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World Cotton Stocks Projected Lowest in 9 Years

The latest U.S. Department of Agriculture (USDA) cotton forecast for 2003/04 indicates that near-record global cotton consumption is reducing world ending stocks to their lowest since 1994/95. Although global cotton production is forecast 5 percent higher this season at 92.7 million bales, world consumption is projected at 97.2 million. As a result, 2003/04 ending stocks are expected to decline 4.3 million bales or 12 percent.

At about 32.5 million bales, world ending stocks are projected to equal 33.5 percent of global consumption in 2003/04, 4 percentage points below 2002/03 and the lowest since 1993/94. Just as important, however, is the stock reduction occurring in China. With consumption expanding significantly in China, stocks there as a share of world consumption have fallen dramatically from 1998/99 to 7 percent this season, the lowest since 1993/94. Meanwhile, the United States accounts for its lowest share in 4 years- about 4.5 percent..

Production Constrained in 2003/04

While world production rose 4 million bales from the year before in 2003/04, production in a number of countries was below potential in part due to weather. World cotton production in 2003/04 was 5 percent higher than in 2002/03, in large part in response to a 30-percent increase in cotton prices during 2002/03, but this increase was below average compared with earlier years.

Since 1987/88, world production has typically risen by about two-thirds as much as the previous year's world price increase. This would have been about a 20-percent increase in production rather than a 5- percent increase. Corn and soybean prices in 2002/03 rose faster than they have during previous times that cotton prices rose, but not enough to account for all of the difference. Favorable weather in the United States, India, and West Africa's Franc Zone boosted production in 2003/04, but output suffered in China, Australia, and Uzbekistan.

Perhaps the largest weather shock suffered by world cotton production in 2003/04 occurred in China. China's National Bureau of Statistics reportedly confirmed its earlier estimate of cotton output, about 22.4 million bales. This suggests yields fell about 19 percent compared with a year earlier, corresponding to this year's unprecedented late season rainfall in China's prime eastern growing regions.

Australia's output was also significantly constrained by weather as drought there continued through the planting of the 2003/04 crop. While Australia's 1999-01 output averaged about 3.5 million bales, the 2003/04 crop is expected to total only 1.3 million due to the depletion of reservoirs there following several years of reduced precipitation.

Uzbekistan's output fell 400,000 bales from the year before in 2003/04 in large part due to a cool, late spring. Although weather improved later in the season, the crop's poor start and reduced area limited output to 4.2 million bales, the lowest in recent memory.


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