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U.S. Cotton
Softens the New Millennium
By Dale Cougot
Recently, U.S. agriculture has been hit by the combined effects of weakness in global commodity markets and adverse weather. Meanwhile, lower economic growth and rising world supplies increased competition for export markets and reduced prices for most of the major commodities in 1998/99.
Cotton was one of the commodities hit hardest by both bad weather and low prices. U.S. cotton producers, already suffering from a combination of low production, quality difficulties, depressed world textile and apparel demand. Despite low production, U.S. cotton stocks have declined only marginally due to weakness in both domestic textile mill use and raw cotton exports. U.S. cotton farmers’ net market returns last season were the lowest since the late 1980s.
Recovery May Be Prolonged
The cotton outlook for 1999/2000
anticipates higher world production and consumption. A larger
U.S. crop is expected to cause a surge in world production;
consumption is projected to rise, as would be consistent with
general recovery in world economic growth.
Despite the modest growth expected in the world economy, world consumption is not likely to peak as high as it did before the Asian financial crisis. Barring production problems, the world will continue to hold surplus cotton stocks at the end of the marketing year.
Foreign cotton policies are key to the future direction of
U.S. cotton trade. Recent liberalization measures may allow China
to export more cotton, raising competition for export markets and
forcing world prices lower.
The United States is poised to be the major source of increased world cotton supplies in 1999/2000, recovering a portion of the market share lost due to lower production the previous year. Exports are unlikely to reach the levels of the early 1990s, however, due to abundant foreign supplies of both cotton and synthetic fiber, and the virtual elimination of imports by China, formerly a major U.S. customer.
The North American Free Trade Agreement (NAFTA) countries may prove an exception, as Mexico’s 1999/2000 U.S. imports are forecast to reach an all-time high for quantity and share. Even with greater exports and total demand for U.S. cotton, 1999/2000 is likely to be a year of rising stocks and declining prices.
Long-term projections for U.S. cotton are more positive. Domestic mill use is expected to grow, although constrained by rising textile imports, and U.S. cotton exports should rise in a recovering global economy.
Ultimately, the direction of U.S. cotton production will be influenced by a variety of factors, including the economic environment, technology advances and developments in trade liberalization.
The author is a senior marketing specialist with the FAS Cotton, Oilseeds, Tobacco and Seeds Division in Washington, D.C. Tel:(202) 720-0139; Fax (202) 720-0965; E-mail: Cougot@fas.usda.gov
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