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Prospects Fade for New-Crop Price Improvement

By Lynette Cockerell

Concerns about an oversupply of cotton in the upcoming year remain dominant in the market, especially as analysts expect higher U.S. production combined with larger crops from some foreign growers and only small increases in demand.

According to an International Cotton Advisory Committee (ICAC) official, world cotton output and consumption are expected to rise slightly in 1999-00 while cotton prices, which have been dropping for the past several years, could remain low. ICAC currently forecasts world 1999-00 cotton production at 88.0 million bales, up from 84.0 million in 1998-99.

“A consensus exists that low prices for competing crops and government programs will help to maintain world cotton area despite lower cotton prices in 1999-00, while better weather could boost average yields,” the official said.

The size of the cotton crop in foreign countries may remain steady or rise slightly. Increased plantings in India’s southern and central regions linked to government and industry efforts to raise yields could lead to a modest rise in 1999-00 cotton production. ICAC recently estimated Indian cotton output at 13.0 million bales.

Production in Pakistan is expected to remain the same in the upcoming season at approximately 7.0 million bales. The country has overcome the effects of the leaf curl virus in cotton, but efforts to control whiteflies have brought additional insect problems such as bollworms.

Closer to home, the ICAC estimates the United State’s output at 17.0 million bales; however, many in the industry anticipate a higher figure due in part to a potentially large crop in Texas. An abundant crop in Texas, where a large amount of cotton is grown, could substantially boost the U.S. crop total in 1999- 00.

However, Texas cotton experienced some weather-related difficulties this spring which could hinder prospects for a record crop. Most of the state received beneficial rainfall earlier this season, but a substantial amount of cotton on the High Plains of Texas was lost to rain, hail and high winds through mid-June. Local experts initially estimated crop losses could range from 250,000 to 400,000 acres and replanting to cotton seemed unlikely at the time for most producers due to the approach of insurance deadlines for planting.

Overall, prospects for Texas’ 1999 crop remain bright as the majority of the crop was in good to excellent shape as summer approached. Some areas still were recovering and hopes were they would be able to grow through their problems and make it to harvest without further damage or hardship.

Meanwhile, crops in other portions of the country were in good condition, although there were some minor problems in the Southeast and on the West Coast. Market observers closely monitored the dry conditions in Georgia and other southeastern states, but the situation had not become a source of anxiety. Also, cool temperatures in California have delayed cotton development, but expectations of warmer weather alleviated concerns.

If the U.S. crop is as large as most in the industry now predict, producers will be faced with the difficulty of selling their crop in a market where worldwide cotton supplies are large and demand currently is low. Due to economic difficulties in East Asia, Russia and Brazil, world cotton consumption has fallen this year to an estimated 87.0 million bales from 89.0 million during each of the last two years. Present estimates show mill use declines in some countries for 1999-00, though overall ICAC expects consumption to improve.

An improvement in mill use should lead to stronger export figures. ICAC foresees world exports will rise from 24.0 million bales this season to 25.0 million in 1999-00. The United States is expected to have the largest share of cotton exports in the new season, rising to 24 percent from the current 16 percent, as U.S. exports of new-crop cotton are pegged at 6.5 million bales.

Barring a disaster in a major cotton producing country or a sudden economic rebound elsewhere in the world, cotton’s supply and demand figures must become more balanced before any significant price improvement can be expected.