In 1997, use of US cotton by US textile mills totaled 11.3 million bales. USDA's latest estimate of mill use for the 2000 crop is only 9.5 million bales- a decline of 1.8 million bales or 16% since 1997. Why the decline? The quick answer is that US total cotton consumption (what is manufactured in our own mills plus imports of foreign manufactured finished goods) continues to be impressive and is trending upward but less and less of our total consumption of cotton products is coming from US textile mills. In short- the 1.8 million bale decline in US textile mill business since 1997 has been replaced by imports of products manufactured in foreign mills.

This causes for great concern for 2 reasons. First, USDA currently projects 2000 crop US exports of 6.9 million bales. While this is down from earlier expectations, by any measure this is not a "low" level of exports. In fact, US exports for the 10-year period 1990-99 averaged exactly 6.9 million bales per year. Second, US cotton producers are in a situation where it is difficult for them to respond to market signals and adjust acreage downward when it would otherwise be wise to do so. Market prices the past 2-3 years have been lower than desired but prices and profit outlook for other crops is equally as bad or worse. Thus farmers continue to produce cotton in hopes of getting an LDP (Loan Deficiency Payment) or POP to cover cost and help stay afloat financially.

So the situation facing the US cotton grower is that without an incentive to adjust acreage- if US acreage remains at or near current levels and weather cooperates, we will need a near record level of exports every year to avoid building stocks and keep prices at reasonable levels.

This will be a difficult task and increased dependence on foreign markets makes price more risky and uncertain. In this scenario, prices will be very dependent on shocks in supply. With the decline of the US textile industry, industry efforts must be focused on improving export potential, increase demand, and providing a price safety net for growers.

Back to Cotton Outlook