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NCC says cotton industry to face difficult economic climate
17
Feb '09
National Cotton Council Economist Dr. Gary Adams
National Cotton Council Economist Dr. Gary Adams
In presenting the NCC's 2009 Economic Outlook to delegates attending the NCC's 71st Annual Meeting, Adams said, “For the 2009 marketing year, reductions in cotton production will be evident in more countries than observed in previous years.

Also, mill use is expected to recover based on independent economic projections calling for recovery by calendar 2010.” He reiterated, though, that these projections are dependent on the wildcards of overall global economic performance and impacts of policy changes.

In describing the world outlook for 2009, Adams said world cotton production is projected to fall 4.3 million bales to 105.5 million bales – the smallest crop since 2003. World mill use will recover to 113.8 million bales. The smaller crop and increased mill use would allow stocks to decline to 56.3 million bales from 62.2 million in 2008.

Looking at the 2009 world cotton market, Adams said China and India will continue to be important players. He said both countries governments have made policy decisions that have moved significant amounts of the 2008 crop into government stocks – and how they handle those stocks' release will affect U.S. exports.

For example, China is estimated to end the 2008 marketing year with 19.4 million bales of stocks, with a significant amount in government reserves.

“If the Chinese government decides to aggressively liquidate those reserves in the coming months, it could dramatically alter their import requirements,” Adams said. He noted that for the 2009 marketing year, a slight recovery in China's mill cotton use to 47.2 million bales is expected along with a cotton crop decline to 32.6 million bales from 36.5 million in 2008 – which would result in China importing 9.6 million bales in the 2009 marketing year.

On the other hand, he said India may return as a more significant exporter in 2009 as that country's production is expected to be near current levels with only a slight recovery in mill use.

The economist told delegates the NCC sees a slight contraction in U.S. cotton offtake for 2009 with U.S. cotton exports projected at 11.2 million bales and U.S. mill cotton use at 3.9 million bales.

“Heading in 2009, the U.S. textile industry remains under pressure from a combination of factors,” Adams said. “Retail purchases declined in calendar 2008 and likely will fall further in 2009. In addition, the limits on imports from China in 34 textile categories expired at the end of 2008.”

On a positive note, Adams said the much-needed economic assistance included in the 2008 Farm Bill has been implemented and textile mills are submitting the necessary documentation to receive 4 cents per pound on their cotton consumption.

Also, the United States' government has begun monitoring certain U.S. textile and apparel imports from China in a move aimed at preventing a repeat of the disruptive surge of Chinese textile/apparel exports to thiscountry following the discontinuation of quotas in 2005.

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