"Under the current farm program, we project about 14.6 million acres, which should produce about 18 million bales – considerably less than the 20 million-plus this season." Growers planted about 16 million acres in 2001, producing a record crop.
"I think the price of competing crops and the reduction in the cost of the insurance program for cotton will be the major factors for the projected acreage decline" for the 2002 crop, he said. "This past season, the insurance price in the Mid-South states was 63 cents; next year, it’s projected to be about 50 cents."
An improving economy should see U.S. cotton consumption increase to 7.8 million bales, according to the Dunavant analysis, with exports hitting 10 million bales. Carryover would rise only modestly, from 8.7 million bales to 8.9 million.
Cautioning that "it’s only January, and a lot can happen with both production and consumption over the next 12 months," he said the projected U.S. numbers "are not bullish."
World production is expected to drop sharply next season, Dunavant said, from 95.9 million bales in the past season to 89.5 million bales. Consumption will rise slightly, going from 90.55 million bales this season to 91.8 million next season.
That will create a decline in world carryover from 45 million bales to 42.7 million. And while world production is showing some response to lower prices and improving textile economies, "That will still be too much cotton," he said.
Production in China will be down, but "still a big crop of 21 million bales," a result of significant yield upturns from transgenic and other improved varieties, but larger crops are expected from Pakistan, India, Central Asia, and West Africa, even though acreages will be down slightly.
Southern Hemisphere countries "will be very, very responsive to price – lower prices, less acreage; higher prices, more acreage." Brazil’s Mato Grosso area has "unlimited production potential," if price warrants.
China is expected to import 2 million bales next season, Dunavant said, "although not all will be U.S. cotton; price and quality will dictate the area of growth they purchase." Mexico will continue to be a big customer for American cotton, he noted, depending on how they recover from their textile recession. They currently have "a substantial volume" in contracts with U.S. merchants that haven’t been performed on, and some are expected to be rolled into next season.
Turkey’s purchases of U.S. cotton will rise by about 100,000 bales, but India and Pakistan "will not be major buyers next season." Korea, Japan, Taiwan, Hong Kong, and Indonesia "will continue to be large buyers."
Australia has taken away a lot of markets for U.S. cotton, Dunavant noted. "Their quality is very much desired by foreign spinners and it competes very well with California-style cotton."