Economists with the National Cotton Council say that, despite four years of supplemental assistance to growers and continued council efforts to open more markets in the Caribbean and elsewhere, the U.S. cotton industry remains in peril.
Speaking at the NCC's annual meeting in Dallas, the economists noted the council's efforts to deliver disaster assistance legislation to growers the last four years and to win implementation of laws such as the Caribbean Basin Initiative or CBI. But they said those have been offset by other factors outside the council's or its members' control.
In noting the U.S. dollar's strength and the reality of U.S. manufacturing being unable to compete against artificially cheap foreign products, the economists said, “firm closures and job losses continue across the U.S. as the nation finds itself unable to establish effective policies to address the situation.
“While the U.S. cotton production sector seeks an effective farm policy in a debate that has now stretched out to a year in length, the U.S. cotton textile industry fights for its very survival. The entire U.S. cotton industry faces unrivaled pressures on its very existence. Farm sector economics are as bleak as any seen in the post-war period. Prices for most commodities have not covered production expenses for five consecutive years.”
The economists said that as U.S. cotton considers the transition to an export-oriented industry, each cotton policy component sought by the NCC is “crucial.” Among those are unrestricted access to a marketing loan keyed to world price, holding on to a highly efficient yarn-spinning sector by eliminating the Step 2 threshold and seeking implementation of effective regional trade agreements.
For 2002, the NCC economists project U.S. growers will produce a 17.1-million-bale cotton crop, domestic mill use will hold at 7.5 million bales and U.S. exports could reach 10.2 million bales — if China becomes a net importer of raw cotton.
They said many analysts predict China will be in a “zero” import position during the 2002-03 crop year, but if the Chinese abide by their World Trade Organization commitments and if they reduce their plantings then net Chinese imports of 2 million bales or so are possible. The U.S. should expect to garner some 50 percent of any Chinese raw cotton imports, the economists said.
Based on that production and offtake estimate, the economists said U.S. projected stocks on July 31, 2003 would be 8 million bales with a corresponding stocks-to-use ratio of 45 percent.
The NCC economists pegged world cotton production for 2002-03 at 91 million bales, with the bulk of the reduction from the 2001-02 level of 96.7 million bales borne by the U.S. and China. With world mill use projected to grow slightly to 92.5 million bales, ending world stocks July 31, 2003, would decline to 42.6 million bales and the world stocks-to-use ratio would decline to 46 percent.
The economists noted that the world cotton situation is troubling with world mill use of cotton “in suspended animation” even as the world economy has grown in the past decade. Unfortunately, the growth in world fiber use has been captured by man-made fibers.
“The WTO accession by China was to open up a potential market for more than 3 million bales of the world's cotton,” their report noted. “As yet, this remains unrealized and Chinese actions going into the planting season for 2002 are uncertain.”
12.87 million acres
The economists also announced the results of the NCC's 19th Annual Early Season Planting Intentions Survey — total U.S. upland cotton plantings of 14.49 million acres, a decrease of 6.7 percent from 2001 plantings of 15.53 million acres. The survey revealed extra long staple (ELS) intentions of 247,000 acres, which would be a 5.3 percent decline from 2001.
With average abandonment, total upland and ELS harvested area would be about 12.87 million acres. Applying each state's average yield to its 2002 projected harvested acres generates a crop of 17.1 million bales — 16.6 million bales of upland cotton and 535,000 bales of ELS cotton. This compares to 2001's record total production of 20.08 million bales, according to USDA's January 2002 estimate.
Less cottonseed production
Cottonseed production for 2002 is projected to 6.5 million tons in 2002, down from 7.6 million tons the previous year.
Kent Lanclos, assistant director of the NCC's Economic Services, cited weak cotton prices as a major factor behind the expected 2002 cotton acreage reduction.
Based on survey results, the largest decrease in cotton acreage is expected for the Mid-South with a reduction of almost 20 percent. A decrease of 11.6 percent is indicated for the West and a 3.1 percent decline is projected in the Southeast. Upland cotton acreage in the Southwest is projected to increase 1.6 percent because of higher acreage in Texas.
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