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New cotton `bull market' unsettling

While the recent upmoves in U.S. cotton prices appear to have ended a five-year downward spiral, "This new bull market has proven unsettling to the industry's major players," says USDA Fibers Analyst Carol Skelly, Washington.

"Foreign mills are not buying, U.S. mills have yet to lock in prices, and farmers are just beginning to hedge their crops," she told members of the Cotton Board at their annual meeting at Coronado, Calif. "All this is causing U.S. merchants to wonder if it's really possible to reach exports of the 8-million-bale magnitude that the USDA is projecting."

In addition, she said, "The marketing loan parameters are in a state of flux: U.S. prices are rising faster than the A-Index, which means the POP rate is declining slowly, the Step 2 rate is rising a little faster, and the Step 3 import quota has triggered again."

Three major factors have pushed cotton prices upward, Skelly said.

- Concerns about U.S. and world supplies.

- Strong world demand.

- Uncertainties about policy and trade in China.

Global production and consumption projections for 2000-2001 point to a continuing decline in world stocks, she said, with next July's levels expected to be the lowest in six years, thus "increasing the market's sensitivity to any development that could further reduce world supplies." And, she noted, the market has been factoring in a further reduction in this year's weather-ravaged U.S. crop, with some analysts lopping as much as 1 million bales off the August USDA forecast of 19.2 million.

"World consumption is projected at a record 92.5 million bales," Skelly said, and with strong world economic growth expected to continue, "a return to the long-run average growth rate seems a reasonable assumption at this point."

Although some analysts see China as a net exporter of cotton, she says, "closer examination suggests large net exports are unlikely."

Still, "Uncertainty about China's trade and stocks is clouding the supply-demand picture." The USDA is projecting China's imports and exports a wash at 700,000 bales.

What are the implications of the tightening world cotton situation for U.S. supply and demand? "The chief implication is that the U.S. will provide an unusually large share of world exports," Skelly said.

On the domestic front, "the good news is that U.S. consumers are buying more cotton; the bad news for U.S. spinners is that of the total retail cotton consumption estimate of 21.9-million-bale equivalents, domestic mill use is likely to account for just under half. Conversely, the good news for importers is that growth in cotton textile imports and the textile trade deficit continue to increase the import share of the U.S. retail market." The USDA's August cotton mill use estimate was 10.2 million bales.

"The combination of larger production and the recent stronger prices should raise gross market income for the 2000 crop," Skelly said, "but farmers' financial positions may not improve commensurate with the market returns. Recent increases in the A-Index suggest that loan deficiency and marketing loan payments will decline from last year, cutting total programs income from about $2.75 billion to about $1.6 billion.

"Total gross income - including market receipts and contract payments, marketing loss payments, the marketing loan program, and cottonseed support - are projected to be up slightly. But, if we deduct variable production costs to derive net returns per planted acre, we find they are at or slightly below last year's level, even with the emergency assistance. And these estimates do not reflect any further losses due to weather. It should also be kept in mind that the distribution of benefit will not be targeted to those with the greatest crop disasters."

While "further farm legislation is possible in 2001," Skelly noted, discussion of the 2002 farm bill will likely begin in earnest following the November elections.

"Policy discussions around Washington have thus far centered on goals of maintaining planting flexibility, support exports, and providing an appropriate income safety net."

The Cotton Board provides oversight for the research and promotion programs of Cotton Incorporated that are funded by U.S. producer checkoff funds and levies on cotton importers.

It has served many purposes since the early 1600s, including medicinal uses, to make cement, to preserve fruits, to make furniture polish and varnish, and to prepare food and beverages. What is this versatile substance? Honey!

We grow money! U.S. paper currency is made of 75 percent cotton, much of it grown in California, and 25 percent linen. One bale of cotton can make $294,000 in one-dollar bills.

Each year more than 10 million California residents of all ages and from all backgrounds get together to celebrate agriculture at 79 state-supported fairs. This first-hand look at agriculture is a first-time experience for some. Some come to show animals, others compete for prizes and some exhibit their handiwork. Everyone comes for the food and the fun that contributes approximately $1.6 billion to the economy.

Margaret Thatcher once said, "It may be the cock that crows, but it is the hen that lays eggs." Laying an egg is something to crow about. A hen must eat 4 pounds of feed to make a dozen eggs. According to Farm Bureau sources, the largest single chicken egg ever laid weighed a pound with a double yolk and double shell

"Make hay while the sun shines." California farmers did. Of all field crops last year, hay was valued the highest at $802 million.

The University of California Cooperative Extension has launched a new Web site that gives California farmers access to certain UC agricultural meetings anytime on demand over the Internet. The Web site, found at, features audio recordings of UC advisors and specialists synchronized with the photos, graphs and tables they use in their presentations.

If you think there's no farming in San Francisco, you should know that at last report, nursery production in the "city by the bay" was valued at $1.9 million dollars.

Now that we've been fruitful and multiplied, how can we feed and clothe the 12 billion people that will populate the earth in 40 years? No problem. All we need is 93 million farmers who can each produce enough food and fiber to feed 129 people for a year ... just like a California farmer.

The first trans-Atlantic voyage of the airship Graf Zeppelin in 1928 brought seven species of insects and two plant diseases in the bouquets of flowers on board. This called attention to the need for quarantines and the fact that people are not the only living things that travel on international fights.

Agriculture does more than put food on your table. In California, it contributed more than $80 billion to the economy.

In this country, we eat about 2,175 pounds of food per person each year and about 900 calories more every day than the worldwide average of 2,700, say Farm Bureau sources.

There are 1.8 acres per person of arable land in agricultural production to feed the current U.S. population. By 2050, that figure is expected to decline to 0.6 acres. This will result in higher food prices, imported goods and less diversity in our diet. Farmers look to advances in science, biotechnology, animal nutrition, technology and water delivery systems to help them stay productive and competitive.

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