USA : US cotton stocks to fall sharply by July 2009, NCC
Source: National Cotton Council Date: 2008-02-13
Dr. Gary Adams, the National Cotton Council’s vice president, Economics and Policy Analysis, said U.S. cotton growers are projected to produce 15.4 million bales in 2008 – the smallest since the 1998 crop of 13.9 million bales.
In presenting the NCC’s 2008 Economic Outlook to delegates at the organization’s annual meeting in Memphis here, Adams said that this U.S. cotton production estimate of 14.8 million bales of upland and 600,000 bales of extra long staple (ELS) fiber is based on the NCC’s survey that has planting intentions of 9.32 million upland acres and 231,000 ELS acres.
Adams noted that a range of 12-18 million bales is not unrealistic as weather will affect the final production. The economist told delegates the NCC sees U.S. exports of 14.7 million bales and domestic mill use of 4.4 million bales in 2008-09.
Assuming a new farm bill is enacted with the economic assistance program for the U.S. textile industry, Adams said any 2008 textile mill losses due to a slowdown in the U.S. economy and the elimination of China import safeguards should be tempered.
By July of 2009, he said, U.S. cotton stocks are expected to fall sharply as total offtake exceeds the 15.4 million bale crop.
Adams also noted that the 2008 U.S. crop production estimate translates to 5.3 million tons of cottonseed, down from 6.6 million tons in 2007.
“If competing feed prices remain strong, there’s little if anything that would call for lower cottonseed prices in 2008,” the economist said. “In fact, just the opposite seems true. Cottonseed prices could push higher with the expectation of a 5 million ton crop.”
Regarding world trade, Adams said world production is expected to increase to 122.4 million bales in 2008 as larger crops in China, Brazil, India, Pakistan, Australia and West Africa more than offset lower U.S. production. India, in fact, is now the second largest producer and processor of cotton, devoting more area to cotton production than any other country.
“While their textile industry has been expanding, the most notable development in the Indian market is cotton production that has more than doubled in the last five years, and is estimated at almost 25 million bales in 2007,” Adams said. He said India’s production growth is largely the result of improved yields, which have soared from a 270-lb. per acre average in 2002 to more than 500-lbs. in 2007.
He said the NCC sees India producing more than 26 million bales in 2008 and expects them to remain a significant exporter – perhaps as much as 7 million bales.
On the demand side, Adams said even with slower growth in China mill cotton use, that country’s textile sector still could consume a healthy 57 million bales – 16.6 million bales imported -- in the 2008 marketing year. He said China also will continue to be the largest export customer of U.S. cotton.
“Demand (world) is expected to grow but at a slower pace due to overall economic performance and strength in cotton prices relative to competing fibers,” he said. “However, total use is expected to exceed production, which will further tighten stocks.”
Adams said declining global stocks should continue to be supportive of world prices in 2008, but, “One concern will be the ability to maintain demand growth at higher price levels, particularly in light of concerns about the general economy. In addition, the gaps between cotton prices and yarn prices and polyester prices have widened. So, while the current outlook is supportive of prices, we can not forget the competition from manmade fibers. ”
