Jarral Neeper, Calcot's economist and assistant vice president, and Claud Acker, assistant vice president for domestic sales, recently participated in an informational market development tour through key textile states in the southeastern U.S. The message they shared with cotton buyers was a cautiously optimistic one.
The best yield on record in San Joaquin Valley cottons, combined with extremely high quality fiber results, mean cotton production could be on the upswing in the area, Acker said in his presentation.
Despite declines in acreage over the past several years, California made up for some of its acreage reduction in 2002, boasting record yields of 1,439 pounds per acre, 200 pounds per acre above the five-year average.
"Better varieties and near ideal conditions on more productive ground deserves most of the credit," Acker said.
Combined Western yields improved from 1,295 pounds per acre in 2001 to about 1,324 pounds per acre in 2002. Those numbers include California, Arizona and New Mexico cotton production. Total 2002-2003 cotton supplies from the Far West will total about 2.75 million bales, a decline of about 17 percent from 2001.
Quality attributes measured by USDA showed improvement for Far West cottons, while color grade and leaf may set records.
To date, Acker said, "About 95 percent of the crop is at a high quality level of 31-3s and better." Excluding the Far West, he noted, the rest of the U.S. produced only about a half million bales of 31-3-35 and longer, 3.5-4.9 micronaire, 28 grams per tex cotton.
That shortage of high quality in U.S. combined with an overall cotton shortage in Australia bodes well for Calcot producers, he said.
From the economic point of view, Neeper said, 2002 world production of cotton declined by 11.4 million bales from the season prior, while consumption is 2.3 million bales higher. That means ending stocks of cotton will drop by a significant amount.
While the U.S. textile sector continues to struggle, U.S. cotton growers will find excellent export opportunities for U.S. supplies into the world market, Neeper said.
Higher grain prices may keep many of the world's farmers away from planting much more cotton in 2003, he said, with worldwide plantings expected to produce about 92.6 million bales in 2003 versus 87.0 in 2002. U.S. cotton growers are expected to plant about the same acreage as last year, while the rest of the world will plant about five percent more acres.
The tightening of available supplies generally means better prices, he said. However, better prices aren't likely to be move high enough to significantly affect U.S. growers, but may put more producers back in the market rather than in the government farm program.
Despite near record drops in cotton production, world cotton prices have made little headway in encouraging planting increases for 2003, he said. World prices are up over five percent since the lows of November 2001, but higher grain prices are impacting planting decisions too.
Neeper added that current world cotton prices should be higher than they are, based on historical measures. Unfortunately, the price of finished yarn is not in keeping with the increase in fiber price, which results in a lack of pricing power for textile customers.
"There is resistance to price increases, which has exacerbated the hand-to-mouth buying routine seen over recent history," he said. A tepid global economy and Middle East tensions are adding to difficulties. However, a short supply of quality cottons should increase prices eventually, he said, encouraging more planting.
The growing economic power of China may also be a boon for Calcot growers, Neeper added, as that country's rising middle class is becoming powerful consumers, opening potentially lucrative markets for U.S. cottons.
Neeper also believes the decline in U.S. cotton consumption has reached bottom. Data from the January through November 2002 consumption period showed U.S. usage was down only 5 percent, year-over-year.
In 2001, the decline was 20 percent, and for the first four months of the current crop year, consumption is down less than 2 percent, versus a year ago.
"After working through one of the most trying times for the textile industry, U.S. consumption has held up better than expected," he said.