Extra-long staple cotton report – production and export statistics for marketing year 1989/90-1991/92 including USSR, Egypt, Israel, Peru and Sudan; U.S. pima cotton production and export statistics

Extra-long staple cotton report – production and export statistics for marketing year 1989/90-1991/92 including USSR, Egypt, Israel, Peru and Sudan; U.S. pima cotton production and export statistics – U.S. Dept. of Agriculture, Foreign Agricultural Service report

Brian Goggin

I. Introduction

Due to genetic differences, extra-long staple (ELS) cotton is fundamentally unlike upland cotton. ELS cotton is produced from the lint fibers of Gossypium Barbadense, a perennial plant originally domesticated in South America. On the other hand, upland cotton is produced from the lint fibers of Gossypium Hirsutum, a separate species that was domesticated independently in the Tehuacan Valley of Mexico. ELS cotton generally has staple lengths of at least 1 3/8″ or longer. (The Agricultural Act of 1949 defines ELS cotton, for program purposes, as “any pure strains of the Barbadense species, or hybrid there of, that is grown in a county designated by the Commodity Credit Corporation as suitable for ELS production….”) ELS cotton fibers are also generally stronger and finer than upland cotton fibers. Although there are clear genetic differences between the two cotton species, the differences are often blurred by dissimilar cotton classification techniques in ELS producing countries. Also, accurate identification of cotton staple lengths for every ELS bale produced, consumed, and traded is beyond the limits of any organization. The current method of estimating ELS production, consumption, and trade is to identify cotton types that are generally longer than upland varieties and report the entire crop of that type as ELS. This technique allows ELS to be described by type. Example ELS types are Pima, (produced in the United States, Peru, and Israel); Egypt’s Giza 45, 70, 76, & 70; India’s Suvin and DCH-32; China’s Xiniang 149; Sudan’s Barakat; and the USSR’s Tonkovoloknistyi. ELS cotton is generally used to manufacture high quality ring-spun yarns. Common end-uses of ELS cotton include sewing thread, lace yarns, and high quality dress and shirt fabric. It is seldom used to produce coarse yarns for denim and knits–these being more economically produced with upland cotton varieties. Prior to the development of special man-made fibers, ELS had widespread industrial and military applications, including tire cord, military belting for uniforms and machine-guns, and parachute ribbing. The cultivation and ginning of ELS cotton also are different from upland cotton. ELS cotton requires a longer growing season, and with few exceptions, is grown under irrigation. (Although plant breeders have substantially shortened the ELS growing season, most ELS types mature 2 to 8 weeks later than upland cotton types.) In order to maintain its unique fiber qualities, ELS cotton is normally roller-ginned, while upland cotton is typically saw-ginned. ELS production accounts for less than 8 percent of total world cotton production and is primarily concentrated in 7 countries–USSR, India, Egypt, Sudan, the United States, Peru, and Israel. These countries produce more than 95 percent of the world’s ELS crop. Other producers include Morocco, Belize, and Barbados. In contrast to ELS’s limited geographical production, ELS consumption is nearly worldwide. Since it requires no special investment in equipment or added preparations, ELS consumption is extended throughout the world. Also, ELS cotton is easily integrated into a variety of cotton fiber spinning systems, and is sometimes mixed with polyester staple to produce high quality poly-cotton blends. Since ELS production is concentrated in just a few countries, and since its consumption is extensive, a large portion of the ELS crop is exported. In recent years, the leading ELS cotton exporter is the United States, which expanded the production of ELS Pima cotton throughout the late 1980’s and surpassed Egypt in MY 1987/88 as the largest exporter. For the 1991/92 marketing year, U.S. exports of ELS cotton totaled over 30 percent of worldwide ELS exports. The leading importer of ELS cotton is Japan, followed by Italy and Germany. The next section will describe recent trends in worldwide ELS production and exports. Following the worldwide production and export situation will be a discussion of the production situation and outlook in five of the largest exporting countries: USSR, Egypt, Israel, Peru, and Sudan. The report will then close with a review of the situation and outlook for U.S. Pima cotton.

II. A Review of Extra-long Staple Cotton Production and Exports

According to the International Cotton Advisory Committee (ICAC), and the Foreign Agricultural Service estimates, worldwide ELS cotton production in the current 1991/92 marketing year (August-July) is expected to fall by nearly 300,000 bales. A variety of factors in the producing countries, including slackening demand for textiles produced with ELS cotton (especially in Europe), falling international prices, and drought, are the cause of the production decline. Table 1 shows that the main source of the decline is attributed to a 232,000-bale drop in Egypt’s production.

Table 1. World ELS Cotton Production

(In thousand 480 lb. bales)

MY 89/90 MY 90/91 MY 91/92

China 160 259 184

India 979 969 975

Peru 125 92 97

Egypt, LS(1/) 938 948 795

Egypt, ELS 371 380 395

Sudan 219 64 95

Israel 145 71 72

USSR 1263 1461 1492

United States 692 450 422

Others(*) 50 50 41

Totals 4942 4744 4568

(1/)Because of staple-length differences, Egyptian varieties require two classifications. Egyptian ELS varieties have generally longer fibers than other ELS varieties and command the highest prices in world markets. Egyptian long staple (LS), although shorter and coarser than Egyptian ELS, is of sufficient length to be included in ELS classification of other countries. Source: Foreign Agricultural Service, Washington D.C. and the ICAC. For MY 1992/93, worldwide ELS production is expected to rebound to approximately 4.90 million bales, which is near the average for MY 1989/90 and MY 1990/91. Among producing countries, Egypt, India, and the United States are expected to increase ELS production, while production declines are expected for Egypt, Israel, and Peru. Consumption in MY 1991/92 is expected to equal last year’s levels which, when coupled with a decline in production, will lead to a drop in worldwide stock levels. Current estimates are that stocks could fall by as much as 25 percent in the current marketing year. The falling stock levels may lead to increased prices, especially in MY 1992/93. Table 2, below, shows that ELS cotton exports are dominated by three countries: the United States, India, and Egypt. Formerly, Egypt dominated ELS exports, in many years achieving a 60-percent worldwide market share:

Table 2. World ELS Cotton Exports

(In Thousand 480-pound bales)

MY 89/90 MY 90/91 MY 91/92

China 38 64 69

India 117 117 117

Peru 51 74 63

Egypt, LS(1/) 50 10 65

Egypt, ELS 156 140 165

Sudan 165 130 120

Israel 147 75 30

USSR 92 92 75

United States 265 450 325

Totals 1081 1152 1029

(1/)Because of staple-length differences, Egyptian varieties require two classifications. Egyptian ELS varieties have generally longer fibers than other ELS varieties and command the highest prices in world markets. Egyptian LS, although shorter and coarser than Egyptian ELS, is of sufficient length to be included in ELS classifications of other countries. Source: Foreign Agricultural Service, Washington D.C. and the ICAC.

Egypt’s dominance in ELS trade is now being challenged for the first time since the late 1800’s by the emergence of the United States as a major ELS cotton exporter. Although Egyptian cotton still commands the highest prices and is still regarded as the world’s finest, U.S. shipments of ELS to international markets have increased significantly since MY 1987/88, while Egypt’s exports have declined markedly due to production shortfalls. Trade sources indicate that imports of ELS in MY 1991/92 have declined throughout Eastern and Western Europe, while ELS imports to the Far East have remained relatively stable. Eastern European cotton textile producers have registered 20 to 70 percent declines in estimated ELS cotton imports. Many of the economies of Eastern Europe are struggling to adjust to free market reforms that were enacted in early 1990. These reforms included the removal of cotton textile import barriers which allowed imports to capture a large share of the Eastern Europe’s cotton apparel and textile market. This trend is expected to continue well into MY 1991/92. Western European ELS cotton spinners have also curtailed imports, primarily because of slackening demand for high-value cotton products. Furthermore, increased competition from synthetics, especially in Germany, has led to a reduction in ELS consumption.

III. Five ELS Producers and Exporters–USSR, Egypt, Israel, Peru, and Sudan

The Soviet Union’s ELS cotton production is concentrated (as it is with upland cotton production) in the Central Asian republics of Tadzhikistan, Turkmenistan, and Uzbekistan. ELS production is expected to increase slightly in MY 1991/92, although efforts to produce more food and forage crops may reduce ELS production in the more distant future. Recently introduced market-oriented practices in the Soviet cotton spinning industry that favor the consumption of upland cotton may reduce Soviet internal consumption of ELS. In an attempt to develop a more internationally competitive textile industry, the Soviet Government will no longer support uneconomical spinning mills. Consequently, cotton spinners are expected to modify their purchasing decisions–reducing their purchases of the more expensive ELS cotton and concentrating on lower priced short-to-medium staple cotton, in order to reduce costs. The change is expected to decrease Soviet ELS consumption and increase exportable supplies. Also, the Central Government is more strongly committed to producing upland cotton in the future. Although, Soviet ELS cotton production increase slightly to 1.49 million bales MY 1991/92, production levels are expected to decline in MY 1992/93. Preliminary projections for MY 1992/93 is for Soviet ELS cotton production to decline to approximately 1 million bales. Egypt was once the dominant ELS cotton producer and exporter, but its ELS production has declined steadily over the past 10 years. In MY 1980/81, Egypt accounted for nearly 60 percent of world ELS production and exports. In contrast, by MY 1990/91, Egypt’s share of world production had fallen to only 27 percent of world production and 15 percent of world exports. Declining yields in recent years is the major cause for the drop in production. From MY 1985/86 to MY 1989/90, yields declined by an average of 8 percent annually. The primary cause of the low yields was unfavorable procurement prices offered by the Egyptian Government compared to other less labor intensive crops, such as rice, berseem clover, and corn. The low procurement prices acted as a tax on producers, who responded with poor agronomic practices and inadequate pickings. The Egyptian Government has recognized the need to raise the procurement price, but as of the upcoming crop, has yet to implement a significant price increase. Consequently, production and exports are expected to decline in MY 1991/92 to 1.25 million bales and 235,000 bales, respectively. The Egyptian long staple varieties, which are long enough to be considered ELS by international standards, have been particularly affected by the low procurement prices. Israel’s ELS production and exports are also declining, although for entirely different reasons than Egypt’s. ELS production in Israel reached 143,000 bales in MY 1989/90, but fell dramatically in 1990/91 to 72,000 bales, due primarily to drought and reduced groundwater for irrigation. The lack of water forced the Government to formulate an emergency water policy and curtail irrigation quotas. In some areas, water use by cotton producers fell by as much as 60 percent. Other emergency regulations required cotton to be irrigated only with brackish water or recycled effluent. Also, growers’ price expectations favored the planting of upland cotton so acreage planted to ELS declined. The outlook for Israel’s ELS production for 1991/92 and beyond is bleak. The Israeli Government decided to cancel water use subsidies and require agricultural producers to pay the full cost for water. If the policy is implemented, few producers can be expected to maintain production at current levels. In fact, the change may induce farmers to develop high-value agricultural production, such as flowers or fruits and vegetables. Consequently, Israel’s ELS production is expected to decline over the next several years. The 1990/91 production estimate is 72,000 bales, slightly more than half of 1989/90’s production. Israel’s cotton textile mills consumed virtually none of the domestic ELS production, so nearly the entire ELS crop is exported, primarily to Italy, Germany, and other EC textile producers. Exports reached 140,000 bales in MY 1989/90 and fell dramatically to an estimated 65,000 bales in MY 1990/91. ELS exports are projected to fall further to 30,000 bales in MY 1991/92. In Peru, unfavorable prices, lower yields, and grower financing problems are expected to reduce both ELS production and exports during MY 1991/92. Peru’s ELS production reached 150,000 bales in 1989/90, but is estimated to have fallen to 121,000 bales in 1990/91. For 1991/92, production is expected to fall further to 99,000 bales. However, domestic consumption of Peru’s ELS cotton is expected to decline in 1991/92. Exports are expected to reach only 40,000 bales, less than half of the 97,000 bales exported in MY 1989/90. The Peruvian Government’s anti-inflation measures caused severe farm credit shortages throughout Peru. As a result, many of Peru’s cotton producers are switching to crops with a shorter growing cycle, such as rice and corn, in order to recoup production costs more quickly. Peru’s farmers have grown dependent on the Government’s subsidized credit to finance the purchase of inputs, such as seed and fertilizers. Also, since cotton requires more inputs that many alternative crops, Peru’s cotton farmers are switching to rice and corn production. In Sudan, the need to produce more food has led to severe declines in ELS cotton production. Sudan’s agricultural policy for 1991/92 is to devote a larger percentage of irrigated land to food and forage production, reduce the area for irrigated cotton, and encourage the expansion of rainfed cotton production. This policy has prompted the reduction of irrigated ELS cotton plantings from nearly 700,000 acres in 1989/90 to 385,000 acres in 1991/92. Conversely, rainfed upland cotton is now planted on 150,000 acres, up from 20,000 acres in 1989/90. In addition to the policy changes, drought and insect infestations reduced yields in 1990/91, resulting in unprecedented production declines. Production of Shambat and Barakat, Sudan’s ELS types, reached only 64,000 bales in 1990/91, down from 219,000 bales in 1989/90. ELS production is expected to rebound to 95,000 bales in 1991/92, due primarily to improved climactic conditions and a reduction in insect infestations.

IV. U.S. Pima Cotton Production and Exports–a Continuing Success Story

In the United States, Pima cotton is an ELS variety produced in Arizona, California, Texas, and New Mexico (nominal amounts are also being produced in Mississippi). The original seedstocks from which Pima cotton varieties are now produced were brought from Egypt in the early 1900’s. After unsuccessful attempts to grow Egyptian cotton varietes in the Southeastern and Delta areas of the United States, USDA plant scientists initiated planting trials in agricultural experiment stations in Arizona. USDA plant breeders were able to develop commercially successful varieties in a few years, but widespread Pima production did not begin until the onset of the U.S. involvement in World War I. The war increased the demand for domestically produced ELS fiber, primarily because the supply of Egyptian cotton to U.S. mills was severely reduced by unrestricted submarine warfare. U.S. corporations, particularly U.S. tire producers, began to invest extensively in Pima cotton production in the Salt River Valley of Arizona. The tire companies produced cotton and contracted Pima cotton production at guaranteed prices that encouraged a Pima cotton boom from 1917 to 1919. Thereafter, prices and production declined swiftly, but Pima cotton would remain a fixture of Southwest agriculture. Eventually, Pima production expanded to other southwestern states, with California substantially increasing production throughout the 1980’s. However, Arizona remains the largest producer. Table 3 shows that Pima cotton production has increased throughout the 1980’s, especially in California. This trend is expected to continue in the 1990’s, with California eventually surpassing Arizona as the largest Pima cotton producing state.

Table 3. U.S. Pima cotton production is concentrated in 4 states.

(1000 480-pound bales)

Arizona California Texas New Mexico Total(2/)

1980/81 72.3 0.1 25.0 6.8 104.2

1981/82 53.7 0.0 18.0 7.9 79.6

1982/83 65.9 0.0 22.8 10.0 98.7

1983/84 46.9 0.0 32.0 15.8 94.7

1984/85 88.1 0.0 29.9 12.4 130.4

1985/86 108.7 0.0 35.1 11.3 155.1

1986/87 148.3 0.0 41.0 16.6 205.9

1987/88 213.0 2.2 50.8 18.6 284.6

1988/89 214.0 3.2 66.5 23.5 334.2

1989/90 477.0 40.2 129.0 44.5 691.7

1990/91 194.0 57.4 81.0 24.5 358.5

1991/92(1/) 180.0 127.5 90.0 26.0 424.6

(1/)Forecast (2/)Nominal amounts are also being produced in Mississippi. Source: National Statistics Board, National Agricultural Statistical Service, USDA, Washington, D.C.

Although the Pima cotton industry was originally developed to provide a source of high quality cotton for domestic spinning mills, U.S. Pima cotton is now primarily produced for export. U.S. mills generally consume less than 30 percent of U.S. Pima production. Ironically, U.S. Pima cotton is now competing successfully with traditional consumers of Egyptian ELS cotton fiber. The high quality of U.S. Pima is proving to be an effective substitute for Egyptian cotton, especially among Far Eastern ELS cotton spinners. As Table 4 illustrates, Japan is the largest importer of U.S. Pima cotton, followed by Germany and Italy:

Table 4. U.S. Exports of Pima Cotton Are Dominated by Shipments to Western

Europe and Far Eastern Destinations for Marketing Years 1987 to 1990

(Aug. 1 to July 31)

(In thousand running bales)

1987/88 1988/89 1989/90 1990/91

European Community: 113.5 103.2 183.2 133.0

Belgium 5.4 3.8 11.3 4.5

France 1.7 1.2 .9 0.0

Germany 67.5 53.1 83.4 39.8

Italy 27.7 35.7 69.5 73.9

Portugal 3.3 4.4 9.7 4.2

Spain 4.2 4.1 4.6 2.3

Other Europe: 25.2 35.2 89.0 84.8

Austria 1.7 1.6 4.7 1.2

Czechoslovakia 0.0 1.9 4.7 3.6

Switzerland 15.8 20.2 32.7 30.5

Turkey 0.9 0.7 1.9 2.7

Yugoslavia 6.4 11.0 5.6 5.5

Japan 53.1 81.2 96.4 112.9

China 0.0 2.2 0.1 0.0

Taiwan .5 .1 5.3 8.0

Other Asia and Oceania: 35.7 36.6 67.1 78.2

Bangladesh 2.4 3.2 7.1 12.8

Indonesia 2.2 3.0 5.8 14.9

Iraq 3.7 5.6 2.3 0.0

Pakistan 2.5 1.7 5.4 1.2

South Korea 22.1 22.3 40.5 42.2

Thailand 1.7 0.9 4.7 7.0

Africa: 1.3 5.0 4.8 6.4

Algeria 0.0 5.0 0.0 5.7

South Africa 1.3 0.0 0.4 .4

Western Hemisphere: 7.8 0.9 5.7 3.8

Argentina 0.5 0.0 0.7 0.0

Brazil 0.0 0.0 3.8 3.8

Chile 0.6 0.8 0.7 0.0

World Totals 237.1 264.4 451.9 395.6

Source: U.S. Export Sales, Foreign Agricultural Service, USDA.

Pima production for 1991/92 is projected to reach 434,100 bales, a 21-percent increase above last year’s production. The 75,600-bale increase is attributed to both higher planted area and higher yields. Planted area reached 246,200 acres this year, 15,000 more than last year, while the average yield is projected to reach 856 pounds per acre, 98 pounds greater than last year. Total offtake of U.S. Pima cotton reached 482,000 bales in MY 1990/91, with only 65,000 bales consumed domestically. The 415,000 bales exported in MY 1990/91 were the second highest on record, behind the 451,000 exported in 1989/90. Domestic consumption is expected to rise slightly in MY 1991/92, to 70,000 bales. Exports are expected, however, to fall to 325,000 bales, due primarily to increased worldwide competition from other suppliers, and slackening demand for cotton fabrics in Europe. Exports of ELS cotton for August through October 1991 were only 29,600 running bales, or roughly 35 percent of the 83,000 bales exported during the same period last year. Consequently, total offtake is expected to fall below the 425,000-bale production estimate, reaching 395,000 bales. The carry-over will raise ending stocks to 111,000 bales, a 43-percent increase above last year’s levels. The long-run outlook for Pima production is generally good. Continued strong export demand and favorable price developments should continue to drive production upward. Current projections for the 1992/93 marketing year, based on trend yields and normal abandonment, have production reaching at least 450,000 bales. Exports are also expected to increase to 400,000 bales. U.S. Pima growers have rapidly accepted the leading role as the largest ELS exporter, assuming a leading share in markets that were once dominated by Egypt. Also, the ELS/Upland price ratio, the most important factor determining ELS production decisions, is generally favorable. Figure 1, on page 45, shows that the ratio has exceeded 1.20 in favor of Pima since June of 1990. Although domestic Pima prices have not risen appreciably since then, upland prices have fallen sharply.

Brian Goggin, Agricultural Economist, Tobacco, Cotton & Seeds Division, Foreign Agricultural Service, USDA.

COPYRIGHT 1991 U.S. Department of Agriculture

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