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Serving: United States
Corn+Soybean Digest

Cotton Acreage Expands

U.S. cotton producers intend to plant 14.05 million acres of the crop this spring, up 0.6% from last year, according to the National Cotton Council (NCC) in its annual early season planting intentions survey.

Upland cotton intentions are up 1.1% to 13.86 million acres. Extra long staple (ELS) intentions of 184,000 acres represent a 24.7% decline over 2002.

With average abandonment, total upland and ELS harvested area would be about 12.7 million acres. Applying each state's average yield to its 2003 projected harvested acres generates a crop of 17 million bales from 16.64 million bales of upland cotton and 435,000 bales of ELS cotton.

“Current futures suggest that grower returns will still be consistent with loan values or just slightly better for this year's crop,” says Gary Adams, vice president of economics and policy analysis. “Corn prices have fared slightly better than either cotton or soybeans, and as a result, we may see some acres shift from cotton into corn. As an offset, changes in the peanut program under the '02 Farm Bill may lead to additional acres shifted into cotton.”

Adams says the decline in ELS acreage comes in response to prices that are pressured below historical averages.

Cotton Merchants' Role Grows

U.S. cotton merchants will play a greater role in producers' economic viability in the months ahead, says Gary Adams, National Cotton Council (NCC) vice president of economics and policy analysis.

Adams says that the demand base for U.S. raw cotton continues to have “very serious” challenges. With more than half of U.S. raw cotton moving into the world market, increased access and sales to international markets will be more crucial to the industry's health.

Adams, speaking at the annual NCC meeting in Tampa, says a more export-oriented U.S. raw cotton sector will be greatly affected by shifts in global supply and demand. The increased emphasis on exports has been necessary as the domestic textile industry contracted under severe pressure from increased textile imports.

Maintaining domestic mill use will also be important in preserving U.S. cotton's demand base.

For 2003, NCC projects that U.S. domestic mill use will fall to 7.3 million bales. U.S. exports could reach 10.7 million bales — if China continues to be a net importer of raw cotton.

“China remains the wild card in world markets due to the sheer size of its market and unpredictability of its net trade position,” Adams says. “Lower production and increased consumption have led to a drawdown in China's stocks as well as increased imports during the current marketing year.”

For the 2003-04 crop year, he expects China's production will again fall short of consumption, leading to continued imports. However, these imports are based on need and don't reflect changes in the country's willingness to abide by the commitments associated with World Trade Organization (WTO) accession.

“The U.S. must continue to push China to correct its implementation of tariff rate quotas under its WTO accession agreement, and to oppose barriers erected due to arbitrary quality tests,” Adams says.

Brazil Requests WTO Settlement Against U.S.

Brazil has requested a formal World Trade Organization (WTO) dispute settlement panel as a continuation of its November request for consultations with the U.S. concerning virtually all aspects of the U.S. cotton program. Brazil charged that the cotton program violated the U.S.'s obligations under the WTO ag agreements and U.S. commitments under the so-called peace clause.

U.S. officials consulted with representatives of the Brazilian government in Geneva in December and January. The Brazilian WTO complaint is broad and far-reaching. It will require the first clear-cut interpretation of the “peace clause” contained in the WTO agreement.

Brazil also challenges the Export Credit Guarantee Program and Step 2 of the cotton competitiveness provisions.

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