In 1997, use of U.S. cotton by U.S. textile mills totaled 11.3 million bales. USDA's March estimate of mill use for the 2000 crop is only 9.5 million bales — a decline of 1.8 million bales or 16 percent since 1997.
During the previous 10 crop marketing years (1990-99), mill use averaged 10.4 million bales annually. If realized, the projected 9.5 million-bale use for the 2000 crop would be the lowest level since 1991.
Not entire picture
But this is not the whole picture. Actually, total cotton consumption in the United States (what we consume that is manufactured through our own mills plus imports of foreign manufactured goods) continues to trend upward.
For the 1999 crop year ended July 31, 2000, total U.S. cotton consumption was the equivalent of 20 million bales compared to 12.2 million bales in 1990. In 1990, U.S. cotton accounted for 71 percent of total consumption. In 1999, U.S. cotton accounted for only 51 percent of total consumption.
In short — the 1.8 million bale decline in U.S. textile mill business since 1997 has been replaced by imports of products manufactured in foreign mills.
The causes for the decline of the U.S. textile mill industry are no doubt numerous and complicated and cannot be discussed here. Nevertheless, the decline of the mill industry should be a major concern for U.S. cotton producers for at least two reasons.
First, USDA's March report projected exports of the 2000 U.S. crop at 6.9 million bales.
This is down from USDA's first estimate of 8.2 million bales in August and has been (should be) a cause for much concern.
While projections are down from earlier expectations, this is not really a “low” level of exports. In fact, U.S. exports for the 10-year period 1990-99 averaged exactly 6.9 million bales per year and U.S. market share for 2000 would actually be the highest since 1997.
Second, U.S. cotton producers in recent years find themselves in a situation where it is difficult to respond to market signals and adjust acreage downward when it otherwise would appear prudent to do so. Cotton prices during the past two to three years have been lower than desired, but prices and profit outlook for other crops has been equally as bad or worse.
Thus, cotton producers continue to plant cotton in hopes of getting an LDP (Loan Deficiency Payment) or POP to help cover costs and stay afloat financially.
So, the economic dilemma facing the U.S. cotton grower is that U.S. mill use has plummeted to a 10-year low and there is little or no incentive or ability to adjust acreage significantly.
With the decline in the U.S. mill industry and if U.S. acreage remains at or near current levels and weather cooperates, a near record level of exports will be needed every year to avoid building stocks and keep prices at reasonable levels.
This will be a difficult task.
Increased dependence on foreign markets also makes price more risky and uncertain. In this scenario, prices will be very dependent on shocks in supply.
With the decline of the U.S. textile industry, cotton industry efforts must be focused on improving export potential, increasing both U.S. and foreign demand and providing a price safety net for growers.