Cotton futures could push beyond 67 cents a pound, but yield and quality of the Delta and Southeast crops could restrict gains, says Ed Jernigan chairman and CEO of GLOBECOT, a marketing and information company.
“Still, I'm bullish about the upside potential.”
Jernigan, speaking at a Bayer Crop Science/FiberMax Field Day in Idalou, Texas, recently, outlined opportunities and obstacles facing the U.S. cotton industry.
The good news is that the world supply of cotton is significantly below consumption. Estimates indicate a 92-million- to a 94-million-bale production for 2003. Consumption could reach 100 million bales, Jernigan said. “Production is lower than earlier projections, primarily because of China's reduced crop prospects.”
Massive flooding took out as much as 6 million bales in China.
Jernigan said ending stocks are likely to range from 30 million to 31 million bales.
The situation in the United States is less promising. “We have a surplus,” Jernigan said. “Domestic consumption has dropped from 11 million bales to 6 million.”
Impetus for the decline includes the rapid disappearance of the domestic textile industry. “And we hear reports that more mills are closing. That leaves us relying on an export market.”
U.S. farmer arena
Jernigan said the U.S. carryout would be 70 percent of domestic demand. Projections for the 2003 crop range from 16.9 million to 17 million bales, leaving a sizeable chunk for the export market.
That's the arena in which U.S. cotton farmers will play, Jernigan said. China, the world's largest consumer of cotton, accounts for one-third of all consumption. But they also account for a significant percentage of U.S. textile imports.
“China's economy is one of the hottest in the world,” Jernigan said. “China is the No. 1 supplier to most other Asian nations.”
India, Pakistan, Turkey and Vietnam follow China as top consumers.
“Vietnam cotton consumption is growing,” he said.
He said quality of U.S. cotton must improve to compete in the international market.
But high quality cotton from U.S. fields may have an opening this year. Jernigan said the Australian crop, known for quality, would be significantly reduced, leaving San Joaquin Valley, California/Arizona and FiberMax cottons to take up the slack.
He said a FiberMax certification program could add premiums to growers who register in the program.
Italy, he said, buys a lot of Australian cotton and may look to FiberMax to fill some gaps this year, since the varieties have an Australian base. He said FiberMax was the third U.S. cotton to sell out last year.