It may come as a surprise to beleaguered American cotton growers, who've seen average prices this year at the lowest level in 30 years and stocks rising, but the USDA's chief economist says there's some good news.

“It is that the U.S. has a large supply of high quality cotton and, as a result, our share of world exports is up sharply this year,” Keith Collins said at the Agricultural Outlook Forum 2002 in Washington. “Despite slow world economic growth, U.S. cotton exports are forecast to reach 10 million bales — the highest since the 1920s.”

That, however, is against the gloomy backdrop of carryover stocks at the highest levels in two decades, record high U.S. production last year, and domestic mill use in the tank.

For the latter, the outlook continues grim. “Domestic mill use of cotton is expected to decline about 18 percent for 2001/2002,” Collins said. At 7.3 million bales, that represents a loss of 4 million bales, or 35 percent, from the peak of U.S. mill use in 1997/98.

“U.S. cotton demand has been hurt by contraction of the domestic apparel industry; the strength of the U.S. dollar is also a key factor.

“Since 1997 alone, the textile trade weighted value of the dollar has risen 30 percent, if trade with Mexico is excluded. Textile and apparel imports have risen nearly 5 million raw cotton-equivalent bales from 1997/98 to 2001/02. One third of the increase came from NAFTA (North American Free Trade Agreement) countries, another one-third from Asia, and the rest from other regions.”

However, over half the imports from NAFTA countries were offset by higher U.S. textile imports such as yarn and fabric to those countries, chiefly Mexico.

“But with the dollar's strength, it has become more difficult for both U.S. and Mexican businesses to compete with foreign mills, and the growth in NAFTA textile trade has slowed.”

The dragging U.S. economy has also hurt American mill use, Collins said. “At retail, U.S. consumers used an estimated 20.7 million bales of cotton in the form of imported and domestic products during 1999/2000; 20 million in 2000/01; and an expected 18.9 million this season.”

For 2002/03, Collins said economic recovery in the U.S. “is likely to promote growth in retail use of cotton, after two years of decline.”

Foreign mills' share of the U.S. consumer market is likely to continue rising, he noted, “but higher retail use should help U.S. mill use to increase slightly.

“This season's lower prices should reduce U.S. and foreign-planted acreages, with U.S. production declining about 2.5 million bales from the record 20.1 million last year.

“U.S. exports could be strong again,” Collins said, “and could exceed this year's level, but U.S. stocks are likely to decline only slightly, limiting prospects for any sharp rebound in cotton prices.”

hbrandon@primediabusiness.com