Cotton Economic Report
American Pima and Global ELS Market Outlook Marc A. Lewkowitz Executive Vice President Supima According to the latest International Cotton Advisory Committee (ICAC) figures 2007/08 crop year production of Global Extra‐Long Staple (ELS) cotton and Long Staple (LS) cotton is estimated to be 3,569,000 bales; a 150,000 bale increase over last year and the largest production figure since the 1992/93 crop year when total production reached 3,895,000 bales. Similarly, the ICAC mill consumption estimate of 2,305,000 bales for global ELS and LS cottons for the 2007/08 crop year is the largest since 1993/94 when 2,338,000 bales were consumed by countries that also grew ELS and LS cottons. Likewise the export the estimate of 1,796,000 bales is 327,000 bales greater than last year’s volume and would be the largest since the 2004/05 crop year when 1,902,000 bales were exported. The growth of the global ELS and LS markets is undeniable. The underlying fundamental demand for these specialty cotton fibers is strong on a global basis. However, there are also some fundamental changes in where the cotton is being produced and consumed. The biggest noticeable change is in China. ELS cotton production in China has seen explosive growth when compared to their low production figure in the 1995/96 crop year of 37,000 bales. (Chart 1) With the tremendous growth in the Chinese ELS production, China is taking on the title of being the largest global ELS producer with a crop of 781,000 bales in 2006/07, exceeding the U.S.’s production by 16,000 bales. For the 2007/08 crop year, the crop is anticipated to grow again with a forecasted production figure of 811,000 bales. Again this would exceed the U.S.’s current production estimate of 793,000 bales.
Chart 1
As concerning as this tremendous growth in production of Chinese ELS cotton may be, it is balanced by equally impressive numbers on the consumption side of the equation. According to ICAC reports, China’s consumption had hovered around the 100,000 bale per year mark through the late 1990’s. In 2000 the Chinese consumption of ELS cotton began to pick up with 184,000 bales used that year. By the time the 2006/07 crop year had ended China had consumed 758,000 bales, and the forecast for the 2007/08 crop year anticipates China consuming 834,000 bales (Chart 2). By comparison, the U.S.’s domestic consumption that reached a high of almost 150,000 bales at the end of the late 1990’s has slipped by more than two thirds with current consumption figures hovering around 40,000 bales annually.
Chart 2
Today the cotton industry in the U.S. is faced with a number of domestic and global challenges that can affect U.S. cotton production. These impacts can be seen affecting U.S. Upland production figures in the current United States Department of Agriculture (USDA) – National Agricultural Statistics Services (NASS) production estimate that forecasts Upland cotton production to fall almost 4 million bales or about 20%! American Pima production in the U.S. has also seen some significant changes in production beginning with a shift in production from Arizona to California from the late 1980’s through the early 1990’s (Chart 3 ).
Chart 3
Today, California accounts for almost 90% of the American Pima production and is also facing a variety of crop threatening challenges such as higher commodity prices (other than cotton), water costs and availability, rising production costs (chemicals, labor, insurance, energy), along with consumers’ perception of value versus price and the consequential impact through the supply chain. Production pressure on cotton has been very high in the vast and very competitive San Joaquin Valley (SJV). Total cotton acreage in the SJV has fallen to less than half the record 914,000 acres set in the 2000/01 crop year. This year’s planted acreage estimate places total at 451,000 acres. Notably, while total acreage is shrinking, American Pima has managed to hold firm in the current marketplace, and for the first time will have more acreage planted to American Pima in California than Upland cotton (Chart 4).
Chart 4
The U.S.’s strength in American Pima lies in the farming practices employed by the growers, the management of the cotton through the merchandising channels, the quality classification of each bale by the USDA, the globally recognized low instances of contamination, the high consistency of quality and the unique promotional efforts made to differentiate and distinguish it in the global marketplace. Through these combined efforts the U.S. has been successful in producing and marketing a high quality competitive cotton.
Chart 1
As concerning as this tremendous growth in production of Chinese ELS cotton may be, it is balanced by equally impressive numbers on the consumption side of the equation. According to ICAC reports, China’s consumption had hovered around the 100,000 bale per year mark through the late 1990’s. In 2000 the Chinese consumption of ELS cotton began to pick up with 184,000 bales used that year. By the time the 2006/07 crop year had ended China had consumed 758,000 bales, and the forecast for the 2007/08 crop year anticipates China consuming 834,000 bales (Chart 2). By comparison, the U.S.’s domestic consumption that reached a high of almost 150,000 bales at the end of the late 1990’s has slipped by more than two thirds with current consumption figures hovering around 40,000 bales annually.
Chart 2
Today the cotton industry in the U.S. is faced with a number of domestic and global challenges that can affect U.S. cotton production. These impacts can be seen affecting U.S. Upland production figures in the current United States Department of Agriculture (USDA) – National Agricultural Statistics Services (NASS) production estimate that forecasts Upland cotton production to fall almost 4 million bales or about 20%! American Pima production in the U.S. has also seen some significant changes in production beginning with a shift in production from Arizona to California from the late 1980’s through the early 1990’s (Chart 3 ).
Chart 3
Today, California accounts for almost 90% of the American Pima production and is also facing a variety of crop threatening challenges such as higher commodity prices (other than cotton), water costs and availability, rising production costs (chemicals, labor, insurance, energy), along with consumers’ perception of value versus price and the consequential impact through the supply chain. Production pressure on cotton has been very high in the vast and very competitive San Joaquin Valley (SJV). Total cotton acreage in the SJV has fallen to less than half the record 914,000 acres set in the 2000/01 crop year. This year’s planted acreage estimate places total at 451,000 acres. Notably, while total acreage is shrinking, American Pima has managed to hold firm in the current marketplace, and for the first time will have more acreage planted to American Pima in California than Upland cotton (Chart 4).
Chart 4
The U.S.’s strength in American Pima lies in the farming practices employed by the growers, the management of the cotton through the merchandising channels, the quality classification of each bale by the USDA, the globally recognized low instances of contamination, the high consistency of quality and the unique promotional efforts made to differentiate and distinguish it in the global marketplace. Through these combined efforts the U.S. has been successful in producing and marketing a high quality competitive cotton.
