COTTON AND WOOL OUTLOOK May 13, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- COTTON AND WOOL OUTLOOK is published monthly (except January) by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. CWS--0496. ----------------------------------------------------------------------------- Larger U.S. Crop Projected in 1996/97; Stocks To Rise The first official USDA forecast for 1996/97 U.S. cotton production is 19 million bales. The forecast, based on the Prospective Plantings report released March 29, indicated cotton area at 15.2 million acres. Additional assumptions about harvested acreage and yield were made in reaching the production forecast. Projected harvested area is based on 1986-95 U.S. average acreage abandonment, while the projected yield of 650 pounds per harvested acre is based on 5-year State averages, weighted by area. If realized, the 1996 crop would rebound about 6 percent from the final 1995 production of 17.9 million bales. As of May 5, 33 percent of the U.S. cotton crop had been planted, compared with 36 percent last year and a 5-year average of 37 percent. To date, cotton plantings were lagging last year in about half the States. However, significant progress was made during the past week. Compared with their 5-year averages, four States were ahead of normal: Arizona and California in the West and the Carolinas in the Southeast. Although acreage projected to be planted to cotton in 1996 is much smaller than a year ago and new crop futures prices are slightly better than last year, upland cotton acreage forward contracted is down significantly from 1995. As of May 1, only 16 percent of the acreage had been contracted, compared with 32 percent in 1995. Sixteen percent was also contracted by May 1, 1994. By region, the Southeast had booked 27 percent of its acreage; the Delta, 17 percent; the West, 16 percent; and the Southwest, 10 percent. With cotton stocks projected at 2.7 million bales by the start of 1996/97, virtually unchanged from a year ago, stocks may build substantially as production is expected to outpace total demand. In 1996/97, domestic mill use is projected to strengthen to near the level achieved in 1994/95. The initial projection is for U.S. mill consumption to rise 5 percent above 1995/96 to 11 million bales. Meanwhile, U.S. exports are expected to decline for the second consecutive year. The initial U.S. export projection of 6.8 million bales is about 12 percent below the 1995/96 estimate. Although reduced foreign import demand during 1996/97 will likely keep world cotton trade below this season's, the U.S. share is projected to remain relatively high at 25 percent. Based on these initial U.S. cotton supply and demand projections, stocks would rise nearly 50 percent during the 1996/97 season. Ending stocks on July 31, 1997 are projected at 4 million bales, a stocks-to-use ratio of 22.5 percent. Foreign Cotton Production Steady in 1996/97 Foreign production is projected to be virtually unchanged in 1996/97, at 71 million bales, while foreign area is also projected to remain near this season's 28.8 million hectares, given stable prices during the first half of the marketing year compared with a year earlier. The world's largest area is planted in India, where prices of competing crops have been steady or rising and cotton prices have fallen, suggesting some of 1995/96's 8.4 million hectares might go to other crops in 1996/97. Area is not expected to rise in China, perhaps falling slightly, according to a State Statistical Bureau survey released in March. As in previous years, China's cotton production remains hampered by high returns on competing crops and a persistent bollworm threat, suggesting that the targeted area of 6.0 million hectares is very optimistic. Pakistan's opportunities for increasing area are limited, although continued tight stocks and high prices in Pakistan during 1995/96 suggest cotton should hold its own against competing crops like sugar during 1996/97. And in Central Asia, planned area is little changed in 1996/97 as Governments there continue to favor increasing food crop production. Planting progress to date has lagged year ago levels, but weather could account for some delay. Finally, improved water supplies suggest Australia's cotton area could be a record high. Foreign yields may increase slightly in 1996/97. Yields have trended higher since 1992/93, in part due to recoveries in China and Pakistan. To varying degrees, yields in China and Pakistan have been constrained by pests and disease during 1992/93-1995/96, but have grown as area shifts away from susceptible regions in China and away from susceptible varieties in Pakistan. Yields could rise in India if the monsoon arrives at a more average date than in 1995/96 (average based on the years just preceding 1995/96). Little change is likely in Central Asia's yields this year, but Australia's rains have recharged reservoirs, and a much higher proportion of the crop is likely to be irrigated in 1996/97. Foreign Consumption Higher in 1996/97, Trade Lower Foreign consumption is expected to rise about 2.5 percent in 1996/97 to 77 million bales, only the second increase since the collapse of the Soviet Union. Consumption in Russia stabilized during 1995/96, and with the economy expected to grow during 1996, cotton consumption could increase as well. In China, recent changes in macro economic policy suggest cotton consumption could increase slightly, while India should continue the steady growth achieved since 1991. Slightly improving economic growth in the rest of the world is expected to support increased cotton consumption worldwide. On the other hand, world trade is expected to decline moderately in 1996/97, from 28.4 million bales to 27 million, largely due to reduced foreign import demand. As a result, U.S. exports are expected to drop 900,000 bales to 6.8 million. In addition, the U.S. share of world trade is projected to fall 2 percentage points. 1995/96 U.S. Mill Use Improves, Demand Estimates Raised March cotton mill consumption, according to the latest U.S. Commerce Department data, improved dramatically from February despite an upward revision in the February data. On a daily basis, mill use in March averaged 42,900 480-pound bales per day, compared with the revised February figure of 41,000 bales. On a seasonally adjusted annual rate (SAAR) basis, March's mill consumption jumped more than 450,000 bales from February's rate to over 10.7 million. The March SAAR is the highest since September 1995. Cotton mill use during the first 8 months of 1995/96 totaled nearly 7 million bales. This compares with approximately 7.7 million a year ago when 11.2 million was used during the season. With the SAAR for August 1995 through March 1996 averaging above 10.4 million bales and with the recent strength exhibited in cotton mill consumption, this month's USDA estimate for the current season was increased 100,000 bales to 10.5 million. Likewise, the estimate for 1995/96 U.S. exports was raised 100,000 bales to 7.7 million as Bureau of the Census trade data continue to outpace shipments reported in Export Sales through February. Census data totals 350,000 bales higher than Export Sales, and the Census Bureau is the source of official trade data. Some of this difference is expected to be offset during coming months, but perhaps not the entire 350,000 bales. Cotton Prices Move Higher U.S. cotton prices continued strong in April. The average price received by upland producers for the first half of April reached 79.4 cents per pound, the highest this marketing year. A year earlier, this price equaled 77.6 cents. The upland spot price for base quality cotton also advanced in April to 84.7 cents per pound, the highest since last September. Meanwhile, the ELS spot price remains quoted at over $1.60 per pound. Mill-delivered upland prices rose in April to 92 cents per pound. However, price declines for manmade fibers have left cotton in its least competitive situation since July 1995. Polyester staple prices were lowered to 84 cents per pound in April while rayon prices declined to $1.20 per pound. Meanwhile, the cotton/polyester price ratio reached 1.17 in April, compared with 1.40 a year earlier. At the same time, new crop cotton prices continue to increase. In April, the December 1996 futures averaged above 81 cents per pound, but during the first part of May, the futures have moved several cents above this average. However, competing crop prices also remain strong for the 1996 season, which along with the new farm legislation, has given producers more planting flexibility this year. Larger Exports, Lower Imports Ease Textile Trade Deficit February textile exports, at 253 million pounds (raw-fiber equivalent), increased 5 percent from January and were 9 percent above February 1995. Total exports were higher in all major fibers and all end-use categories, except apparel. Lower manmade fiber apparel exports more than offset slight increases in all other apparel shipments. Cotton textile exports, at 110 million pounds, were 5 percent above January and 8 percent above a year ago. Textile imports totaled 562 million pounds, down 8 percent from January. Overall, imports decreased in all major fibers and in each major end-use category. Cotton imports, at 311 million pounds, accounted for 55 percent of all textile shipments. In addition, textile imports during the first 2 months of 1996 were 7 percent below the corresponding period of 1995, and cotton textile imports were down 3 percent. For all fibers, the textile trade deficit during January and February 1996 totaled 679 million pounds, 6 percent below a year earlier. The cumulative cotton trade deficit was nearly 9 percent lower than the first 2 months of 1995. However, cotton's share of the trade deficit rose from 56.6 to 61.7 percent. Despite larger cotton textile exports, smaller trade deficits primarily in manmade fiber and linen textiles resulted in an increase in cotton's share of the trade deficit. Special Notice: With the recent passage of the 1996 farm legislation, existing legislation which specified the release of monthly cotton crop reports at 3:00 p.m. EST was repealed. This action allows all reports to be released simultaneously before the commodity markets open. May was the first month for the 8:30 a.m. EST release of the USDA cotton supply and demand report. Subsequent release dates are as follows: June 12, July 12, August 12, September 11, October 11, November 12, and December 12. Consequently, the originally scheduled release dates for the Cotton and Wool Outlook will also be altered. This report will be released one business day after the dates listed above. The next Cotton and Wool Outlook (CWS-0596) will be released on June 13. For further information, contact Leslie Meyer at (202) 501-8528 (U.S. Cotton), Steve MacDonald at (202) 219-1179 (Foreign Cotton), or Robert Skinner at (202) 219-0767 (Textiles and Wool). U.S. COTTON SUPPLY AND USE ESTIMATES ---------------------------------------------------------------------- 1995/96 ---------------------------- Item 1994/95 Mar Apr May ---------------------------------------------------------------------- Upland: Million acres Planted 13.55 16.72 16.72 16.72 Program 11.62 11.02 11.02 11.02 Harvested 13.16 15.78 15.78 15.80 Pounds Yield/harvested acre 705 536 536 533 Million 480-lb. bales Beginning stocks 3.30 2.59 2.59 2.59 Production 19.32 17.61 17.56 17.53 Total supply 1/ 22.65 20.39 20.44 20.41 Mill use 11.10 10.41 10.31 10.41 Exports 8.98 7.09 7.29 7.39 Total use 20.07 17.50 17.59 17.79 Ending stocks 2.59 2.88 2.87 2.67 Percent Stocks-to-use ratio 12.9 16.4 16.3 15.0 Extra-long staple: 1,000 acres Planted 169 215 215 215 Program 84 26 26 26 Harvested 166 211 211 211 Pounds Yield/harvested acre 974 821 821 836 1,000 480-lb. bales Beginning stocks 227 59 59 59 Production 338 361 367 368 Total supply 1/ 567 430 436 437 Mill use 102 95 95 95 Exports 424 310 315 315 Total use 526 405 410 410 Ending stocks 59 25 26 27 Percent Stocks-to-use ratio 11.2 6.2 6.3 6.6 ---------------------------------------------------------------------- Based on USDA estimates. 1/ Includes imports. WORLD COTTON SUPPLY AND USE ESTIMATES ---------------------------------------------------------------------- 1995/96 ------------------------------ Item 1994/95 Mar Apr May ---------------------------------------------------------------------- Supply: Million 480-lb. bales Beginning stocks World 26.34 28.75 28.87 28.91 Foreign 22.81 26.10 26.22 26.26 Production World 85.67 89.05 88.83 88.41 Foreign 66.01 71.08 70.90 70.51 Imports World 30.53 28.37 28.57 28.59 Foreign 30.51 28.17 28.27 28.29 Use: Mill use World 84.79 85.91 85.78 85.62 Foreign 73.60 75.41 75.38 75.12 Exports World 28.63 28.27 28.51 28.39 Foreign 19.23 20.87 20.91 20.69 Ending stocks World 28.91 31.73 31.79 31.73 Foreign 26.26 28.83 28.89 29.03 Stocks-to-use ratio Percent World 34.1 36.9 37.1 37.1 Foreign 35.7 38.2 38.3 38.6 ---------------------------------------------------------------------- Based on USDA estimates. FIBER SUPPLY ---------------------------------------------------------------------- 1996 1995 -------------------------- Item Jan Feb Mar Mar ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales Ginnings 411 21 0 0 Imports since August 1 5.2 12.8 NA 11.2 Stocks, beginning 12,821 11,089 8,962 11,077 At mills 569 638 650 691 Public storage 10,074 8,597 6,916 8,322 CCC stocks 2,054 2,142 1,899 2,099 Manmade: Million pounds Production 800.8 767.4 805.1 879.5 Noncellulosic 762.9 730.2 763.3 835.4 Cellulosic 37.9 37.2 41.8 44.1 Total since January 1 800.8 1,568.2 2,373.3 2,476.3 1995 1996 1995 ------------------ Dec Jan Feb Feb ---------------------------------------------------------------------- Million pounds Raw fiber imports 82.2 83.2 NA 89.8 Noncellulosic 77.3 78.1 NA 84.2 Cellulosic 4.9 5.1 NA 5.6 Total since January 1 1,093.5 83.2 NA 174.7 Wool and Mohair: 1,000 pounds Raw wool imports, clean 4,084 9,624 9,114 7,722 48's-and-finer 2,536 7,248 5,891 6,431 Not-finer-than-46's 1,548 2,376 3,223 1,291 Total since January 1 88,820 9,624 18,737 18,164 Wool top imports 298 629 799 590 Total since January 1 4,530 629 170 950 Mohair imports, clean 0 2 1 0 Total since January 1 143 2 3 4 ---------------------------------------------------------------------- NA = Not available. COTTON SYSTEM FIBER CONSUMPTION ---------------------------------------------------------------------- 1996 1995 --------------------------- Item Jan Feb Mar Mar ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales All consumed by mills 1/ 884 861 902 1,048 Total since August 1 1/ 5,208 6,069 6,971 7,661 SA annual rate 2/ 10,120 10,288 10,748 11,605 SA daily rate 2/ 38.6 39.3 41.0 44.5 Daily rate 38.4 41.0 42.9 45.5 Upland consumed by mills 1/ 873 851 890 1,037 Total since August 1 1/ 5,155 6,006 6,896 7,596 SA annual rate 2/ 10,000 10,164 10,609 11,483 SA daily rate 2/ 38.2 38.8 40.5 44.0 Daily rate 38.0 40.5 42.4 45.1 Spindles in place 6,520 6,433 6,389 7,252 Active spindles 6,054 5,957 5,943 6,801 100 percent cotton 2,768 2,678 2,680 2,974 100 percent manmade 1,008 1,003 1,002 1,131 Blends 2,278 2,276 2,261 2,696 Percent Cotton's share of fibers 78.4 78.0 78.1 76.7 Manmade: 1,000 pounds Total consumed by mills 1/ 116,727 116,440 121,375 152,770 Total since August 1 1/ 695,012 811,452 932,826 1,092,407 Daily rate 5,075 5,545 5,780 6,642 Noncellulosic staple 4,369 4,690 4,870 5,791 Cellulosic staple 706 855 910 851 ---------------------------------------------------------------------- 1/ Adjusted to calendar month. 2/ SA = seasonally adjusted. FIBER EXPORTS ---------------------------------------------------------------------- 1995 1996 1995 ------------------ Item Dec Jan Feb Feb ---------------------------------------------------------------------- Cotton: 1,000 480-lb. bales Upland exports 1,198 1,204 1,257 1,332 Total since August 1 2,881 4,085 5,342 5,338 Sales for next season 119 87 28 192 Total since August 1 166 253 281 2,888 ELS exports 32.0 58.6 37.9 51.3 Total since August 1 93.9 152.4 190.3 173.8 Sales for next season 32.2 17.4 18.4 24.5 Total since August 1 78.0 95.6 113.9 58.6 Manmade: Million pounds Raw fiber exports 86.1 75.2 NA 72.1 Noncellulosic 79.4 70.9 NA 66.9 Cellulosic 6.7 4.3 NA 5.2 Total since January 1 1,048.0 75.2 NA 161.3 Wool and Mohair: 1,000 pounds Raw wool exports, clean 113.2 336.5 183.4 351.9 Total since January 1 6,041.7 336.5 519.9 542.8 Wool top exports 940.0 822.2 1,147.9 1,182.1 Total since January 1 13,842.1 822.2 1,970.1 1,818.5 Mohair exports, clean 687.2 1,236.8 206.8 610.4 Total since January 1 4,853.6 1,236.8 1,443.6 1,484.5 ---------------------------------------------------------------------- FIBER PRICES ---------------------------------------------------------------------- 1996 1995 ----------------------------- Item Feb Mar Apr Apr ---------------------------------------------------------------------- Domestic cotton prices: Cents per pound Adjusted World Price 70.42 68.26 68.53 94.53 May'96 futures 85.12 83.92 84.70 80.15 Dec'96 futures 78.58 79.88 81.19 NA Upland spot 41-34 81.56 81.13 84.69 104.94 Pima spot 03-46 162.63 162.11 163.46 123.39 Avg. price received by: Upland producers 76.50 77.20 79.40 77.60 Mill delivered: Cotton Actual 89.76 88.79 92.10 113.17 Raw fiber equivalent 99.73 98.66 102.33 125.74 Rayon staple Actual 125.00 125.00 120.00 109.00 Raw fiber equivalent 130.21 130.21 125.00 113.54 Polyester staple Actual 88.00 88.00 84.00 86.00 Raw fiber equivalent 91.67 91.67 87.50 89.58 Price ratios Percent Cotton/rayon 76.6 75.8 81.9 110.7 Cotton/polyester 108.8 107.6 117.0 140.4 Northern Europe cotton quotes: Cents per pound A Index 84.99 83.18 82.90 114.55 Memphis Territory 94.70 94.13 96.69 120.25 California/Arizona 100.20 98.31 100.13 124.63 B Index 78.98 77.76 77.53 111.41 Orleans/Texas 90.40 89.88 91.06 116.88 Wool prices (clean): Dollars per pound U.S. 56's 1.35 1.35 1.35 1.86 Australian 56's 1/ 1.92 1.90 1.83 2.64 U.S. 60's 1.56 1.57 1.57 2.26 Australian 60's 1/ 2.05 2.03 1.97 2.80 U.S. 64's 1.92 1.97 1.97 2.88 Australian 64's 1/ 2.37 2.38 2.34 3.02 ---------------------------------------------------------------------- NA = Not available. 1/ In bond, Charleston, SC. TEXTILE TRADE ---------------------------------------------------------------------- 1995 1996 1995 --------------- Item Dec Jan Feb Feb ---------------------------------------------------------------------- Imports: 1,000 pounds 1/ Yarn, thread, and fabric 145,724 165,841 139,967 174,571 Cotton 58,969 65,330 61,012 70,390 Linen 26,438 35,821 22,606 39,904 Wool 2,465 3,002 3,000 3,475 Silk 542 708 556 598 Manmade 57,311 60,980 52,792 60,204 Apparel 296,216 389,768 372,675 372,028 Cotton 172,364 226,847 221,484 216,721 Linen 7,780 12,753 9,925 13,455 Wool 8,636 11,170 11,058 9,858 Silk 8,018 12,506 9,888 12,046 Manmade 99,418 126,492 120,320 119,950 House furnishings 23,938 31,545 27,596 30,542 Cotton 16,434 22,892 20,749 22,597 Linen 167 154 178 161 Wool 122 127 99 93 Silk 34 10 29 31 Manmade 7,181 8,362 6,541 7,660 Floor covering 18,305 16,729 15,041 21,682 Cotton 3,709 4,177 3,518 3,312 Linen 2,281 2,746 2,228 2,734 Wool 4,785 4,432 3,791 8,100 Silk 570 479 335 475 Manmade 6,959 4,896 5,169 7,062 Total imports 2/ 489,739 611,224 562,291 605,543 Cotton 254,050 323,250 310,967 316,832 Linen 36,688 51,509 34,957 56,334 Wool 16,084 18,790 17,983 21,663 Silk 9,165 13,704 10,812 13,150 Manmade 173,752 203,972 187,571 197,565 Exports: 1,000 pounds 1/ Yarn, thread, and fabric 106,926 105,961 116,595 114,017 Cotton 35,297 38,190 41,978 38,007 Linen 2,935 2,734 3,321 3,067 Wool 3,231 2,572 2,777 3,365 Silk 1,145 1,296 1,314 1,606 Manmade 64,318 61,170 67,205 67,972 Apparel 73,141 105,420 104,565 89,926 Cotton 55,063 61,697 62,252 57,533 Linen 2,010 1,813 2,117 2,117 Wool 4,062 4,801 4,597 3,228 Silk 1,505 1,769 1,757 1,521 Manmade 30,502 35,340 33,842 25,528 House furnishings 5,767 4,781 5,327 4,434 Cotton 3,339 2,838 3,172 2,742 Linen 289 174 270 149 Wool 121 65 105 52 Silk 125 111 151 107 Manmade 1,894 1,592 1,629 1,384 Floor covering 27,197 25,181 25,649 23,688 Cotton 3,102 2,250 2,754 3,547 Linen 1,103 1,053 1,072 1,033 Wool 1,313 1,340 1,793 1,071 Silk 3/ --- --- --- --- Manmade 21,679 20,538 20,030 18,037 Total exports 2/ 233,458 241,613 252,615 232,317 Cotton 96,851 105,019 110,214 101,864 Linen 6,347 5,782 6,793 6,373 Wool 8,742 8,796 9,296 7,731 Silk 2,775 3,176 3,222 3,234 Manmade 118,743 118,841 123,090 113,115 ---------------------------------------------------------------------- 1/ Raw fiber equivalent. 1996 data are subject to revision. 2/ Includes headgear. 3/ Absence of trade. ESTIMATED AND FINAL 1995 COTTON ACREAGE, YIELD, AND PRODUCTION ------------------------------------------------------------------------- Item Aug Sep Oct Nov Dec Jan May ------------------------------------------------------------------------- Upland: Southeast Harvested 1/ 3,436 3,436 3,436 3,406 3,406 3,416 3,425 Yield 2/ 649 598 593 578 577 545 540 Production 3/ 4,648 4,283 4,248 4,103 4,093 3,880 3,851 Delta Harvested 1/ 4,550 4,570 4,635 4,730 4,695 4,706 4,718 Yield 2/ 787 685 613 603 605 605 602 Production 3/ 7,460 6,520 5,920 5,945 5,920 5,935 5,921 Soutwest Harvested 1/ 6,027 6,027 6,027 6,027 6,002 6,068 6,068 Yield 2/ 440 432 402 398 375 366 363 Production 3/ 5,522 5,422 5,052 5,002 4,687 4,626 4,584 West Harvested 1/ 1,600 1,585 1,590 1,590 1,590 1,585 1,585 Yield 2/ 1,147 1,112 1,072 1,036 960 960 962 Production 3/ 3,823 3,673 3,551 3,431 3,179 3,169 3,176 Total Upland Harvested 1/ 15,613 15,618 15,688 15,753 15,693 15,775 15,796 Yield 2/ 660 612 574 563 547 536 533 Production 3/ 21,453 19,898 18,771 18,481 17,879 17,610 17,532 Pima Harvested 1/ 188 193 193 196 206 211 211 Yield 2/ 916 918 930 877 832 821 836 Production 3/ 358 368 373 357 357 361 368 Total All Kinds Harvested 1/ 15,801 15,810 15,881 15,949 15,899 15,986 16,007 Yield 2/ 663 615 579 567 551 540 537 Production 3/ 21,811 20,266 19,144 18,838 18,236 17,971 17,900 ------------------------------------------------------------------------- 1/ Thousand acres. 2/ Pounds per acre. 3/ Thousand bales. 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