COTTON AND WOOL OUTLOOK December 12, 2001 December 2001, ERS-CWS-1101 Approved by the World Agricultural Outlook Board -------------------------------------------------------------------------- COTTON AND WOOL OUTLOOK is issued electronically 10 times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Electronic release only; no printed copies available. -------------------------------------------------------------------------- Summary: December 2001 The latest United States Department of Agriculture (USDA) cotton forecast for 2001/02 signals a decline in ending stocks from last month due largely to a boost in the U.S. export forecast. U.S. cotton exports were raised 4 percent this month to 9.8 million bales, the highest since 1926/27. U.S. production-although still a record-was lowered slightly this month as was the forecast for cotton mill use. These December supply and demand adjustments resulted in a 3-percent decrease in ending stocks to 8.4 million bales. Foreign production in 2001/02 is estimated at 75.9 million bales, 4.6 million above last season, largely due to increased planting in China, India, and West Africa. This would be the largest foreign crop since 1991/92s record. Foreign cotton use is forecast to reach a record, at 83.7 million bales this season, 660,000 bales higher than 2000/01. Meanwhile, 2001/02 ending stocks are projected more than 6 percent higher than a year ago at 35.1 million bales. Excluding China, foreign stocks as a ratio of use are forecast at one of their highest levels ever, nearly 30 percent. As foreign stocks rise, foreign exports are forecast nearly 1 million bales below last year, down to their lowest since 1983/84. Domestic Outlook U.S. 2001 Cotton Production Lowered Slightly The December USDA Crop Production report estimated the 2001 U.S. cotton crop at a record 20.1 million bales, 100,000 bales below last month but nearly 3 million above 2000/01. Upland production is forecast at 19.4 million bales, while the extra-long staple (ELS) crop is projected at 628,000 bales. During the previous 20 years, the December forecast has been below final production 10 times and above 10 times. And, past differences between the December forecast and the final production estimate indicate that chances are two out of three for the 2001 U.S. cotton crop to range between 19.7 and 20.4 million bales. Meanwhile, Cotton Ginnings reported that 15.5 million running bales had been ginned as of December 1, compared with 13.6 million at this time last year. Compared with last season, upland production is projected to rise in three of the four regions of the Cotton Belt, while the West regions crop is expected to fall below a year ago. In the Delta, upland production is projected one-third higher than in 2000 to a record 7 million bales. The increase this season is the result of larger area and an 80-pound increase in yield for the region. While the 2001 production estimate surpasses the 1994 crop, the Delta yield of 736 pounds per harvested acre is the sixth highest in the last 10 years and 82 pounds from the regions record in 1994. Similarly in the Southeast region, the upland crop is estimated to reach a high of 5.3 million bales in 2001/02, with Georgia and North Carolina accounting for over 3.7 million of the total. The Southeast has not produced a crop of this size since the 1926 season. The average yield for the region in 2001 is projected about 100 pounds above average and near 1996s 723 pounds per harvested acre. For the Southwest, upland production is once again hampered by weather, and output there is forecast below the 5-year average at 4.3 million bales. With about 2 million acres projected abandoned in the region, the Southwest yield is expected to reach 460 pounds per harvested acre, near the 10-year average. In the West, upland output is expected to approach only 2.7 million bales, 400,000 below last season as some area in the region shifted from upland to ELS in 2001. Despite lower area, an above-average regional yield of 1,292 pounds per harvested acre kept production near the 5-year average. In contrast to upland, ELS production in the West is expected to rise dramatically (66 percent) as California producers added area and increased yields this season. California continues to dominate ELS production and is projected to account for 91 percent of the ELS crop in 2001, similar to last season. Total planted area to cotton remains estimated at 16.2 million acres and abandonment is projected at a relatively high 14 percent. As a result, cotton area to be harvested is forecast at 13.9 million acres, 900,000 above last season and the highest since 1995. Based on the harvested area, the national yield is estimated at 691 pounds per acre, 59 pounds above 2000 and above the 5-year average of 648 pounds. Larger U.S. Cotton Supply/Demand in 2001/02 Based on the December U.S. cotton production forecast and carryin stocks estimated at 6 million bales, total U.S. cotton supplies for 2001/02 are forecast to reach 26.1 million bales, an astonishing 5 million (17 percent) above last season and the largest supply since 1966/67. At the same time, total use of U.S. cotton is projected to rise 13 percent from the previous season to 17.7 million bales, the highest in 4 years. However, U.S. ending stocks will rise once again this season as U.S. cotton supplies exceed demand. The demand highlight of the 2001/02 season is undoubtedly U.S. cotton exports, which are projected to jump to their highest level in 75 years. The current forecast-at 9.8 million bales-is 400,000 bales above last month and 3 million above last season. Supporting U.S. cotton exports this season are the expected record foreign use, the abundant supplies, and the competitiveness of U.S. cotton evidenced by the export commitment data. As of the end of November, data based on the Export Sales report indicate that approximately 8.6 million bales already have been committed this season, with 3.1 million shipped. This compares with commitments of 4.6 million bales a year ago and shipments of 1.6 million. Although shipments are well ahead of last seasons pace, U.S. exports-based on the latest estimate-need to average about 190,000 bales per week, similar to the current shipment level. Based on the December projections of U.S. and world trade, the U.S. share of global exports is estimated at 34.4 percent, up from about 26 percent in 2000/01. In contrast, 2001/02 U.S. cotton mill use is projected to decline once again. Mill use is currently estimated at 7.9 million bales, 11 percent (1 million bales) below the final 2000/01 estimate as the domestic industry continues to struggle with the effects of a sluggish retail demand and competition from foreign products. With the sustained strength of the U.S. dollar, U.S. cotton textile and apparel imports in calendar 2001 are expected to rise for the 13th consecutive year, while textile and apparel exports are projected to contract for the first time in 17 years. In addition, these imports continue to displace U.S. fiber mill use as the raw-fiber equivalent of cotton textile imports exceeds the quantity consumed by domestic mills for the fourth successive year. Based on these U.S. cotton supply and demand projections, stocks for 2001/02 are projected to reach 8.4 million bales by seasons end, the highest since 1985/86. Despite larger use this season, the implied stocks-to-use ratio for 2001/02 is currently near 48 percent, 10 percentage points above last season. Textile Trade Declines in September, Deficit Continues To Climb Textile imports declined in September to 1.16 billion pounds after increasing the previous 4 months. Shipments fell 13 percent from a month earlier and were 7 percent below September 2000. Imports of all major fibers and major end-use categories were lower compared with a month earlier. Cotton textile imports, at 601 million pounds, were down 14 percent from August and were 9 percent below September 2000. On a regional basis, most of the September decline occurred in Asian and North American countries. Lower shipments from major suppliers such as China, Bangladesh, Hong Kong, Pakistan, India, and Mexico accounted for the majority of the decrease. Textile exports also declined in September. Shipments, at 389 million pounds, were 8 percent below August and 17 percent below a year ago. Exports of all major fibers and all end-use categories, except home furnishings, declined from a month earlier. Cotton textile exports, at 170 million pounds, were 5 percent below a month earlier and 21 percent below September 2000. U.S. shipments to Mexico, at 54 million pounds, were 13 percent below August exports. The cumulative January through September trade deficit reached 6.55 billion pounds. The deficit for the corresponding period during 2000 was 6.33 billion pounds. Total imports, at 10.3 billion pounds, are only 1.4 million above last year. However, total textile exports compared with a year earlier declined 220 million pounds to 3.77 billion. The 9-month cotton textile trade deficit, at 4.1 billion pounds, is 3 percent above 2000. With stable textile imports and declining exports, the total and cotton textile trade deficit will likely continue to widen in 2001. International Outlook Foreign Production and Consumption Down, U.S. Exports Up USDAs estimate of foreign cotton production in 2001/02 is 760,000 bales lower this month, at 75.9 million bales, but remains 4.6 million bales above the 2000/01 crop. The forecast for 2001/02 foreign consumption is 185,000 bales higher than in November, at 83.7 million, 660,000 bales above its 2000/01 level. The forecast for foreign imports is higher this month, by 300,000 bales, and foreign exports are forecast 45,000 bales lower. Foreign imports are forecast to reach 28.7 million bales in 2001/02-nearly 2 million bales higher than in 2000/01-and foreign exports are forecast to decline nearly 1 million bales to 18.7 million. Foreign ending stocks in 2001/02 are forecast about 600,000 bales lower than during November, at 35.1 million bales. However, foreign ending stocks in 2001/02 are still forecast 2.2 million bales higher than the year before, and are expected to equal 42 percent of consumption. Low foreign exports-forecast in 2001/02 at their lowest level since 1983/84- reflect reduced production compared with the year before in several competing countries, primarily Australia and other Southern Hemisphere producers. Production in Central Asia and the Franc Zone is forecast above year-earlier levels, but beginning stocks are lower, and there is growing evidence that reluctance to market cotton in a low-price environment may mean higher ending stocks in these countries. This, combined with continued strong U.S. export sales, resulted in a 400,000-bale increase in the forecast for U.S. cotton exports, to 9.8 million bales, the largest in 75 years. Insect Damage and Reduced Plantings Cut Foreign Production Compared with last month, foreign production in 2001/02 is forecast lower largely due to insect damage in India and Pakistan. Indias expected crop is 400,000 bales lower this month, at 11.8 million bales. Pakistans is 300,000 bales lower, at 8 million bales. Bollworm damage in each countrys Punjab has become apparent from the pace of arrivals during November. Indias 2001/02 crop is now estimated at 11.8 million bales, still nearly 1 million bales above the previous year. However, at 8 million bales, Pakistans estimated 2001/02 crop is now 100,000 bales below its 2000/01 level. Argentinas and Australias expected 2001/02 production is also lower than in November, down 100,000 bales in each case following government reports of lower than expected plantings. Argentina is now expected to produce 450,000 bales in 2001/02, a 39-percent drop in output from the previous year, and Australia is expected to produce 3 million bales, a 19- percent drop. Paraguays 2001/02 crop forecast is also reduced from its November level- down 35,000 bales-and is now forecast 19 percent below 2000/01. In total, Southern Hemisphere production in 2001/02 is forecast 17 percent lower than the year before, at 8.4 million bales. This is the sharpest decline in Southern Hemisphere production since 1992/93. Slightly higher production in 2001/02 compared with last month is estimated for Uzbekistan and Tajikistan. Uzbekistans output is estimated 100,000 bales higher than during November, at 4.8 million bales, due to a revision in expected ginning output rather than any change in expected raw cotton production. A reappraisal of historical ginning ratios in Uzbekistan suggests that the 2001/02 ratio will be higher than previously forecast. However, Tajikistans 50,000-bale increase from Novembers estimate of 2001/02 production reflects larger than expected raw cotton production. END_OF_FILE