MP_CN206
December 10, 1999

Spot cotton quotations averaged lower than in the previous week, according to the USDA, Agricultural 
Marketing Service?s Cotton Programs.  The base quality of cotton (color 41, leaf 4, staple 34, mike 35-36 and 
43-49, strength 23.5-25.4) in the seven designated markets averaged 46.79 cents per pound during the week 
ending Thursday, December 9.  Quotations averaged 47.37 cents during the previous four-day week, and 
61.92 cents during the corresponding week a year ago.  Quotations ranged from a new season low of 46.46 
cents on Monday, December 6, to a high of 47.19 cents on Tuesday, December 7.  The December 6 average 
was the lowest daily average since November 20, 1986, when the average was 45.85 cents.  The New York 
March futures settlement price ended the week at 49.90 cents, against 50.59 cents a week earlier.  The NY 
May futures settlement price was 51.24 cents, compared with 51.97 cents a week ago.   

Southeastern markets.  Spot cotton trading was moderately active.  Supplies were moderate.  Demand 
was good for color 41 and better, leaf 4 and better, staple 34 and longer, mike 35-49, and most offerings 
traded. Demand was light for cotton in mixed lots with a high percentage of staple 33 and shorter or mike 
50 and higher.  In mixed lots, color 41 and better, leaf 4 and better, staple 34 and longer, mike 35-49, 
traded at around 250 points off New York March futures, FOB car/truck.  Premiums of 100 to 150 points 
were paid for cotton with staple 35 and longer.  Prices for similar qualities with a large percentage of 
staple 33 and shorter were discounted 575 points and higher.  Domestic mills purchased a moderate 
volume of cotton for second through fourth quarter 2000 delivery.  Export trading was light.  Harvesting 
was virtually completed.  Most gins have scaled back their operations to one shift or have begun operating 
on gin days.

South central markets. Spot cotton trading was moderately active.  Transactions involving CCC loan 
equities made up the bulk of activity.  Demand remained good for color 41 and better, leaf 4 and better, 
staple 34 and longer, mike 35-49, and available supplies sold readily.  Most of the cotton offered by 
growers was outside the demand range and often received no bid.  Mixed lots of CCC loan equities sold at 
8.5 to 13 cents per pound.  Mixed lots of color 41 and better, leaf 4 and better, staple 34 and longer, mike 
35-49, sold at around 250 points off NY March futures, FOB car/truck.  Similar qualities with staple 33 
and shorter, or mike 50 and higher were heavily discounted.  Domestic mill purchases were light.  Export 
trading was primarily with Far Eastern and Mexican mills for nearby shipment.  Forward contracts for 
2000-crop cotton were offered to growers at about 300 points off NY December 2000 futures, basis color 
41, leaf 4, staple 34, mike 35-49, FOB car/truck, but no activity was reported.  Fieldwork was briefly 
interrupted early in the period by scattered showers.  Most gins have completed their regular ginning 
operations for the season.  Ginning of moduled seed cotton continued on a limited basis.

Southwestern markets. Spot cotton trading was moderately active.  Supplies were heavy.  Demand 
remained very good for color 31 and better, leaf 3 and better, staple 35 and longer, mike 35-44, strength 
27 and higher, free of extraneous matter.  Demand for other qualities was light to moderate and some of 
those qualities were often heavily discounted.  Prices were slightly lower for most qualities.  In mixed 
lots, colors 41, 32 and better, leaf 4 and better, staple 32 and longer, mike 35-49, strength 26 and higher, 
with limited extraneous matter, sold at 1000-1400 points off New York March futures, FOB car/truck.  
Mixed lots with a higher percentage of staple 32 and shorter often sold for 1500 to 1800 points off NY 
March futures, FOB car/truck.  Domestic and  foreign mill inquiries were light to moderate.  Harvesting 
in some west Texas and Oklahoma communities was slowed by rain and snow.

Western markets.  Spot cotton trading was moderate in the Sacramento and San Joaquin Valleys (SJV).  
Supplies and demand were moderate.  A light to moderate volume of Acala varieties with color 31 and better, 
leaf 3 and better, staple 35 and longer, mike 35-49, traded at around 725 points on NY March futures, UD 
free, FOB gin yard.  Similar qualities, of non-Acala varieties, traded at 300 to 400 points on March.  
Domestic mill purchases remained very light.  Far Eastern mills purchased a light volume of cotton for 
prompt shipment.  Harvesting was virtually completed. Gins continued to operate from backlogs of moduled 
seed cotton.  Plowing of harvested cotton fields for pink bollworm control was in full swing.  Spot cotton 
trading was light to moderate in the Desert Southwest (DSW).  Supplies and demand were moderate.  A light 
volume of color 31 and better, leaf 3 and better, staple 36 and longer, mike 35-49, strength 26 and higher, 
traded at 150 to 200 points off NY March futures, uncompressed, FOB warehouse.  Foreign mills purchased 
a light volume of cotton for prompt shipment.  Spot cotton trading of American Pima increased, even though, 
demand remained light.  In the SJV, a light volume of grade 2, staple 46, mike 35 and higher, traded at 
around 85.50 to 86.00 cents per pound, UD free, FOB gin yard.  Harvesting made good progress.

Textile mill report. Domestic mills purchased a moderate volume of cotton for second through fourth 
quarter 2000 delivery.  Demand was good for color 41 and better, leaf 4 and better, staple 34 and longer, 
mike 35-49.  Some mills continued to bring in San Joaquin Valley and Texas growth cotton to replace 
shorter staple cotton from delta and southeastern growths.  Demand for fine count yarns was good and 
was light to moderate for coarse count yarns.  Consumer sales of housewares were good; men's knitted 
outerwear, infant wear, women's casual apparel, teen apparel and hosiery were moderate; and denim were 
light.  Mill sales of specialty yarns were moderate; sales yarn, upholstery, and industrial fabrics were 
good; gray cloth were light; and domestic denim fabrics and print cloth were very light.  Most mills 
operated on a five to six day workweek.  

The following information was excerpted from the Cotton and Wool Situation Yearbook Summary, 
released December 3, by the Economic Research Service, USDA:  U.S. cotton exports in 1999-2000 
(August-July marketing year) are expected to rebound from last season's 13-year low.  Shipments are 
projected to reach 5.7 million bales this season as an improving world economy in the aftermath of the 
Asian crisis and more competitive prices resulting from the reinstatement of the "Step 2" program are 
coupled with the larger exportable supply.   In early November, U.S. export commitments had already 
reached 4.2 million bales, nearly 1 million above a year earlier.  Even with world cotton trade rising this 
season, U.S. exports are climbing faster.  The U.S. share of the global market is projected to climb to 22 
percent in 1999-2000, compared with 18.5 percent last season. 
        In contrast, U.S. cotton mill use is expected to fall slightly (2 percent) this season to 10.2 million bales.  
The continued rise in cotton textile imports, a projected slowdown in the robust U.S. economic growth of 
the last several years, and a decline in denim demand are expected to moderate mill consumption.  In 
1999, cotton textile exports are expected to increase for the 15th consecutive year, reaching the equivalent 
of 4.3 million bales.  On the other hand, cotton textile imports will rise for the 11th year in a row, and 
could approach the equivalent of 13.5 million bales, further widening the textile trade deficit.  In addition, 
total domestic consumption (mill use plus net textile trade) could reach a record 9.5 billion pounds, with 
per capita consumption surpassing last year's 34.4 pounds.
        Similar to 1998-99, U.S. cotton beginning stocks were 3.9 million bales.  However, the larger 
production this season has mitigated the need for foreign supplies and imports are expected to be small in 
1999-2000.  As a result, total U.S. cotton supply is projected at 20.5 million bales, more than 2 million 
above 1998-99.  Meanwhile, demand is forecast at 15.9 million bales, 8 percent above last season.  Based 
on these supply and demand estimates, U.S. ending stocks for 1999-2000 are estimated to rise to 4.6 
million bales, 17 percent above last season and similar to the 1992 season.  With both stocks and use 
projected to rise in 1999-2000, the stocks-to-use ratio is expected to increase only 2 percentage points to 
29 percent.
        World cotton production in 1999-2000 is forecast to rise to 87.3 million bales, up 2.8 million, primarily 
due to the larger U.S. crop.  Foreign production, projected at 70.8 million bales, is only marginally higher.  
Production increases in 1999-2000 for Pakistan and Uzbekistan stem from higher area and yield, but are 
offset by lower production in China and Mexico, where planted area declined.
        Likewise, world cotton consumption is projected to rebound after two consecutive declines to 87.8 
million bales in 1999-2000, a gain of 2.8 million bales.  Although lower use is expected in the United 
States, consumption in China and India, the world's two largest consumers, is forecast to rise a combined 
1.2 million bales and account for over 40 percent of the rise in consumption.  Brazil, Turkey, Mexico, and 
Pakistan are also projected to consume more cotton this season as world economic growth rebounds.
        World cotton exports in 1999-2000 are forecast to increase 9 percent to 25.7 million bales.  Foreign 
shipments are expected to reach 20 million bales, above the last two seasons and equal to 1996-97.  
Rising exports from Uzbekistan, the leading foreign exporter, coupled with China's return as a major 
shipper in 1999-2000 account for nearly all of the projected 800,000 bale increase in foreign exports this 
season.  In addition, China's 1.2 million bale export estimate is the highest in over a decade.
        With the increase in world cotton consumption, stocks are projected to decline 600,000 bales to 41.3 
million.  Despite the expected increase in U.S. stocks, foreign stocks in 1999-2000 are forecast to fall 
nearly 1.3 million bales to 36.7 million, the lowest in 3 years.  However, the foreign decline is attributable 
to China, where stocks are forecast to fall nearly 2.5 million bales this season.  Excluding China, foreign 
stocks are expected to increase 1.2 million bales to 21.8 million, equaling those of 1991-92.  At season's 
end, China is forecast to hold 36 percent of the world's cotton stocks, down from 41 percent in 1998-99.

U.S. Cotton Situation and Outlook

Demand Outlook for 1999-2000
The U.S. cotton demand outlook points to an improved offtake in 1999-2000.  This season, total cotton 
use is projected at 15.9 million bales, 8 percent above 1998-99, with exports and domestic mill use 
moving in opposite directions.
        U.S. exports are projected to rebound from last season's disappointing 13-year low, but remains well 
below shipments of 2 years ago.  Two key factors keeping U.S. exports from returning to the robust 1997-
98 level include China's return as a raw cotton exporter and the largest foreign beginning stocks since 
1986-87.  Supporting U.S. shipments, however, is an improving world economy in the aftermath of the 
Asian crisis.  U.S. prices are also more competitive this season.  Despite an approximate 20-cent per 
pound decline in world prices from a year ago, U.S. prices have decreased similarly.  A-Index prices fell 
to about 47 cents per pound in October, while the comparable U.S. price quote was near 55 cents.  
Demand for U.S. cotton overseas is also expected to improve due to legislative funding for the "Step 2" 
program.  
        Currently, 1999-2000 U.S. exports are projected to rise over 1 million bales from last season to 5.7 
million, but still nearly 2 million bales below 1997-98.  Upland shipments are expected to reach 5.3 
million bales, while ELS exports are forecast at 400,000 bales.  With the 30-percent rebound in U.S. 
exports and prospects that global cotton trade will improve to 25.7 million bales, the U.S. share of world 
trade will rise modestly.  As of November, the U.S. share of world trade is estimated at 22 percent for 
1999-2000, compared with 18.5 percent last season.
        Based on U.S. Export Sales data through early November, about 650,000 480-pound bales of upland 
cotton have been shipped, compared with 1 million in 1998-99.  While the pending "Step 2" funding may 
have delayed some shipments, sales "on the books" are running well ahead of a year earlier.  Upland 
commitments (shipments plus outstanding sales) for 1999-2000 have reached 3.9 million bales thus far, 
compared with 3.1 million a year ago.  ELS commitments are also above last season with 255,000 bales 
committed, compared with 233,000 by early November 1998.
        U.S. cotton mill consumption is estimated to reach only 10.2 million bales in 1999-2000, 2 percent or 
200,000 bales below last season.  The continued rise in cotton textile imports, a slowdown in the 
"exceptional" growth seen in the U.S. economy over the last 3 years, and a decline in denim demand will 
help moderate mill consumption this season.  Upland mill use is projected at 10 million bales in 1999-
2000, while ELS consumption is estimated at 160,000 bales.
        Based on the first 3 months of data from the Department of Commerce, the seasonally adjusted annual 
rate of cotton consumption averaged nearly 10.1 million bales.  Actual cotton mill use for August through 
October 1999 reached 2.6 million bales, compared with 2.8 million a year earlier.  Cotton mill use, like 
manmade fiber use, has fallen from a year ago, but cotton has declined faster during the first 3 months of 
1999-2000.  As a result, cotton's share of fiber consumed on the cotton system has averaged only 78.7 
percent, compared with 79.3 percent for the entire 1998-99 season.
        Based on these projections of U.S. cotton supply and demand, ending stocks for the 1999-2000 season 
are estimated to rise to 4.6 million bales, 17 percent above last season and similar to the 1992 season.  
Although stocks are expected to increase about 700,000 bales from the beginning level, the ratio of stocks 
to use is projected to rise only 2 percentage points from last season to 29 percent.  Due to much larger 
production, ending stocks of ELS cotton are projected to more than double during 1999-2000.  The ELS 
price support loan rate (79.65 cents per pound) is currently near the world price level.  As a result, a 
significant quantity of ELS cotton may be forfeited to the Commodity Credit Corporation  (CCC) under 
the loan program.

Legislative Changes Affecting Cotton 
Discussions about refunding the "Step 2" program began well before the funds were exhausted in 
December 1998 when the FAIR Act's statutory spending limit of $701 million was reached.  At that time, 
U.S. cotton became less competitive on the world market and soon the "Step 3" import quotas began to 
trigger.  Despite a significant drop in cotton demand last season, this spring saw U.S. cotton plantings 
increase, due to less attractive alternatives, leading to prospects of excess supplies.  And while U.S. 
agriculture has not experienced the prosperity of the general economy, conditions were compounded by 
weather-related problems once again in 1999.
        As a result, additional funding for agricultural aid was developed in Congress, and later signed by the 
President, for fiscal year 2000 which began October 1, 1999.  In general, the legislation increased the 
payment limitation from $75,000 to $150,000 per person and also doubled the production flexibility 
contract payments for the various eligible commodities.
        For cotton, the major legislative change was the reinstatement of the "Step 2" program through July 31, 
2003.  The legislation left the calculation of the "Step 2" payment essentially unchanged and funding for 
the program was not limited to a spending cap as had been previously established.  In addition, changes to 
the "Step 3" program were made that altered the trigger mechanism and also set a maximum import level 
for a given marketing year.
        Under the new legislation, a special upland cotton ("Step 3") import quota will be triggered after any 
consecutive 4-week period that the average price quote for the lowest U.S. growth, adjusted for any "Step 
2" payment in effect exceeds the northern Europe price by more than 1.25 cents per pound.  However, the 
U.S. growth is not adjusted for the "Step 2" payment rate if the U.S. upland stocks-to-use ratio, excluding 
projected raw cotton imports but including the quantity already imported during the marketing year, is 
below 16 percent.  Additionally, the new import limitation for a given marketing year is equal to 5-weeks' 
consumption of upland cotton by domestic mills at the seasonally adjusted average rate of the 3 months 
immediately preceding the first special import quota that is established in the marketing year.  

U.S. Textile Trade and Domestic Consumption
The overall volume of U.S. textile trade has increased once again during calendar 1999.  Because of the 
Asian crisis and the continued trade liberalization of textile and apparel products, the U.S. trade deficit 
will widen in 1999 as the rise in imports outpaces the gain in exports.  In calendar 1998, the textile trade 
deficit reached a record of nearly 6.5 billion (raw-fiber equivalent) pounds, 21 percent above 1997.  
        Textile exports during the first 9 months of 1999 expanded to 3.45 billion pounds, compared with 3.38 
billion in 1998.  However, textile imports through September 1999 increased to 9 billion pounds, 
compared with 8.3 billion in 1998.  As a result, the textile deficit for all fibers through the first 9 months 
of 1999 has approached 5.6 billion pounds, 14 percent above the same period in 1998.  Similarly, cotton 
textile trade for January through September 1999 has increased.  Cotton textile exports are running 7 
percent ahead of last year, reaching 1.6 billion pounds by September.  Meanwhile, cotton textile imports 
have jumped dramatically, rising 11 percent to 5 billion pounds during the first 9 months of 1999.
        For calendar 1999, cotton textile exports will rise for the 15th consecutive year while imports expand 
for the 11th year.  Exports for the 12 months will likely approach the equivalent of 4.3 million bales (2.1 
billion pounds), 5 percent above 1998.  On the other hand, cotton textile imports could exceed the 
equivalent of 13.5 million bales (6.5 billion pounds), 8 percent higher than in 1998.  With imports rising 
faster than exports, the cotton textile trade deficit is expected to expand again in 1999 to the equivalent of 
9.2 million bales of raw cotton.
        With cotton mill use lower and the continued strength of textile imports, calendar 1999 marks the 
second consecutive year in which the raw-fiber equivalent of cotton textile imports exceeds the quantity 
consumed by domestic mills.  While the imported quantity had moved closer to that used by U.S. mills for 
a number of years, the current trend is expected to continue as textile and apparel trade liberalization 
accelerates in the future.
        Total domestic consumption (mill use plus net textile trade) of cotton is projected to expand slightly 
for the third consecutive year.  Based on data for the first 9 months of 1999, domestic consumption 
totaled 7.2 billion pounds, nearly 1.3 percent above a year ago.  By year's end, domestic consumption is 
expected to approach 9.5 billion pounds, a record high.   In addition, the U.S. per capita consumption of 
cotton could reach 35 pounds in 1999, up from last year's 34.4 pounds, with about 19 pounds being 
produced in U.S. mills.

World Cotton Situation and Outlook

World Cotton Consumption, Trade, and Prices Fall in 1998-99
In 1998-99 world cotton markets reeled under a nearly unprecedented decline in consumption, one of the 
largest declines in world trade in the last 40 years, and the largest ending stocks since the mid-1980s.  
Although production also fell from the year before, the 1998-99 average A-Index, in inflation-adjusted 
terms, fell 19 percent.  U.S. exports suffered as well, dropping 42 percent to 4.3 million bales.  This 
marked only the second time in more than 20 years that U.S. exports dropped below 5.0 million bales or 
below a 25-percent share of U.S. beginning supplies (beginning stocks plus production).
        World production fell 7 million bales from the year before in 1998-99, to 84.5 million bales.  Declines 
were led by a 5 million bale drop in U.S. production.  Foreign production fell only 2.1 million bales, to 
about its 1996-97 level of 70.6 million bales.  In the largest foreign declines, Pakistan's crop fell 875,000 
bales and Uzbekistan's fell 628,000, as unfavorable weather at the beginning and the end of the season, 
respectively, led to yet another year of disappointing yields in each country.  Weather problems also 
helped trim Argentina's crop by about 500,000 bales, and Egypt's production was also about 500,000 
bales lower due to price reforms and an unusually hot late season there.  China's production fell only 
400,000 bales from the year before in 1998-99 as larger area and higher yields in Xinjiang partly offset 
reduced crops in most other provinces.  Sub-Saharan Africa harvested 579,000 fewer bales than during 
the year before, due to a 270,000 bale decline in Franc Zone production and declines in Sudan, Tanzania, 
and Zambia.  Among the handful of countries with notably larger crops were India (up 463,000 bales), 
Brazil (up 355,000), Turkey (199,000), and Turkmenistan (100,000).
        World consumption fell 3.5 million bales in 1998-99 to 85 million.  This was a 3.9 percent decline, the 
largest since 1974's 5.4 percent decrease.  Outside the United States, foreign consumption fell 3.3 percent, 
the largest since 1961.  By country, the largest drop came in China, 1 million bales lower than the year 
before, a decline slightly larger than the 950,000 bale drop in U.S. mill consumption.  Other large declines 
were 545,000 bales in Turkey, 300,000 bales in Russia, and about 200,000 bales each in the EU, Pakistan, 
and India.  Countries where consumption rose from a year earlier included Indonesia (up 300,000 bales), 
Mexico (200,000), Korea (122,000), Hong Kong (51,000), and Bangladesh (50,000).
        World trade fell 3.2 million bales to 23.5 million in 1998-99 as world consumption shrank.  U.S. 
exports also shrank 3.2 million bales as the large drop in U.S. yields, exhaustion of  "Step 2" funding, 
reduced sales prospects in importing countries, and changes in Chinese trade policy drove U.S. exports to 
their lowest since 1985.  Uzbekistan, Pakistan, Argentina, and Chad also exported less cotton in 1998-99, 
with declines ranging from 770,000 bales to 175,000 bales.  China's exports rose 647,000 bales and 
Turkey, Turkmenistan, and Syria each exported 250,000 bales more than the year before.  Exports by 
Australia and Egypt were also higher.
        Import declines were led by China (down 1.5 million bales), Turkey (530,000), Brazil (519,000), 
Russia (375,000), and the EU (366,000) (appendix table 18).  Surprisingly, the largest import gains from a 
year earlier in 1998-99 were all by traditional exporters:  Pakistan 780,000 bales higher, the U.S. 430,000 
higher, and India, 305,000 higher.  Larger imports were also reported by several traditional importers, 
including Indonesia (up 277,000 bales), Taiwan (166,000), and South Korea (150,000).
        The changes in imports highlight the difficulties facing the United States on world markets in 1998-99.  
At the same time that an extraordinary drop in U.S. yields reduced the availability of U.S. cotton, China 
reversed its trade policy of the proceeding half-decade, and reverberations of the financial shocks that 
began in Southeast Asia during 1997 continued to affect importing markets.  While Asia's financial crisis 
did far less economic damage than many feared, highlighted by rising imports during 1998-99 by 
Indonesia, Taiwan, and South Korea late 1998 saw Russia and Brazil suffer severe currency devaluations 
and economic contractions.
        As a result, textile industries and cotton imports contracted, but indirect effects showed up in lower 
imports by Turkey and the EU.  Turkey's textile industry had benefited substantially from "suitcase trade" 
with Russia for several years as small traders shipped clothing, and many other goods, in response to an 
overvalued Russian exchange rate.  With the end of this opportunity, Turkey's textile production shrank, 
and traders sought new markets in the EU.  EU textile production, already depressed by increased 
competition from Asia following substantial devaluations in Southeast, East, and South Asia during the 
early phase of the Asian crisis, was forced to contract still further.
        China's change in trade policy also had serious consequences for U.S. exports, as well as world prices.  
On the one hand, the 1.5 million-bale decline in China's imports from all sources represented a direct loss 
in U.S. exports to what was the United States' second largest market during 1997-98 and its largest in 
1996-97.  During 1998-99, U.S. exports to China fell 666,000 bales from the year before.  Moreover, 
indirect competition in other markets increased as other exporters also responded to reduced Chinese 
purchases, and as China returned to the world market as a competitor.
        While the increase in China's exports was not extraordinarily large by historical standards, and its 
decrease in imports was not its largest ever, on a net basis, the impact of these two changes was 
extraordinary.   China's year-to-year decline in imports and increase in exports in 1998-99 summed to a 
2.2 million-bale shift in net trade.  This was the largest decline in China's net imports in a single year, and 
was equivalent to 9 percent of world trade in 1998-99.  Thus, the United States and other exporters faced 
not only the difficulty of competing during a year when world trade shrank to its lowest since 1970, but 
also faced the difficulty of accommodating the efforts of the world's largest cotton producer and consumer 
to correct its supply imbalances through trade policy.  While the level of world trade is expected to 
rebound in 1999-2000, China's supply imbalance could be expected to continue to haunt world markets.

World Production and Consumption Higher in 1999-2000
With a rebounding U.S. crop and foreign production about unchanged from the year before, world cotton 
production is estimated at 87.3 million bales in 1999-2000, up 2.8 million bales, or 3.3 percent, from the 
year before.
        Beneficial weather across a substantial part of Asia contributed to a 4 percent increase in foreign 
production outside of China, despite a 19 percent decline in the inflation-adjusted A-Index during the 
previous marketing year.  Central Asia is expected to harvest 880,000 bales of additional cotton in 1999-
2000 compared with the previous year.  This is by far the biggest upward spike in Central Asia's 
production since the economic upheaval associated with the breakup of the Soviet Union drove the 
region's production into a downward spiral.  Pakistan's crop is expected to jump 1.5 million bales to its 
third largest ever, and excellent yields in the Punjab are expected to sustain India's crop close to its 1998-
99 level, for its fourth largest crop ever.  In Africa's Franc Zone, untimely rains have trimmed forecasts 
recently, but the 1999-2000 crop is expected to be 110,000 bales above the year before, and the second 
biggest ever.  In the Southern Hemisphere, Australia's crop is expected to fall only 100,000 bales in 1999-
2000, for the second largest crop ever, and no change is expected from the year before in Brazil's and 
Argentina's output.
        China's production is forecast 1.7 million bales lower than the year before in 1999-2000, but early 
season procurement prices there have fallen around 30 percent from the preceding year's official levels as 
China begins its first year without guaranteed prices or procurement.  In anticipation of this change, 
cotton area in China fell nearly 13 percent, but with area largely unchanged in high-yielding Xinjiang 
province, China's production is expected to be only 8 percent lower than the year before, at 19 million 
bales.  Smaller crops area also expected in Mexico (down 400,000 bales), Syria (139,000), Israel 
(110,000), Zimbabwe (68,000), and Nigeria (50,000).
        World consumption is forecast to be slightly larger than production in 1999-2000, and, at 87.8 million 
bales, has matched the 2.8-million bale and 3.3 percent year-to-year gain achieved by world production.  
China's expected increase in use is the largest, at 700,000 bales, reflecting the improved competitiveness 
of cotton versus manmade fibers following price reform.  India, Brazil, and Turkey are expected to 
increase their cotton consumption by 500,000, 350,000, and 345,000 bales, respectively, from the year 
before in a rebound from the effects of the Asian financial crisis.  Smaller gains are expected for similar 
reasons in Indonesia (150,000 bales) and Russia (100,000), and Mexico and Pakistan are each expected to 
increase consumption by 300,000 bales.
        World cotton trade is expected to increase in 1999-2000 in line with the expected rebound in 
consumption.  At 25.7 million bales, world exports are forecast 2.2 million bales or 9.3 percent higher 
than the year before.  The United States accounts for much of the expected increase, with exports forecast 
1.4 million bales higher than the year before, at 5.7 million bales.  The second largest export gain is 
expected in China, where exports are projected to rise 519,000 bales to 1.2 million, the highest in a 
decade.  Rebounding crops in Pakistan, Uzbekistan, and Turkmenistan are expected to boost exports from 
these countries by 440,000, 300,000, and 100,000 bales, respectively.  Lower exports are expected from 
Turkey (225,000 bales), Argentina (150,000), and Syria and Australia (100,000 each).
        Expected import gains from the year before in 1999-2000 are led by those in Mexico (up 650,000 
bales), Brazil (285,000), and Indonesia (200,000).  Imports by Turkey, Russia, Korea, and Thailand are 
expected to increase between 100,000 and 200,000 bales.  The largest declines in imports are all foreseen 
in exporting countries in 1999-2000:  Pakistan (down 600,000 bales), the United States, (368,000), and 
China (109,000).
        World ending stocks are expected to fall slightly in 1999-2000, to 41.3 million bales.  However, the 
619,000-bale global decline is comprised of an expected decline of 2.5 million bales in China's ending 
stocks, and a 1.8-million bale increase in ending stocks for the rest of the world.  Outside of the United 
States (where a 661,000 bale increase is expected), the largest increases are foreseen in Pakistan (up 
325,000 bales), Uzbekistan (255,000), Turkmenistan (200,000), and Brazil (150,000).  India's stocks are 
expected to fall 250,000 bales, and Egypt's by 123,000 bales.
        As a share of global consumption, world ending stocks are expected to be their highest since the mid-
1980's.  Excluding China, the stocks-to-consumption ratio is expected to increase from 37 percent in 
1998-99 to 38.5 percent in 1999-2000, comparable to levels seen in the early 1990s, but well below those 
of the mid-1980s.  However, as of October 1999, the monthly average A-Index in nominal terms was well 
below that of 1992 and 1993.  In inflation-adjusted real terms, the A-Index was even slightly below the 
lowest points of 1986, and perhaps the lowest ever.  Adjusting the August 1986 A-Index of 37.2 cents to 
account for inflation (as measured by the U.S. Gross Domestic Product deflator), suggests a price in 1999 
dollars of 52.7 cents, compared with the 47.5 cents that the A-Index averaged during October 1999.  
Adjusted for inflation, the A-Index has fallen about 60 percent from its most recent peak in May 1995.
        In 1999, world cotton markets face the uncertainty of China's shift to a more market-oriented farm 
policy under the cloud of beginning stocks in excess of 17 million bales.  Markets have not forgotten how 
China's exports soared in the years following the last time its stocks surpassed 17 million bales.  Also, 
while world economic growth in calendar 1999 has not fared as poorly as many had earlier feared, the 
average growth rate of 2.6 percent over 1997-99 is well below the 3.8-percent average of 1984-86.  Even 
more distressing for cotton, in 1986, the lowest annual increase in world consumption during the 
proceeding 4 years had been 2.7 percent, while in 1999, the highest rate in the preceding 4 years was 2.5 
percent. Thus, past experience could lead current market participants to expect less favorable future 
prospects than they would have foreseen in the mid-1980s.
        Finally, the legacy of past monetary policy and price expectations in general is very different in 1999 
from 1986, with prospective price increases for any commodity now much more difficult to pass through 
to consumers.  Wheat, corn, and soybean prices are all in similar circumstances.  Current prices for these 
commodities are once again approaching, or even undershooting, nominal lows last seen in the last half of 
1986, and it is unlikely that cotton could stray from general price conditions for very long in such an 
environment.  What remains to be seen is the response in the following year by producers and consumers 
of all these commodities after this period of remarkably low prices.

World cotton supply and demand estimates.  According to the December 10, World Agricultural 
Supply and Demand Estimates, the U.S. cotton situation reflects higher production and exports relative to 
last month.  Estimated production is raised about 350,000 bales to nearly 16.9 million bales, based on 
increases in Texas and California.  Domestic mill use is unchanged at 10.2 million bales.  A sharp 
increase of 500,000 bales in the export estimate, from 5.7 to 6.2 million bales, reflects very strong export 
sales in recent weeks.  Prospective U.S. exports have improved because of higher than average production 
of short staple export-quality cotton, increased foreign import demand, and the Step 2 program.  Ending 
stocks are reduced to 4.5 million bales, 27.4 percent of total use.
        Stronger trade highlights this month's world cotton situation.  Projected larger crops in India and the 
United States about offset lower production in South America.  The crop estimate for Argentina is 
reduced sharply as very dry conditions have restricted planted area.  Brazil's prospective yield has been 
reduced due to adverse planting conditions and the effect of current low prices on input use.  World 
consumption is up marginally from last month as increases in Brazil and Indonesia are offset by 
reductions in Europe and Ukraine.  Higher consumption and lower production raise Brazil's import 
requirements by nearly 500,000 bales, and world exports are adjusted accordingly.  World ending stocks 
are reduced slightly. 

All cotton production in the United States is forecast at 16.9 million 480-pound bales, up 2 percent from 
last month, and up 21 percent from 1998, according to the Agricultural Statistics Service Board, NASS, 
USDA.  Yield is expected to average 604 pounds per harvested acre, down 21 pounds from last year.  
Texas production was increased 300,000 bales from November's forecast, while California was increased 
50,000 bales.  On November 28, U.S. harvest was 88 percent complete, compared to the 5-year average of 
87 percent.
        Harvest of the Texas cotton crop progressed near normal throughout November under generally dry, 
open conditions.  However, the first hard freeze did not occur in the Plains until late November, so many 
producers sprayed to aid harvest.  On November 28, seventy-seven percent of the cotton acreage in Texas 
was reported harvested.  This compares to 78 percent for the 5-year average.  Cotton stalk destruction 
closely followed harvest in many areas.  Dry weather aided harvesting in New Mexico throughout 
November as progress advanced to near normal by mid-month.  Cotton objective yield data indicate 
Texas' crop has the seventh lowest boll weights in the last 10 years.
        The Delta states (Arkansas, Louisiana, Mississippi, Missouri, and Tennessee) made good progress on 
harvest and were virtually complete by mid-November.  While the dry conditions were instrumental in 
aiding a quick harvest, these conditions also led to some deterioration in the quality of the crop. Data from 
objective yield surveys show boll weights in Arkansas and Mississippi were the lowest in the last ten 
years, while Louisiana's weight was ranked as the ninth lowest out of the last ten years.
        Arizona's cotton harvest gained momentum during mid-November, but was still behind average. 
Seventy-nine percent of the acreage was harvested as of November 28, compared to 87 percent for the 5-
year average.  California, at 96 percent harvested as of November 28, made great progress during the first 
half of November and was nearly complete by the end of the month. Following harvest in California, 
fields were being disced for pink bollworm control.  December 1 cotton objective yield counts show boll 
weights in California are the lowest in the last ten years.
In the Southeastern states (Alabama, Georgia, North Carolina, and South Carolina), harvest progress 
gradually accelerated during November.  However, North Carolina continues to lag behind normal due to 
adverse weather conditions early in the harvest season. Alabama producers harvested 95 percent of their 
acreage as of November 28, compared to 94 percent on average.  On November 28, Georgia was 4 points 
ahead of average with 86 percent of the acreage harvested, and South Carolina was 5 points ahead of 
average with 92 percent harvested.  North Carolina continues to be behind normal due to the affects of 
earlier hurricanes and subsequent wet fields.  Generally dry conditions throughout November has allowed 
progress to accelerate.  As of November 28, seventy-two percent of the acreage was harvested, compared 
to 87 percent on average.
        American Pima production is forecast at 679,000 bales, up 54 percent from 1998's output, but down 
5,500 bales from the November forecast.  The U.S. yield is forecast at 1,054 pounds per harvested acre, 
only 2 pounds per acre below the record high yield set in 1997.  The production in California was 
unchanged from the November forecast, while Arizona's production was reduced 2,000 bales.  Harvest 
made great progress in Arizona during the last two weeks of November, but remained behind the average 
harvest pace.  In California, harvest progressed rapidly during the first half of November and remained 
ahead of normal.  By the end of November, harvest was virtually complete.  New Mexico's production 
was reduced 1,500 bales from November and the Texas crop was lowered 2,000 bales. 
        Ginnings totaled 13,587,200 running bales prior to December 1, compared with 11,309,550 running 
bales ginned prior to the same date last year and 14,734,600 running bales in 1997.