 72,620 73,350 70,193 71,281 Linen 12,693 25,628 19,599 20,884 Wool 3,930 4,491 4,322 3,695 Silk 724 834 908 439 Manmade 62,669 63,735 63,079 54,103 Apparel 474,103 462,646 386,329 335,136 Cotton 243,391 242,630 213,810 177,386 Linen 22,183 23,753 16,232 21,000 Wool 26,812 24,164 15,001 11,801 Silk 12,977 15,924 12,604 16,897 Manmade 168,740 156,175 128,682 108,052 House furnishings 37,305 28,471 28,354 30,365 Cotton 26,381 19,642 19,753 22,251 Linen 156 221 131 83 Wool 175 164 133 122 Silk 35 19 23 17 Manmade 10,558 8,425 8,314 7,892 Floor covering 21,824 18,066 17,563 15,120 Cotton 4,299 4,466 3,599 3,432 Linen 3,568 3,322 3,065 1,164 Wool 7,027 3,231 3,379 5,762 Silk 494 416 439 130 Manmade 6,436 6,631 7,081 4,632 Total imports 2/ 692,395 682,840 600,346 536,363 Cotton 349,158 341,900 310,707 275,966 Linen 14,231 17,194 14,025 17,483 Wool 38,281 32,282 23,193 21,570 Silk 38,766 52,962 39,076 43,211 Manmade 251,959 238,502 213,345 178,133 Exports: 1,000 pounds 1/ Yarn, thread, and fabric 117,415 118,195 116,093 102,436 Cotton 36,674 38,087 37,800 27,236 Linen 3,238 3,551 3,462 1,931 Wool 3,060 3,336 2,924 2,416 Silk 1,199 1,471 1,754 852 Manmade 73,244 71,750 70,153 70,001 Apparel 91,770 93,865 87,686 73,397 Cotton 58,263 59,592 53,885 46,135 Linen 2,153 2,840 2,195 1,860 Wool 3,222 3,003 3,111 2,498 Silk 1,489 1,568 1,488 1,381 Manmade 26,643 26,862 27,008 21,523 House furnishings 5,812 7,503 7,403 6,180 Cotton 3,341 4,426 4,167 3,734 Linen 198 187 318 209 Wool 48 80 77 75 Silk 80 99 183 132 Manmade 2,145 2,711 2,657 2,030 Floor covering 27,027 28,006 28,422 29,574 Cotton 2,984 3,410 3,550 4,017 Linen 1,311 1,180 1,271 1,305 Wool 1,333 1,753 1,424 1,145 Silk 3/ --- --- --- --- Manmade 21,399 21,663 22,177 23,107 Total exports 2/ 242,431 247,930 240,761 212,058 Cotton 101,321 105,556 99,547 81,194 Linen 6,912 7,767 7,276 5,320 Wool 7,688 8,196 7,595 6,164 Silk 2,768 3,138 3,424 2,365 Manmade 123,742 123,273 122,920 117,015 ---------------------------------------------------------------------- 1/ Raw fiber equivalent. 2/ Includes headgear. 3/ Absence of trade.