U.S. Cotton Industry Outlook Tied to Demand Recovery

The U.S. cotton industry continues to face “a very competitive and difficult economic climate” but there are some reasons for optimism in the coming year, National Cotton Council Economist Dr. Gary Adams said in presenting the 2009 Economic Outlook to the NCC’s 71st Annual Meeting in Washington, DC. In describing the world outlook for 2009, Adams said world cotton production is projected to fall 4.3 million bales to 105.5 million bales – the smallest crop since 2003. World mill use will recover to 113.8 million bales. The smaller crop and increased mill use would allow stocks to decline to 56.3 million bales from 62.2 million in 2008. China and India will continue to be important players. He said both countries governments have made policy decisions that have moved significant amounts of the 2008 crop into government stocks – and how they handle those stocks’ release will affect U.S. exports. He noted that for the 2009 marketing year, a slight recovery in China’s mill cotton use to 47.2 million bales is expected along with a cotton crop decline to 32.6 million bales from 36.5 million in 2008 – which would result in China importing 9.6 million bales in the 2009 marketing year. On the other hand, he said India may return as a more significant exporter in 2009 as that country’s production is expected to be near current levels with only a slight recovery in mill use.

The economist told delegates the NCC sees a slight contraction in U.S. cotton offtake for 2009 with U.S. cotton exports projected at 11.2 million bales and U.S. mill cotton use at 3.9 million bales. On a positive note, Adams said the much-needed economic assistance included in the 2008 Farm Bill has been implemented and textile mills are submitting the necessary documentation to receive 4 cents per pound on their cotton consumption. Also, the United States’ government has begun monitoring certain U.S. textile and apparel imports from China in a move aimed at preventing a repeat of the disruptive surge of Chinese textile/apparel exports to this country following the discontinuation of quotas in 2005. One significant cause for optimism, Adams says, is that due largely to lower oil prices, costs of purchased crop inputs could range from $50 to $100 per acre lower than in 2008, depending on specific production practices.