Cotton Situation and Outlook

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2002-2003 Cotton Situation and Outlook
Don Shurley Professor/Economist-
Cotton University of Georgia
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US Cotton An Industry In Economic Turmoil

• US acreage largely unresponsive to price
  signals
• Large increase in world production and ending
  stocks in 2001
• Textile industry down over 30 since 1997
• Imports of foreign textile goods has increased
• Strong dollar encourages imports, lowers prices
  and exports
• Yields declining or staple, cost of production
  increasing

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Current and Historical Price Situation
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Cotton Futures Prices Long-term Chart
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Cotton Futures Prices December 2002
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Weekly Cotton Prices, Futures 2000-2002
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US Average Price Received For Cotton
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US Average Price Received Plus Average LDP
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US and World Prices -- Relationships
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Indices Exchange Rate Cotton Futures
Exchange Rate
Cotton Futures
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A-Index and SLM 34/4-34, 1999-2001 Crops
A-Index
Spot Price
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World Price, Supply, and Demand (S/U Measures
Relative Tightness of Supply)
A-Index
World End S/U
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World Price, Supply, and Demand (S/U Measures
Relative Tightness of Supply)
A-Index
World End S/U
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World Price, Supply, and Demand, 1977-2001
(A-Index Increases Above 35-40 S/U)
World Stocks-to-Use Ratio ()
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US Crop Production Condition, Acres, Yields
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U.S. Cotton Crop Conditions
Crop Index 3.42 Last Year 3.20
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U.S. Cotton Crop Progress
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US Cotton Acres Planted, 1990-2002
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US Cotton Acres Planted, By Region 1990-2002
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US Cotton Yield Per Acre, 10 Years 1993-2002
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US Cotton Supply/Demand
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US Cotton Acreage, Production, Supply and Demand
SOURCE USDA, September 2002.
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Possible 2002 Crop US Ending Stocks
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US and Foreign Ending Stocks, 10 Years 1993-2002
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Total Demand For US Cotton, 10 Years 1993-2002
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U.S. Cotton Mill Use and Total NDC
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Cotton Textile Mill Use By Country, 2000-2002
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Foreign and World Supply/Demand
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World Cotton Supply and Demand
SOURCE USDA, September 2002.
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World Cotton Production, Consumption, and Ending
Stocks
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Foreign Production Compared ToForeign Mill Use
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The China Factor
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The Farm Bill and Cotton
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What the 2002 Farm Bill DOES address

• Provides for much needed base and yield
  updating
• Provides a much improved safety net for farm
  income
• in the form of Counter Cyclical Payments
  (CCP)
• Eliminates the 1.25 cents/lb differential
  between the A-Index
• and USNE price when calculating Step 2
  values
• Provides separate and equal payment limitations
  for peanuts

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What the 2002 Farm Bill DOES NOT address

• The oversupply problem maintains planting
  flexibility
• and LDP payments w/o limitation
• Trade and US dollar valuation issues facing raw
  cotton and
• the slumping US textile industry
• Inflation in land rent due to increased
  government payments
• Loss of rented acres available for production
  due to payments
• tied to historical production
• Production, marketing, and lint quality
  issues/challenges that
• still face producers

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Price Plus Payments On Payment Acres and
Yield 1996 Farm Bill Compared to 2002 Farm Bill
2002 Farm Bill
1996 Farm Bill
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Current 2002 Price and Payment Situation
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Price Outlook

• Production still unknown Southeast, MidSouth
• Possible smaller crop may not increase price
  significantly
• Foreign acreage, production, and stocks down
• A-Index should continue to improve
• US prices probably 40-50 cents per pound
• Total money still around 55-60 cents with LDP
• Export projections could be high, key to prices