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1

 The information and analysis provided in this report are for the purposes of this report only. 

Nothing in this report should be construed to indicate how the Commission would find in an

investigation conducted under statutory authority covering the same or similar subject matter.

i

PREFACE

In 1991 the United States International Trade Commission initiated its current Industry and

Trade Summary series of informational reports on the thousands of products imported into

and exported from the United States. Each summary addresses a different

commodity/industry area and contains information on product uses, U.S. and foreign

producers, and customs treatment. Also included is an analysis of the basic factors affecting

trends in consumption, production, and trade of the commodity, as well as those bearing on

the competitiveness of U.S. industries in domestic and foreign markets.1

This report on cotton covers the period 1995-1999. Listed below are the individual summary

reports published to date on the agriculture and forest product sectors.

USITC

publication Publication

number date Title

2459 November 1991 ........ Live Sheep and Meat of Sheep

2462 November 1991 ........ Cigarettes

2477 January 1992 .......... Dairy Produce

2478 January 1992 .......... Oilseeds

2511 March 1992 ........... Live Swine and Fresh, Chilled, or

 Frozen Pork

2520 June 1992 ............. Poultry

2544 August 1992 ........... Fresh or Frozen Fish

2545 November 1992 ........ Natural Sweeteners

2551 November 1992 ........ Newsprint

2612 March 1993 ........... Wood Pulp and Waste Paper

2615 March 1993 ........... Citrus Fruit

2625 April 1993 ............ Live Cattle and Fresh, Chilled, or 

 Frozen Beef and Veal

2631 May 1993 ............. Animal and Vegetable Fats and Oils

2635 June 1993 ............. Cocoa, Chocolate, and Confectionery

2636 May 1993 ............. Olives

2639 June 1993 ............. Wine and Certain Fermented Beverages

2693 October 1993 .......... Printing and Writing Paper

2702 November 1993 ........ Fur Goods

2726 January 1994 .......... Furskins

2737 March 1994 ........... Cut Flowers

2749 March 1994 ........... Paper Boxes and Bags

2762 April 1994 ............ Coffee and Tea

2859 May 1995 ............. Seeds
ii

PREFACE—Continued

USITC

publication Publication

number date Title

2865 April 1995 ............ Malt Beverages

2875 May 1995 ............. Certain Fresh Deciduous Fruits

2898 June 1995 ............. Certain Miscellaneous Vegetable

 Substances and Products

2917 October 1995 .......... Lumber, Flooring, and Siding

2918 August 1995 ........... Printed Matter

2928 November 1995 ........ Processed Vegetables

3015 February 1997 ......... Hides, Skins, and Leather

3020 March 1997 ........... Nonalcoholic Beverages

3022 April 1997 ............ Industrial Papers and Paperboards

3080 January 1998 .......... Dairy Products

3083 January 1998 .......... Canned Fish, Except Shellfish

3095 March 1998 ........... Milled Grains, Malts, and Starches

3096 April 1998 ............ Millwork

3145 December 1998 ......... Wool and Related Animal Hair

3148 December 1998 ......... Poultry

3171 March 1999 ........... Dried Fruits Other Than Tropical

3268 December 1999 ......... Eggs

3275 January 2000 .......... Animal Feeds

3350 September 2000 ........ Grain (Cereals)

3352 September 2000 ........ Edible Nuts

3355 September 2000 ........ Newsprint

3373 November 2000 ........ Distilled Spirits
iii

CONTENTS

Page

Preface ................................................................ i

Abbreviations and acronyms .................................... vii

Glossary .............................................................. ix

Abstract .............................................................. 1

Introduction ...................................................... 3

Overview of cotton .............................................. 5

Planting and harvesting ................................................ 5

Ginning ............................................................ 6

Classing ............................................................ 7

Storage and handling .................................................. 9

Upland cotton ........................................................ 10

Extra-long staple (ELS) cotton ........................................... 10

U.S. industry profile ............................................ 11

Industry structure ..................................................... 11

Number, concentration, and geographic distribution of cotton farms ............. 11

Number and concentration of cotton farms ................................ 13

Geographic distribution of cotton farms .................................. 13

Number, concentration, and geographic distribution of cotton gins ............... 14

American Pima gins ................................................. 14

Employment and wages ................................................ 14

Cotton farms ...................................................... 14

Cotton gins ........................................................ 15

Marketing methods and distribution ....................................... 16

Domestic marketing ................................................. 16

Internet marketing .................................................. 16

International marketing ............................................... 17

Options and futures ................................................. 17

Vertical integration of the U.S. cotton industry ............................... 18

Extent of globalization in the cotton industry ................................. 19
iv

CONTENTS—Continued

Page

U.S. industry profile—Continued

Cotton pricing ....................................................... 20

U.S. government programs .............................................. 22

Production flexibility contract (PFC) payments ............................. 22

Marketing loss assistance payments ..................................... 24

Marketing assistance loans ............................................ 25

Loan deficiency payments (LDPs) ....................................... 26

Three-step competitiveness process ...................................... 27

Storage and interest charges for upland cotton .............................. 27

ELS competitiveness payment program ................................... 28

Research and development .............................................. 29

Research and promotion assessments .................................... 29

Boll weevil eradication program ........................................ 29

Cottonseed biotechnology ............................................. 30

U.S. market ....................................................... 31

Consumer characteristics and factors affecting demand ......................... 31

Characteristics of consumers .......................................... 31

Factors affecting demand ............................................. 32

Comparative pricing between cotton and man-made fibers ..................... 32

Fashion shifts affecting cotton demand ................................... 33

Substitution between upland and American Pima cotton ...................... 33

Consumption ........................................................ 33

Consumption trends and import penetration ................................ 33

Conditions of competition between foreign and U.S. cotton .................... 34

Production .......................................................... 35

U.S. inventories ...................................................... 35

Comparative production costs and yields .................................... 36

U.S. trade .......................................................... 37

Overview ........................................................... 37

U.S. imports ......................................................... 38

Products imported .................................................. 38

Import levels and trends .............................................. 38

Principal import suppliers ............................................ 38

U.S. trade measures ................................................... 39

Tariff and nontariff measures .......................................... 39

Tariff-rate quotas (TRQs) .......................................... 39

Step 3 program ................................................... 40
v

CONTENTS—Continued

Page

U.S. trade—Continued

Limited global (“spot market”) import quota ............................. 40

Safeguards ........................................................ 41

U.S. exports ......................................................... 41

Products exported .................................................. 41

Export levels and trends .............................................. 42

Principal export markets ............................................. 42

U.S. export trade measures .............................................. 42

GSM-102/103 export credit guarantees and the supplier credit 

guarantee program (SCGP) ........................................... 42

Foreign export trade measures ........................................... 43

Tariff measures .................................................... 43

Nontariff measures ................................................. 43

Production subsidies ................................................ 44

Foreign industry profile ....................................... 45

Overview of world market .............................................. 45

Market profiles ....................................................... 45

China ............................................................ 45

India ............................................................ 46

Pakistan .......................................................... 47

Uzbekistan ........................................................ 48

Franc-Zone Africa (FZA) ............................................. 48

U.S.-sub-Saharan Africa trade legislation ................................. 49

Turkey ........................................................... 49

Egypt ............................................................ 50

Foreign trade investigations impacting U.S. cotton ............................ 51

Appendixes .......................................................

A. Explanation of tariff and trade agreement terms .............................. A-1

B. Statistical tables ...................................................... B-1

C. Growths used to calculate Cotlook “A” index ................................ C-1

D. Schedule of loan premiums and discounts for upland and ELS cotton .............. D-1

E. Example calculation of the adjusted world price (AWP) for upland cotton ........... E-1
vi

CONTENTS—Continued

Page

Figures

1. U.S. cotton industry: Distribution of an average bale of U.S. cotton .................. 4

2. Physical flow of U.S. cotton after harvesting ................................... 12

3. Comparison of Cotlook A-index and USDA’s adjusted world price (AWP)

for cotton, monthly, January 1995-July 2000 ................................ 21

Table

1. Summary of U.S. government programs for cotton ............................... 23
vii

ABBREVIATIONS and ACRONYMS

AD Antidumping

AMS Agricultural Marketing Service of the U.S. Department of Agriculture

APHIS Animal and Plant Health Inspection Service of the U.S. Department of Agriculture

ARS Agricultural Research Service of the U.S. Department of Agriculture

AVE Ad valorem equivalent

AWP Adjusted World Price

BLS Bureau of Labor Statistics of the U.S. Department of Labor

Bt Bacillus thuringiensis

CAP Common Agricultural Policy of the EU

CCC Commodity Credit Corporation of the U.S. Department of Agriculture

CIF Cost, Insurance, and Freight

COPS Cotton On-line Processing System of the CCC

ELS Extra-Long Staple

ERS Economic Research Service of the U.S. Department of Agriculture

EU European Union

FAIR Federal Agriculture Improvement and Reform Act of 1996

FAS Foreign Agricultural Service of the U.S. Department of Agriculture

FOB Freight On Board

FSA Farm Service Agency of the U.S. Department of Agriculture

FY Fiscal Year

FZA Franc-Zone Africa

GM Genetically Modified

GMO Genetically Modified Organism

GSM-102 Export Credit Guarantee Program

GSM-103 Intermediate Export Credit Guarantee Program

HTS Harmonized Tariff Schedule of the United States

HVI High Volume Instrument

ICAC International Cotton Advisory Council

LCA Liverpool Cotton Association

LDP Loan Deficiency Payment

MLA Marketing Loss Assistance

MT Metric Tons

MY Marketing Year

NAFTA North American Free Trade Agreement

NAICS North American Industry Classification System

NASS National Agricultural Statistics Service of the U.S. Department of Agriculture

NTB Non-Tariff Barrier

NYCE New York Commodity Exchange

PBI Permanent Bale Identification

PFC Production Flexibility Contract

SCGP Supplier Credit Guarantee Program

SIC Standard Industrial Classification

SLM Strict Low Middling

SSA Sub-Saharan Africa

TRQ Tariff-Rate Quota

UD Universal Density
viii

ABBREVIATIONS and ACRONYMS—

Continued

UEMOA West African Economic Monetary Union

URA GATT Uruguay Round Agreement

USDA U.S. Department of Agriculture

WTO World Trade Organization
ix

Glossary

Adjusted world price (AWP) – price level calculated by USDA on a weekly basis, in which the CotlookA Index is adjusted for the average U.S. location, and the basis grade of strict low middling (SLM) is

adjusted to a staple length of 1-1/16 in. The AWP is used to determine the rate at which marketing

assistance loans must be repaid.

American Pima – U.S. styles of ELS cotton (Gossypium barbadense). See Extra-long staple (ELS)

cotton.

Bale – container unit of cotton fiber compressed to 28 lbs. per cubic foot (universal density) and weighing

approximately 498-500 lbs., including packaging materials. Each bale contains approximately 480 lbs. of

cotton. 

Boll weevil (Anthonomus grandis) – a beetle that infests cotton plants and feeds on the internal tissues of

the buds and bolls. Four or five generations of boll weevils can grow in one season. 

Bollworm – any larva of various moths (order Lepidoptera), including the pink bollworm. Like boll

weevils, they burrow into the bolls of cotton plants.

Cotlook A-Index – a cotton price index compiled by Cotton Outlook, a private consultancy based in the

United Kingdom. The index is intended to represent the price level on the international raw cotton market.

It is an average of the cheapest five quotations from a selection (at present numbering fifteen) of the

principal upland cottons traded internationally. Basis grade of the A-Index is Middling with a staple length

of 1-3/32 in. The geographical basis is North European ports, and the terms quoted are Cost, Insurance and

Freight (CIF).

Cotton Council International – see National Cotton Council.

Cotton, Inc. – see National Cotton Council.

Cotton No. 2 contract – standard contract for trading in cotton options and futures on the New York

Commodity Exchange. The trading unit is approximately 100 bales (50,000 pounds net weight), the active

trading months are March, May, July, October, and December, and contracts are listed in cents per pound.

Basis Grade is Strict Low Middling with a staple length of 1-1/16 in. Delivery points are Galveston TX;

Houston, TX; New Orleans, LA; Memphis, TN; and Greenville/Spartanburg, S.C. 

Extra-long staple (ELS) cotton – normally Gossypium barbadense or crosses between G. barbadense

and Gossypium hirsutum (see upland cotton), although other ELS varieties such as Sea Island cotton

(Gossypium vitifolium) are grown around the world. Under U.S. law, only G. barbadense receives

government benefits under domestic programs for ELS cotton. The fiber length for ELS cotton is usually 

1-3/8 in. or more. ELS cotton can be spun into finer, stronger yarns than cottons with shorter staple

lengths.

Gene stacking – combining traits (e.g., herbicide tolerance and insect resistance) in a single variety of seed.
x

Glossary—Continued

Herbicide-tolerant cotton – a variety developed to survive certain herbicides which destroy targeted 

weeds. The most common herbicide-resistant cotton are Round Ready (RR) crops, which are resistant to

glyphosate, a herbicide which destroys several species of grass, broadleaf weeds, and sedges. 

Length uniformity – the degree to which cotton fibers in a bale sample are of a uniform length, measured

as the ratio of mean length to the upper half mean length, expressed as a percentage. Cotton with low length

uniformity increases breakage during yarn spinning and reduces a yarn’s strength and uniformity.

Fiber strength – the force necessary to break a bundle of fibers 1 tex in size. Defined in grams per tex. 

Fiber strength is important for cotton to withstand ginning and yarn production and is a predictor of a

yarn’s strength.

Ginning – extracting seeds and trash from cotton lint.

Genetically-modified (GM) seeds – see transgenic seeds.

Long staple cotton – cotton fiber with a staple length 1-1/8 in. or more, but under 1-3/8 in.

Marketing loan gain – the amount of principal waived when a farmer repays a loan at an alternative loan

payment rate that is less than the applicable loan rate.

Micronaire – the size of an individual cotton fiber taken in cross section. It is an airflow measurement unit

that indicates fiber fineness and maturity.

National Cotton Council – an umbrella organization for the U.S. cotton industry, consisting of growers,

ginners, warehousers, cottonseed crushers, merchants, cooperatives, and textile manufacturers. 

Subsidiaries include Cotton, Inc., a research and domestic marketing organization, and Cotton Council

International, an international marketing arm.

Nonrecourse loans – marketing assistance loans which can be repaid in full by defaulting and turning over

collateral cotton to the USDA’s Commodity Credit Corporation (CCC). The loans are nonrecourse because

farmers are not liable for any losses incurred by the CCC when selling the cotton.

Pheromones – hormonal substances secreted by insects which stimulate a physiological or behavioral

response from other insects of the same species.

Pickers – mechanical cotton harvesters that use 5-inch long, screw-like shafts with spines on them to free

lint (cotton fiber) from the rest of the cotton boll.

Short staple cotton – cotton fiber with a staple length under 1-1/8 in.

Staple length – the length of a cotton fiber, measured on a bale as the average length of the longest half of

a bale’s fibers (upper half mean length). Longer staple lengths are preferred by textile mills to lessen yarn

breakage.
xi

Glossary—Continued

Strippers – mechanical cotton harvesters that pull the entire cotton boll off of the plant. Used primarily in

Texas. 

Tariff-rate quota (TRQ) – a quota designed to allow a defined quantity of imports into the United States

at a low rate of duty, while imports over that defined quantity are entered at a higher rate of duty. 

Tex (grams per kilometer) – a decimal count system for describing the linear density (mass per unit

length) of fibers, filaments, and yarns. The lower the number, the finer the thread. 

Tobacco budworms (Heliothis virescens) – the larvae of budworm moths that eat the buds, stems, and

leaves of cotton plants.

Transgenic seeds – seed varieties which result from the insertion of genetic material from another

organism so that the resulting plant will exhibit desired traits.

Upland cotton (Gossypium hirsutum L.) – the fiber length for upland cotton is usually 22-32 mm

(approx. 7/8 - 1-1/4 in.). 

Yarn – intermediate textile product created by carding cotton fibers into strands (“slivers”) and then

drawing, roving and spinning those strands into thicker cords suitable for making weaving and knitting

fabrics.

1

ABSTRACT

This report addresses trade and industry conditions for raw cotton for the period 1995-99.

• The United States is an important producer of cotton, supplying approximately

20 percent of world output. Production totaled 3.7 million metric tons in

marketing year (MY) 1999, of which 147,000 metric tons was ELS cotton. Other

major producers include China, India, Pakistan, the Republic of Uzbekistan,

Franc-Zone Africa, and Turkey.

• U.S. cotton farming and ginning is becoming increasingly concentrated, while at

the same time, total harvested acreage is increasing. In 1969, nearly 200,000

cotton farms harvested 11.5 million acres (4.7 million hectares); by 1997, only

31,456 farms were harvesting 13.2 million acres (5.3 million hectares). Over the

last twenty years, the number of domestic cotton gins declined nearly 52 percent,

from 2,251 to 1,084. Per acre yields inched upward and costs declined during

1995-99 through the use of transgenic seeds, insect eradication programs, and

land management techniques.

• Domestic cotton farmers are supported by a patchwork of government programs

designed to stabilize income during severe price volatility, provide timely cash

flow, and maintain competitiveness in U.S. and foreign markets. Some of the

programs include marketing loss assistance payments, marketing assistance loans,

loan deficiency payments, and a three-step competitiveness program.

• The United States remains by far the largest exporter of raw cotton, accounting

for 18-27 percent of annual world exports during MY 1995-99. In 1999, the

United States held an $832 million trade surplus with its trading partners, down

from $2.5 billion in 1998. Major export markets include textile-producing

countries in East Asia, such as Indonesia, Japan, Korea, and Taiwan, as well as

Canada, Mexico, and Turkey. U.S. imports of cotton in 1999 totaled

$136 million, and major suppliers included Greece, China, Syria, Egypt, and

Argentina. Imports fluctuated substantially during 1995-99, varying from a high

of $283 million in 1996 to a low of $3 million in 1997. Import suppliers also

shifted considerably over the five-year period.

• The U.S. consumers of raw cotton are textile mills that process the fibers into

yarns and threads. These intermediate products are then consumed downstream

producing hundreds of items, including 1) wearing apparel; 2) home furnishings,

such as draperies, upholstery fabrics; towels, wash cloths, sheets, pillowcases;

and rugs; and 3) industrial use products, such as medical supplies and industrial

thread. Consumer demand for cotton is closely linked to fashion trends, home

sales, and competitive pricing vis-a-vis man-made fibers.

 

1

 Converted into 480-lb. bales, which is the standard U.S. statistical measurement. 

 

2

 World Agricultural Production, FAS, USDA, July 2000, table 2.

 

3

 Monthly upland cotton prices (based on the Cotlook A-Index) fluctuated from a high of over

110 cents per pound in 1995 to a low of 44 cents per pound in 1999. At current prices hovering

around 60 cents per pound, MY 1999 production can be valued at roughly $4.9 billion.

 

4

 Unless explicitly stated as a marketing year, all years refer to a calendar year (Jan.-Dec.).

 

5

 Robyn Clark and Deborah Vivian, Cotton Counts Its Customers, (Memphis, TN: National

Cotton Council of America, 2000), pp. 1-5.

3

INTRODUCTION

This summary covers raw, unprocessed cotton classified for tariff purposes in chapter 52,

heading 5201 of the Harmonized Tariff Schedule of the United States (HTS), which provides

for cotton, not carded or combed, of any staple length. Information is presented in this report

on the structure and development of U.S. cotton farming and ginning, government programs

supporting cotton production and exportation (including marketing loans and step 2 funding),

comparative production costs and yields among major cotton-producing countries,

biotechnological developments, U.S. and foreign tariff and nontariff measures, and the

competitive conditions of the U.S. cotton industry in world markets. The analysis primarily

covers the period 1995-99. Much of the data presented in this report are in terms of marketing

years (MY), which run from August 1 through July 31 (e.g., MY 1999 begins on Aug. 1,

1999). An explanation of tariff and trade agreement terms can be found in appendix A;

statistical tables are in appendix B.

The United States is the second-largest producer and the largest exporter of cotton in the

world. U.S. production currently accounts for roughly 20 percent of world supply. In MY

1999, U.S. cotton production totaled approximately 3.7 million metric tons (17.0 million

bales).1, 2, 3

U.S. imports of cotton in 19994 were valued at $136 million, most of which were entered dutyfree outside of U.S. tariff rate quotas (TRQs) established pursuant to concessions given in the

GATT Uruguay Round of multilateral tariff negotiations. These additional imports, known

as “special import (Step 3) quotas,” accounted for 83.5 percent of total U.S. imports in 1999.

Imports are normally less than 5 percent of domestic consumption. U.S. exports of cotton

totaled $968 million in 1999 and the U.S. trade surplus in cotton (exports minus imports)

totaled $832 million.

Cotton is converted primarily into yarns and threads for use in the production of fabrics and

downstream products in the textile and apparel sectors (figure 1 and table B-1). The primary

end uses for cotton include 1) wearing apparel; 2) home furnishings, such as draperies;

upholstery fabrics; towels, wash cloths, sheets, pillowcases; and rugs; and 3) industrial uses,

such as medical supplies and industrial thread.5
4

Figure 1

U.S. cotton industry: Distribution of an average bale of U.S. cotton

(in lbs.)

Gross weight

bale 

500

Bugging

and ties 

20

Net weight

bale 480

Non-woven

products 

20

Total waste 

60

Non-lint

waste 

22

Spun yarn 

 400 Usable

waste 38

Carpeting and

tufting 1

Knit

goods 

138 

Sewing

thread 

7

Woven

fabrics 

254

Gray

cloth 9

Yarn dyed

cloth 64

Finished

cloth 181

Industrial

products 

30

Clothing 

295

Home

furnishings

133

Source: The Cotton Industry in the United States, ERS, USDA, 1996, p. 25. 
 

6

 “History of Cotton,” found at http://www.kings.k12.ca.us/central/cuesd.a/tq/ag/history.html.

 

7

 Depending on the source, American Pima cotton was either named after Pima County, AZ,

where it was cultivated, or after the Pima Indians, a Native American tribe indigenous to the

southwestern United States. 

 

8

 Cotton Council International, found at http://www.cottonusa.org.

 

9

 Julian Roche, The International Cotton Trade (Cambridge, England: Woodhead

Publishing, 1994), p. 24. 

5

OVERVIEW OF COTTON

Cotton has a long history, dating back at least 5,000 years in North Africa and the Indian

subcontinent. Cotton textiles and apparel entered the modern era in the early 1700s, when

they were first spun by machine (rather than by hand looms) in England. The profitability of

cotton and its potential for clothing the masses was greatly enhanced by Eli Whitney’s cotton

gin, patented in 1793. Whitney’s invention enabled one machine to clean (“gin”) as much

cotton in one day as 50 people could do by hand.6 

Most of the cotton grown in the United States is of two varieties, upland cotton (Gossypium

hirsutum) and extra-long staple (ELS) cotton (Gossypium barbadense), which is also referred

to as American Pima cotton.7

Planting and Harvesting

The growing season for cotton lasts 6 to 8 months, depending on the seed variety and regional

weather patterns. In the Rio Grande region of Texas, cotton is planted in late February and

harvested between late July and mid-September. In most other cotton-growing areas, planting

occurs between April and early June, and harvesting runs from late September until

December.8

According to modern production techniques, cotton is now grown as an annual crop, rather

than re-used for several years as a perennial plant. Rapid advances in seed cultivation allow

better yields and greater resistance to insects, weeds, and disease. The production and

harvesting cycle is as follows9:

1. residue disposal;

2. preplant tillage;

3. seedbed preparation, including (a) fertilization and (b) application of

a soil-incorporated herbicide;

4. planting, including the application of fungicides, systemic herbicides,

and pre-emergence herbicides;

5. post-emergence weed control (both chemical and mechanical);

6. insect control;

7. harvesting and hauling.
 

10 Strippers pull the entire cotton boll off of the plant, while pickers use 5-inch long, screwlike shafts with spines on them to free the lint from the rest of the boll. See Keith Edmisten,

“Chapter 2: The Cotton Plant,” 2000 North Carolina Cotton Production Guide, found at

http://ipmwww.ncsu.edu/Production_Guides/Cotton/chptr2-html. and “How Cotton is Grown,”

found at http://www.kings.k12.ca.us/central/cuesd.a/tq/ag/history.html.

 

11 In developed countries such as Australia, Israel, and the United States, nearly all cotton is

picked by mechanical harvesters. But globally, only about 30 percent of production is harvested

by machines. Hand picking is slower but better preserves the fiber characteristics because the

cotton can be picked at more frequent intervals, and weather effects on the fibers are minimized.

See M. Rafiq Chaudhry, “Harvesting and Ginning of Cotton in the World,” International Cotton

Advisory Committee, Jan. 10, 1997, p. 1.

 

12 William Mayfield, “Cotton Ginning Industry Trends in the United States,” pp. 1-2, found

at http://www.cotlook.com, retrieved Aug. 21, 2000.

 

13 While the saw-ginning method is used for nearly all upland cotton, ELS cotton is processed

on roller-gins which remove longer, finer staple fibers from seeds using opposing rollers. See

Keith J. Collins, editor, et al., The Cotton Industry in the United States, ERS, USDA, July 1996,

p. 39.

 

14 Cottonseed constitutes about 55 percent of the total cotton/cottonseed crop, by weight. Most

is crushed for use in oils or animal feed. Even after the initial ginning, cottonseed is transported

to crushing mills, where delinting machines remove additional short fibers known as linters.

Cotton linters are used in products ranging from mattresses to photographic film to chemicals

(continued...)

6

Seeding is done with mechanical planters that cover anywhere from 6-12 rows at once. Seeds

are deposited in the soil at uniform intervals as packets of several seeds together (“hilldropped”) or singularly dropped (“drilled”) into the soil.

Flower buds (“squares”) appear on the plants approximately 60 days after planting. Three

weeks after buds form, blossoms open, and the petals change from white to yellow, and then

to pink, and finally to dark red. After blooming for 3 days, the petals fall off entirely, leaving

behind green pods on the plants called bolls. Over the next 8 to 10 weeks, cotton fibers grow

inside these bolls until they ripen and split apart, leaving cotton lint exposed to the elements

and surrounding the seeds. To cut down on the amount of non-cotton debris (“trash”) collected

during harvesting, cotton plants are then defoliated with chemicals after 60 percent or more

of the bolls split open. The cotton is harvested using mechanical pickers or strippers.10, 11

Ginning

After harvesting, cotton is either immediately transferred to a gin for cleaning (“ginning”) or

stored on the edge of the field in big mounds (“modules”) which protect the cotton until

ginning can take place. Modules help provide an efficient flow of cotton to the gins and allow

farmers to extend the ginning season during years with large crops. In the past, cotton was

ginned immediately after harvesting because it risked becoming damaged in the field by

excessive sunlight or moisture. Presently, more than 85 percent of the U.S. cotton harvest is

initially stored in field modules.12

At the gin, the cotton is first fed through dryers that reduce moisture and then into machines

that mechanically remove trash such as burs, dirt, stems, and leaves from the fibers. It is then

taken to gin stands, where lint is separated from the cottonseed by revolving circular saws

through a process known as the saw-ginning method.13 Cottonseed is either used to grow next

year’s crop or sold to produce food oils, animal feed, and fertilizers.14 After several more
 

14 (...continued)

such as nitrocellulose. See Cotton: From Field to Fabric, publication from the National Cotton

Council of America, p. 12, and “How Cotton is Ginned and Marketed,” found at

http://www.kings.k12.ca.us/central/cuesd.a/tq/ag/howginned.html.

 

15 Bales weigh approximately 498-500 lbs. with packaging materials included and have about

480 lbs. of cotton lint. Nearly all bales (99 percent) are compressed to a “universal density (UD)”

of 28 pounds per cubic foot. See William Mayfield, “Cotton Ginning Industry Trends in the

United States,” pp. 1-2, found at http://www.cotlook.com, retrieved Aug. 21, 2000, and Keith J.

Collins, editor, et al., The Cotton Industry in the United States, ERS, USDA, July 1996, p. 39.

 

16

 Cotton: From Field to Fabric, publication from the National Cotton Council of America, 

p. 10.

 

17 “U.S. cotton production costs and returns, 1997-98,” ERS, USDA, found at

http://www.cotton.org, retrieved Aug. 21, 2000.

 

18 Micronaire is the size of an individual cotton fiber taken in cross section.

 

19 Research done by geneticists at USDA’s Cotton Physiology and Genetics Laboratory in

Stoneville, MS is isolating genetic and climate/farming impacts on cotton fiber quality. 

Preliminary results indicate that seed genetics often overpowers weather patterns and farming

techniques in determining the quality of cotton produced. Speech by Dr. William Meredith,

ARS, USDA, Sept. 27, 2000. 

7

cleaning steps to remove any remaining trash (e.g., small leaf particles and grass), the cotton

lint is compressed into bales weighing approximately 500 pounds.15 Modern gins can produce

up to 60 bales of cotton in an hour.16 Ginning costs were roughly 10 percent of the average

total per acre costs of producing U.S. cotton in 1997 and 1998, the last two years for which

data are available.17

Cotton Ginning Costs, per acre, 1995-99

Title 1995 1996 1997 1998 1999

Cotton ginning costs (dollars) ...... 53.13 50.84 51.27 45.57 (

1

)

 1 Not yet available from ERS, USDA.

Sources: “U.S. cotton production costs and returns, 1997-98,” and “U.S.

cotton production costs and returns, 1975-97,” ERS, USDA, found at

http://www.cotton.org, retrieved Aug. 24, 2000.

Classing

After baling the ginned cotton fiber, samples (“beards”) are taken from each bale and classed

for quality according to staple length, length uniformity, fiber strength, color, trash content,

and micronaire18 (fineness). As with all agricultural products, cotton quality is determined by

seed variety, weather patterns during the growing season, soil content, and farming techniques.

However, research studies indicate that seed variety is playing a more dominant role than ever

in determining the quality of cotton fiber produced each year.19 USDA’s Agricultural

Marketing Service (AMS) classifies nearly all baled cotton in the United States, both for

obtaining government marketing loans and as certification for futures contracts on the
 

20 USDA classing costs roughly $1.50 per bale.

 

21 Keith J. Collins, editor, et al., The Cotton Industry in the United States, ERS, USDA, July

1996, p. 144.

 

22 AMS implemented a new automation classing system in the Memphis, TN classing office

in August 2000. The system is based on the HVI method of classification, will be fully automated

(no human operators are required), and cotton samples will receive quality measurements for

length, strength, micronaire, length uniformity, color, and trash. See “USDA Cotton Classing

Undergoing Changes,” The Cotton Gin and Oil Mill Press, July 29, 2000, p. 19. For detailed

information on HVI cotton fiber measurements, see http://151.121.3.151/cotton/hviresults.htm.

 

23 Keith J. Collins, editor, et al., The Cotton Industry in the United States, ERS, USDA, July

1996, p. 52.

 

24 Staple standards are set by the Official Cotton Standards of the United States for American

upland cotton, also referred to as the Universal Standards. The Universal Standards are

periodically reviewed and approved by major foreign cotton-consuming countries. See The

Cotton Industry in the United States, pp. 144-145.

 

25 “United States: Distribution of color, leaf, and staple for upland cotton classed, 1997

crop,” Farm Service Agency, USDA. Data obtained from Wayne Bjorlie, Director, Fibers Group,

FSA, USDA on June 1, 2000.

 

26

 Agricultural Futures and Options, New York Board of Trade, p. 9.

 

27 A tex is a system of yarn numbering that measures the weight in grams per 1,000 meters of

yarn. For example, a 30-tex yarn weighs 30 grams per 1,000 meters. The lower the tex, the finer

the thread.

 

28 Keith J. Collins, editor, et al., The Cotton Industry in the United States, ERS, USDA, July

1996, p. 52.

8

New York Cotton Exchange (NYCE).20 Automated High Volume Instrument (HVI) testing

has replaced sight and touch methods for computing quality ratings.21, 22

Staple length is a measurement of the average length of the longest half of a bale’s fibers

(upper-half mean length). It is calculated by passing a beard of parallel fibers through a

sensing point.23 Thirty-one official staple lengths exist for U.S. cotton, ranging from less than

13/16 inch to 1-3/4 inches.24 Most cotton has lengths of between 1 and 1-1/4 inches.25 In

futures and options contracts, the standard staple length for upland cotton is 1-1/16 inches.26

Longer staple length is preferred by textile mills, as length improves spinning efficiency during

yarn production, as well as yarn strength and fineness. Consequently, cotton with longer

staple fiber receives a price premium.

Length uniformity is the degree to which the fibers in a beard are uniform, based on the ratio

of mean length to upper half mean length, expressed as a percentage. Cotton with low length

uniformity (i.e., below 80 percent) may experience excessive fiber breakage during the yarn

spinning process and not produce strong or uniform yarns. Fiber strength is measured in

grams per tex and is reported as the force in grams necessary to break a bundle of fibers 1 tex

in size.27 A cotton fiber’s strength is important for withstanding ginning, as well as carding,

drawing, roving, and spinning into yarn. Of course, fiber strength is also a strong predictor

of the ultimate strength of the yarns.28

Trash content measurements describe the amount of leaf, bark or other extraneous matter in

the bale. Because trash must be removed before cotton can be spun into yarn, an increased

level of trash content in the cotton leads to higher cleaning costs for its removal. Micronaire

testing is an airflow measurement that indicates fiber fineness and maturity of the cotton. Low

micronaire readings show that the cotton is finer, which gives the cotton a better feel and can
 

29 Cotton with a micronaire reading of 3.7-4.2 is given a marketing loan premium for some

grades. The base range is 3.5-4.9, and the discount range is 5.0 or more, or below 3.4. See app.

C.

 

30 Interview with Patricia Hodges, Vice President - Traffic, Staplcotn, Sept. 27, 2000.

 

31 Phone conversation with Don Wallace, Cotton Warehouse Association of America, Aug.

24, 2000.

9

garner a premium price.29 However, finer cotton fibers must be treated carefully during

ginning and yarn production to avoid fiber damage.

The color of cotton is determined by measuring reflectance and yellowness. Reflectance

measures how dark a sample beard is, while yellowness indicates how much yellow color is

found. A poor color rating increases the likelihood of reduced fiber strength and also affects

the ability of fibers to absorb and hold dyes and finishes.

A recent development related to USDA cotton classing and tracking U.S.-grown bales is

known as permanent bale identification (PBI). PBI is a computerized system which attaches

a permanent bar code to each bale after ginning, allowing textile mills to monitor when and

how the bale was classified by USDA and trace it back to the producer if the fibers are

substandard. By removing uncertainty about bale quality, PBI lowers the cost of classing

cotton. In the past, brokers, cooperatives, and downstream users would re-class cotton bales

in order to ensure that USDA classing tags were accurate. The reason is that under the old

USDA classing system, tags would fall off, bale classification lists were not computerized,

and classing was more prone to human error. Most bales are now only classified by USDA.

Only in cases of “off-spec” fiber (e.g., very yellow coloring or heavy trash content) do

merchants, cooperatives, or mills re-classify bales for verification.30

Storage and handling

Cotton storage has become more vertically integrated since the early 1970s. As cotton gins

consolidated into bigger operations, the need for reliable warehousing facilities intensified.

Gins began purchasing independent warehouses and either closing facilities down and

constructing larger ones or expanding the buildings to suit their needs. On the other side of the

distribution chain, textile mills (e.g., Parkdale Mills, based in North Carolina) purchased

warehouses in order to use just-in-time (JIT) inventory practices. Vertical integration

displaced many of the family-owned businesses that formed the backbone of the cotton

warehousing sector. During the 1970s, as cotton acreage declined in the Southeast and the

Mississippi Delta, the remaining independent cotton warehouses diversified into other

products, such as lumber, retail supplies, and groceries, to compensate for lost cotton revenue.

After the eradication of the boll weevil, and as irrigation became more common, cotton

acreage rose again in these traditional cotton-growing regions, but some of the warehouses

were now unwilling to trade exclusively in one product line. This unwillingness to specialize

in cotton only encouraged integration, as additional pressure mounted on gins and textile mills

to find reliable warehousing capacity.31 The following tabulation lists the number of cotton

warehouses in 1997, by State.
 

32 Cotton Ginnings, NASS, USDA, Mar. 2000, p. 1. 

 

33 Richard F. Kazmierczak Jr. and Kenneth W. Paxton, “Technical Change and New

Directions for Cotton Production,” Louisiana State University Agricultural Center, June 1997, 

p. 11.

 

34

 Cotton Quality Crop of 1997, (Memphis, TN: AMS, USDA, Apr. 1998), tables 1 and 2.

 

35

 Cotton Quality Crop of 1998, (Memphis, TN: AMS, USDA, Apr. 1999), table 38.

10

Cotton Warehouses in the United States, by State, 1997 

AL AR AZ CA GA LA MO MS NC NM OK SC TN TX Others

U. S.

total

32 33 4 13 57 19 10 29 25 6 3 19 19 64 3 336

Source: National Cotton Council.

Upland Cotton

Upland cotton accounts for roughly 96 percent of all cotton produced in the United States and

is currently produced in seventeen States. The States include four geographic regions:

Southeast (Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia), Delta

(Arkansas, Louisiana, Mississippi, Missouri, and Tennessee), Southwest (Kansas, Oklahoma,

and Texas), and West (Arizona, California, and New Mexico).32

Upland cotton can be divided into three broad classes, or segments, which are generally used

for different end uses. The first is roughly six million acres of “picker cottons,” grown in most

cotton regions of the United States and used in a wide range of textiles. The second segment

is five million acres of “stripper cotton” grown around Lubbock, Texas. Stripper cotton is

storm-resistant because of short plants, but it also tends to have shorter, coarser fibers than

picker varieties. The fibers make stripper cotton suitable for heavy fabrics that do not require

dying or printing. The third segment is Acala cotton grown on more than a million acres in

Arizona and the San Joaquin Valley of California. With proper irrigation and land

management, Acala yields are three times the national average and produce high-quality

textiles.33 Staple length for upland cotton ranges from 28/32 inches to more than 1-1/4 inches,

but nearly 97 percent of bales had lengths between 1 inch and 1-5/32 inches in 1997, a typical

crop year.34

Extra-Long Staple (ELS) Cotton

The remainder of the domestic cotton crop is extra-long staple (ELS), or American Pima,

cotton. In the United States, ELS cotton is grown in Arizona, California, New Mexico, and

Texas, although nearly 90 percent was produced in California during MY 1999. 

Staple lengths for ELS cotton range from 1-1/4 inches to more than 1-1/2 inches, but typically

90 percent of bales have staple lengths of 1-7/16 inches or more.35 American Pima varieties

are more sensitive to poor growing conditions than upland cotton, particularly regarding

disease, insects, and weather damage during cultivation. Consequently, American Pima yields

proved to be poor in many areas of the country; production is now concentrated
 

36 Richard F. Kazmierczak Jr. and Kenneth W. Paxton, “Technical Change and New

Directions for Cotton Production,” Louisiana State University Agricultural Center, June 1997,

pp. 11-12.

 

37 E-mail from Matt Laughlin, Supima Association of America, July 27, 2000.

 

38 Cotton farming is covered by North American Industry Classification System (NAICS)

code 111920 (cotton farming), and cotton ginning is covered by NAICS code 115111 (cotton

ginning).

11

in the arid West, where growing conditions are more conducive to maximizing yields and

profits.36

While ELS and upland cotton have some overlapping uses, ELS cotton produces fine count

yarns (60s or higher) that are used in high-end bedsheets, shirts, and specialty yarns. Because

American Pima cotton is, on average, stronger, longer, and finer than upland cotton, it is used

in products which require increased durability, a softer touch, and additional sheen and luster.

In the United States, 45 percent of American Pima production is used in home furnishings

(e.g., bed and bath items), 35 percent is used in apparel, and 20 percent in thread applications.

Domestically-produced apparel using American Pima cotton are mostly knitted clothing, such

as men’s and women’s polo shirts.37

U.S. INDUSTRY PROFILE

Industry Structure38

The structure of the U.S. cotton industry is provided in figure 2. Cotton bales are transported

to domestic textile mills where the fibers are converted into spun yarn or non-woven products.

After conversion, they are used to make products such as clothing, home furnishings, and

industrial products.

Number, concentration, and geographic distribution of cotton farms

Over the last 50 years, the number of cotton farms declined by over 97 percent, while the

harvested acreage only declined by 50 percent. The result is larger, more efficient operations,

although most cotton farms are still family-owned and operated. While cotton production is

not concentrated in any one region of the southern United States, the largest single cottonproducing State is Texas, with three times more upland cotton harvested than any other State.

Arkansas, Georgia, Mississippi, and California rank in the top five for cotton-producing

States and harvest similar quantities of upland cotton. Since the early 1980s, the U.S. cotton

industry has utilized efficiencies that enabled the industry to annually produce almost 60

percent more cotton on only 35 percent more land (table B-2).
12

Figure 2

Physical flow of U.S. cotton after harvesting

Crushing mills FARMS

(31,456)

Cottonseed

GINS

(1,084)

Warehouses

(reconcentration

points)

Warehouses

(interior)

Export points Domestic

Mills

Source: Adapted from The Cotton Industry in the United States, ERS, USDA, 1996, p. 34. 
 

39 A hectare is a unit of land measurement equaling 2.471 acres.

 

40 Thomas M. Bell and Fred E. M. Gillham, The World of Cotton (Washington, DC: 

Conticotton, EMR, 1989), p. 380.

 

41

 1992 Census of Agriculture, USDA, NASS, tables 41-42.

 

42

 1997 Census of Agriculture, USDA, NASS, tables 41-42. 

 

43 One example of the partial production shift back to traditional cotton-growing regions is

North Carolina. The statewide cotton harvest was 42,000 acres in 1978 when the boll weevil

eradication program started. Certified acreage in 1999 was 861,000 acres. According to North

Carolina’s Agriculture Commissioner, the fact that the State is free of boll weevils has increased

yields and reduced pesticide costs for cotton farmers. See “North Carolina boll weevil assessment

for 2000 is $3.70 per acre,” found at http://www.agr.state.nc.us.

13

Number and concentration of cotton farms

As with most agricultural crops in the United States, cotton farming has consolidated into

larger farms since the Second World War (table B-2). However, the remaining farms are

primarily owned by individuals or families, rather than corporations. In 1949, the United

States contained over 1.1 million farms harvesting 26.6 million acres (10.8 million hectares39),

with farms averaging 24 acres (9.8 hectares). This level of planted acreage reflected continued

demand for cotton in the post-war economic boom. By 1974, due to competition from

synthetic fibers and increased foreign supply, U.S. harvested acreage shrank over 50 percent

to 12.2 million acres, and the number of farms declined over 90 percent to approximately

90,000.40 In 1992, there were 34,812 cotton farms harvesting 11.0 million acres (4.5 million

hectares), with 80.3 percent individual or family-owned. With the number of farms continuing

to decline, the average farm size grew to 315 acres (127 hectares).41 By 1997, the total

number of cotton farms was down to 31,456, but more than 13.2 million acres (5.4 million

hectares) were harvested. The average farm size increased by 1997 to 420 acres (170

hectares), and 79.5 percent were individual or family-owned farms.42

Geographic distribution of cotton farms

Upland cotton production began a geographic shift to Western States (i.e., Arizona,

California, and New Mexico) in the 1960s and 1970s, in large part to take advantage of

technical advances in land irrigation in that region. In addition, the drier climate made cotton

farms less susceptible to natural pests such as the boll weevil. In the 1980s and 1990s, cotton

acreage began shifting back to traditional cotton-growing regions (i.e., Southeastern and

Mississippi Delta States), thanks in part to USDA-sponsored boll weevil eradication programs

administered at the State level.43 Along with geographic proximity to textile mills in North and

South Carolina, these regions are now more cost-competitive for growing cotton. Table B-3

shows the metric tons of upland and ELS cotton produced in each State during MY 1995-99.

Note that Western States had the largest percentage decline in upland cotton production over

the period. States where the eradication program has either just been completed (Alabama)

or is actively in progress (Texas) showed the largest volume increases.
 

44 “Supima Gin List,” found at http://www.supimacotton.org/supima/gins.htm, retrieved 

June 30, 2000.

 

45 E-mail and attachments from Matt Laughlin of the Supima Association of America, July

17, 2000.

 

46 Reliable employment data were difficult to compile for cotton farming because total

employment figures are only compiled by the Bureau of Labor Statistics (BLS) for farms meeting

unemployment insurance thresholds. Because an estimated 90 percent of cotton farms do not

meet the thresholds (10 or more persons employed on each of 20 days in a calendar quarter or

$20,000 or more in wages during a calendar quarter), BLS data significantly underestimates

actual totals. As an alternative data source, the Census of Agriculture reports employment but

(continued...)

14

Number, concentration, and geographic distribution of cotton gins

Cotton gins are located in close proximity to farms where cotton is produced. Table B-4 lists

the number of active U.S. cotton gins (both upland and American Pima) for selected periods

over the last 20 years. By 1999, the ginning sector had consolidated to less than half the

number of active gins in 1980, in large part because gins utilized economies of scale to cut

costs, and cotton modules used during harvest allowed gins to trim overall industry capacity.

(See section on ginning above.) Several States added new capacity, including Georgia

(growing from 58 to 70 gins) and North Carolina (growing from 40 to 51 gins). Florida,

Kansas and Virginia acquired new gins after having none in 1980. This new gin capacity in

the Southeastern States corresponds with cotton acreage shifting back to traditional cottongrowing regions and overall growth in planted acreage during the 1990s. Average capacity

per gin is increasing, both for upland and American Pima cotton (table B-5).

American Pima gins

The Supima Association of America lists 33 active gins for American Pima cotton in MY

1999 (table B-5). More than half (18) are located in California, and the remainder are close

to harvesting areas in Arizona (7), New Mexico, and Texas.44 Most of the gins are in

California because that State produced nearly 90 percent of the American Pima crop in MY

1999. While the overall number of American Pima gins remained constant during MY 1995-

99, the sector is continuing a decade-long shift towards greater capacity in California and gin

closures in Arizona, New Mexico, and Texas. Combined, New Mexico and Texas had 14

active gins in MY 1990, but by MY 1999, there were only 7.45 A further illustration of the

geographic shift in American Pima production is that as late as MY 1989, Arizona produced

447,000 of the 692,000 American Pima bales grown in the United States, or roughly 65

percent of the total bales produced. By MY 1999, Arizona was only producing 16,300 bales

(3,549 metric tons) (table B-3).

Employment and Wages

Cotton farms

Employment in cotton farming was estimated by the National Cotton Council (NCC) to be

173,446 persons in 1997.46 Because nearly all domestically-grown cotton is harvested
 

46 (...continued)

only compiles totals for hired farm laborers and not for contract workers. NCC compiled total

employment on cotton farms during 1997, and NCC estimates for the number of cotton field

workers appear to be the most reliable. 

 

47 Data from Bernard Bell, BLS, attachment to e-mail received Sept, 12, 2000, and from

www.bls.gov., retrieved Jan. 9, 2001.

 

48 Data from the Bureau of Labor Statistics, Department of Labor, found at

http://www.bls.gov, retrieved Sept. 22, 2000. The increase of the CPI during 1995-99 was

calculated comparing Jan. 1995 and Dec. 1999. 

 

49 Data from Bernard Bell, BLS, attachment to e-mail received Sept, 12, 2000.

15

mechanically, employment in the industry is expected to remain stable or perhaps decline only

minimally as farms continue to consolidate. Wages per worker, as reported by the Bureau of

Labor Statistics, were $14,276 in 1995 and rose to $16,952 in 1999, an increase of 18.7

percent, as shown in the following tabulation. This compares with an increase of 20.9 percent

in annual wages per worker during 1995-99 for the agricultural sector as a whole (SIC code

01)47 and compares favorably with the 10.8 increase of the overall Consumer Price Index

(CPI) during the same period.48

Cotton farms: Annual wages per worker

Title 1995 1996 1997 1998 19991

Wages per employee (dollars) ...... 14,276 14,518 15,377 16,260 16,952

 1 Preliminary data.

Source: Covered Employment and Wages Program (ES-202)--Bureau of Labor

Statistics (BLS).

Cotton gins

The following tabulation lists the average annual employment, total sector wages, and wages

per employee in the cotton ginning industry during 1995-99. Employment in cotton ginning

declined as capacity consolidated into larger gins. However, wages per worker increased 15.8

percent during 1995-99. This compares with a 22.6 percent wage increase in the Agricultural

Services sector (SIC code 07) over the same period.49

Cotton gins: Average employment, total wages, and annual wages per employee1

Title 1995 1996 1997 1998 19992

Average employment ........... 11,623 11,577 11,549 10,283 10,287

Total wages ($1,000s) .......... 225,215 228,727 245,355 222,009 230,837

Wages per employee (dollars) .... 19,377 19,757 21,245 21,590 22,440

 1 Because the data are reported from the Covered Employment and Wages Program (ES-202),

only workers covered by unemployment insurance laws are totaled here. In the case of cotton

ginning, nearly 90 percent of the U.S. cotton gins reported data to ES-202 in 1995; 89 percent

reported in 1996, 93 percent in 1997, and 94 percent in 1998.

 2 Preliminary data.

Source: Covered Employment and Wages Program (ES-202), Bureau of Labor Statistics (BLS).

Compiled in part by Karen Hamrick, ERS, USDA and Bernard Bell, BLS, Department of Labor.
 

50 There are also independent ginners, such as those from the Texas Independent Ginners

Association and the Southeastern Cotton Ginners Association. However, to ensure financial

viability and a secure supply of cotton for ginning, these organizations have, over time, become

more closely associated with the growers they serve. Southeastern formed a joint venture in the

1970s with the Southern Cotton Growers (based in Dahlonega, GA, and serving the entire

Southeast region) to market cotton in large batches to mills. In 1998, the Texas Independent

Ginners created a pooling program similar to those offered by farmers’ cooperatives.

Participating farmers can contract acreage with a member gin, receive cash for all sales, and the

cotton is marketed in large batches by Weil Brothers, based in Montgomery, AL. Weil Brothers

also markets cotton pools in Tennessee, Florida, and California. See “Texas ginners offer

marketing alternative,” Southwest Farms Press, Jan. 20, 2000. 

 

51 E-mail from Wayne Bjorlie, FSA, USDA, Aug. 24, 2000.

16

Marketing Methods and Distribution

Domestic marketing

After cotton has been baled and classed, the bales are ready to be sold. Because most domestic

gins are owned by farmers, either individually or through cooperatives, ownership is often

retained by farmers through ginning and storage until final sale.50 The quantity of cotton

designated in a sales contract can be specified in bales, pounds, or in metric tons. It is

generally understood that the stated contract quantity can vary from the actual quantity by up

to 3 percent, depending on the weights of specific bales. Because cotton is a non-perishable

commodity, farmers can either sell the classified bales immediately to textile mills and

independent merchants, or store them in a government-approved warehouse, borrow money

against them (using the cotton as collateral), and sell the bales at a later time. (See the section

on “U.S. government programs” for more information on storage and loans.) Generally, very

few sales from farmers directly to textile mills (“mill-direct”) are ever transacted. Mill-direct

sales usually result from long-term relationships with farmers that specialize in a particular

quality of cotton or have a reputation for providing good quality fiber. On the other hand,

“gin-direct” sales are more common, in which the cotton bales never go into storage but are

sold immediately to domestic mills or in export markets.51 

Some of the larger farmers’ cotton cooperatives, such as Calcot (California/Arizona), and

Plains Cotton Cooperative Association (PCCA) (Texas/Oklahoma), collectively market cotton

to textile mills across the United States. The advantages for farmers marketing through a

cooperative include tailoring large cotton shipments to specific customers and, of course,

collectively bargaining selling prices.

Internet marketing

Recently, several U.S. companies involved in the cotton industry (upstream in seeds for

planting and fertilizers and downstream in ginning, warehousing, marketing, and distribution)

have set up an independent Internet company to boost sales and cut distribution and marketing

costs. Allenberg Cotton (a division of Louis Dreyfus Cotton International), Dunavant
 

52

 Doane’s Agricultural Report, June 2, 2000, p. 1, and found at http://www.pcca.com,

retrieved July 28, 2000.

 

53 AMCOT is an international sales agency for U.S. cotton growers. It is based in Lubbock,

TX and is owned and operated by the four largest U.S. cotton marketing cooperatives -- Calcot,

Ltd., PCCA, Staple Cotton Cooperative Association (Staplcotn), and Southwestern Irrigated

Cotton Growers Association (SWIG). According to AMCOT’s web site, found at

http://www.amcot.org., these farmer-owned cooperatives sell a little more than one-quarter of the

U.S. cotton crop (5 million bales) to textile mills worldwide. 

 

54 “How U.S. Cotton is Marketed,” Cotton Council International, found at

http://www.cottonusa.org.

 

55 Carl G. Anderson, “Price and Marketing Strategies for the Year 2000,” The Cotton Gin

and Oil Mill Press, Feb. 12, 2000, pp. 11-13.

17

Enterprises, Hohenberg Bros. (a division of Cargill), and PCCA are developing a Memphisbased, business-to-business web site for cotton and cotton-related products and services.52

International marketing

Foreign textile mills usually procure U.S. cotton from merchants who are members of the

American Cotton Shippers Association, or from U.S. marketing cooperatives who are

members of AMCOT.53 Sales and distribution of the cotton is done in one of three ways: (1)

through commission agents located in foreign markets; (2) through foreign merchants or

importers; and (3) directly to the textile mills. Selling through commission agents is the most

common method because agents can monitor the needs of the local mills and negotiate future

cotton sales.54

A cotton contract will stipulate whether the cotton is “certified shipping weights final” or “net

landed weights final.” In the first instance, the cotton is re-weighed before shipment by a

licensed public weigher. For “net landed weights final” contracts, the cotton is invoiced on a

provisional basis, and final weight is determined by internationally recognized controllers

upon arrival at the final foreign destination. 

U.S. labels (“growths”) specifying the origin of the cotton are clearly stated on the contract.

Common growths are American (no specific origin), San Joaquin Valley,California/Arizona,

Orleans/Texas (which includes TX, OK, NM, MO, LA, MS, TN, and AK), and

Memphis/Eastern Territory (which includes all points east of the Mississippi River). As with

all sales, foreign or domestic, contract terms describe the shipment’s quality, including grade,

staple length, and micronaire.

Options and futures

If a farmer sells cotton immediately after baling, the transaction is completed in what is called

the cash market. In this case, cash or credit immediately changes hands at the current spot

price and title to the cotton is conveyed to the new owner. However, more and more farmers

are engaging in futures and options to maximize income, alleviate some of the risk due to

fluctuating prices, and time sales to meet cash flow needs.55 Simply put, options and futures

are designed to shift the risk of downward price movements from one party (in this case, the

farmer) to another party (the cotton merchant) for a fee. A futures contract is a standardized

legal commitment to deliver (or receive) a specific quantity of cotton on a specified date to a
 

56 The standard trading unit in the options and futures market is 50,000 lbs. (approximately

100 US bales) of Grade 41 (Strict Low Middling), staple length 34 (1-1/16 inches), and

micronaire 3.5-4.9.

 

57

 Agricultural Futures and Options, New York Board of Trade, pp 3-4.

 

58 A simplified example of the futures market follows: In August, a cotton farmer observes

that the current cash market price is 65 cents per pound, and that December cotton futures are

trading at 68 cents per pound. The difference between the cash market and December futures

prices (“basis”) is 3 cents per pound. The farmer expects a price decline in the near term and

wants to lock in profits accruing to his cotton at the current 65 cents per pound price. To

accomplish this, the farmer sells December futures in August at 68 cents per pound. By

November, December futures are only 64 cents per pound. The farmer closes out the futures

position purchased in August by buying December futures for 64 cents per pound, netting a 4

cents per pound futures market gain (68-64 =4). Even if the cash market price declines to 61

cents per pound (from 65 cents) by the time the cotton is sold, the farmer collects a net cotton

price of 65 cents per pound (61 cents plus the net futures gain of 4 cents). Adapted from

Understanding Futures and Options, New York Board of Trade, pp. 7-8. 

18

specified delivery point.56 For a fee, farmers can sell (“short”) futures contracts on the New

York Cotton Exchange (NYCE) to protect a certain minimum price for the cotton. An option

on a futures contract is a standardized agreement between a buyer (the cotton merchant) and

a seller (the cotton farmer) that grants the option (a “call option”), but not the obligation, to

buy a futures contract at a predetermined price (“strike price”) within a specified period of

time. Once again, a fee (“premium”) is paid, this time from the cotton merchant to the farmer,

to acquire the option rights.57, 58 Futures and options markets are beneficial for farmers and

merchants because the fees paid under the contracts satisfy both parties for the price risk they

bear.

Vertical Integration in the U.S. Cotton Industry

Full-scale vertical integration, from growing cotton to the production of consumer end-use

products, is unusual in the U.S. cotton industry. Several farmers’ cooperatives, such as Calcot

and Staplcotn, have purchased gins and warehouses to both ensure adequate ginning and

storage capacity at harvest time and capture additional profit streams. As mentioned above,

some textile manufacturers have purchased warehouses to ensure just-in-time delivery of

cotton to mills. But full-scale integration is not often advantageous because the technical skills

needed to produce yarns, textiles, and fabrics do not necessarily overlap with growing,

ginning, and warehousing cotton. In addition, strong demand for U.S. cotton in export markets

means that integrated mills are unnecessary to ensure a cotton farmer’s survival. One notable

exception regarding vertical integration is the Plains Cotton Cooperative Association (PCCA).

PCCA, based in Lubbock, Texas, markets roughly 2.5 million to 3 million bales (540,000 to

650,000 metric tons) of cotton annually. This cooperative accounts for about 15 percent of

U.S. production. In addition to growing, ginning, and warehousing cotton, and producing

cottonseed oil, PCCA has owned the American Cotton Growers (ACG) denim mill in

Littlefield, TX, since 1987. In 1998, when its principal denim customer, Levi’s, announced
 

59 S. Gray Maycumber, “For the New Mission Valley, Versatility is the Game,” Daily News

Record, July 12, 1999.

 

60 See http://www.dunavant.com.

 

61 See http://www.hohenbergbros.com.

 

62 See http://www.twynam.com.

 

63 See http://www.louisdreyfus.com.

19

full capacity of the ACG plant, PCCA bought Mission Valley Fabrics, a yarn-dyed fabric

producer, to market ACG’s denim with other Mission Valley product lines.59

Extent of Globalization in the Cotton Industry

U.S. cotton farms are generally not integrated with foreign firms, and as noted above, many

U.S. gins are owned by local farmers or farmer cooperatives. But as cotton moves

downstream in the production process, into services such as warehousing and distribution,

companies are becoming increasingly globalized as they seek to provide consistent supplies

of cotton on a just-in time basis at more stable prices. On-line computer networks connecting

warehouses with shipping and trucking facilities have promoted timely shipments of cotton

to textile mills.60 The consolidation of downstream services within larger and larger companies

is likely to continue because cotton is now sourced globally by textile mills, most cotton is

harvested and ginned long distances from where it is consumed, and mills are demanding

consistent raw material inputs at lower cost. 

U.S. companies such as Dunavant and Hohenberg Bros. (a division of Cargill) have become

global enterprises, performing cotton services in all major cotton-producing regions of the

world. Dunavant owns U.S. and foreign warehouses; a commodities trading operation, a

cotton classing laboratory, and a trucking company in the United States; ginning operations

in Mexico and Australia; and maintains purchasing and selling offices in Asia, Europe, North

America, Central and South America, and Australia. Dunavant handles approximately 4

million bales (870,000 metric tons) of domestic and foreign cotton annually and warehouses

roughly 1.5 million bales (330,000 metric tons). Hohenberg Bros. maintains similar buying,

selling, and shipping operations in over fifty countries.61

Foreign competitors have taken a similar approach to meeting the needs of textile mills around

the world. For example, an Australian company, Colly Cotton, Ltd., maintains purchasing

and selling offices in Australia, Hong Kong, Beijing, Seoul, and the United States, and has a

joint venture with the Houchin family of California to globally market Australian and San

Joaquin Valley (SJV) cotton varieties. Colly Cotton’s parent company, Twynam, grows and

gins cotton in Argentina and Australia, and recently purchased cotton gins in California.62

Another foreign cotton merchandiser, Louis Dreyfus Cotton International, has offices in all

major cotton-growing regions and owns Allenberg Cotton Co., based in Tennessee. The

Allenberg division alone purchases and sells over 750,000 metric tons annually.63 It is

becoming increasingly common for companies such as Dunavant, Hohenberg Bros., Louis

Dreyfus, and Twynam to obtain assets over a wide geographic area in order to alleviate the

financial risk of poor cotton crops in any one region of the world.
 

64 The Cotton No. 2 contract is the standard contract for trading in cotton options and futures

on the New York Commodity Exchange. The trading unit is approximately 100 bales (50,000

pounds net weight); the active trading months are March, May, July, October, and December;

and contracts are listed in cents per pound. Basis Grade is Strict Low Middling with a staple

length of 1-1/16 in. Delivery points are Galveston TX; Houston, TX; New Orleans, LA;

Memphis, TN; and Greenville/Spartanburg, S.C. 

 

65 Contracts are written in terms of a “basis,” which is the cash price minus a defined futures

price (e.g., December of the current year). The basis includes storage costs until the future’s

contract date, transportation costs to the port designated on the future’s contract and any

premiums or discounts due to supply and demand considerations for the particular cotton in

question. For a more detailed analysis of U.S. cotton basis patterns, see V. Fred Seamon, et

al.,“A Regional Comparison of U.S. Cotton Basis Patterns,” Working Paper WP123197,

Clemson University, Dec. 1997. 

 

66 The A-Index is compiled by Cotton Outlook, a private UK cotton consultancy, and is

intended to be representative of the price level on the international raw cotton market. It is the

simple average of the cheapest five quotations from a selection of the principal upland cottons

traded internationally. (See app. C). The prices are CIF cash against documents on arrival of a

vessel at a North European port, including profit and agent's commission. Because the

quotations are intended to reflect the competitive level of offering prices, not the level at which

business has been arranged, a mill buyer would normally expect to succeed with bids that were

slightly lower. See http://www.cotlook.com.

20

Cotton Pricing

Any discussion about cotton is complicated by the fact that the product has no single price.

Cotton prices vary depending on the variety grown and the quality of the harvested crop. (See

section on classing above.) In addition, there are government payment programs (both foreign

and domestic) which affect pricing mechanisms; tariff-rate quotas; global supply shifts due

to the vagaries of weather patterns and political instability; global demand shifts because of

financial crashes in the developing world; and more routine price variations based on

fluctuations in clothing and home furnishings demands by the consumer. In short, cotton

prices face the variability associated with any globally-traded agricultural commodity.

To make some sense of this complicated trading environment, sales contracts for upland

cotton are usually based on prices for the NYCE’s Cotton No. 2 Futures contract.64 The sales

are discounted or given a premium based on how bale quality (staple length, color, etc.)

compares to the specifications of Cotton No. 2 Futures.65 Purchasers and sellers also track the

daily Cotlook A-Index (“A-Index”).66 Cotlook A-Indices and futures prices track one another

to the extent that global demand and supply shifts affect them both. Table B-6 lists monthly

Cotlook A-Index cotton prices for January 1995 through July 2000, as well as the monthly

average of USDA’s weekly Adjusted World Price (AWP) (figure 3). (See section on

marketing assistance loans below for more information on AWP.) USDA and other U.S.

organizations that use the Cotlook A-Index to monitor world prices and compare them to U.S.

cotton prices make adjustments based on transportation costs to domestic ports, as well as

premiums and discounts for the actual quality of cotton traded.
 

67 Amanda Huber, “North Carolina Crop Remains Strong,” Cotton Farming, May 2000, pp.

30-32.

 

68 Carlos A. Valderrama, “The World Cotton Market: Prices and Distortions,” International

Cotton Advisory Committee, pp. 1, 3-8.

21

1/95

4/95

7/95

10/95

1/96

4/96

7/96

10/96

1/97

4/97

7/97

10/97

1/98

4/98

7/98

10/98

1/99

4/99

7/99

10/99

1/00

4/00

7/00

20

30

40

50

60

70

80

90

100

Cents per pound

Cotlook A-Index

AWP

Figure 3

Comparison of Cotlook A-Index and USDA’s Adjusted World Price (AWP) for Cotton, monthly,

January 1995-July 2000

Source: Cotton Outlook and USDA.

U.S. prices for upland and ELS cotton declined consistently during 1995-99 (tables B-7 and

B-8). The simple reason for this decline is that world production exceeded world consumption

needs. At least until MY 1999, when the A-index fell below 60 cents per pound and continued

a rapid descent before bottoming out at 44.21 cents in December 1999, U.S. cotton farmers

continued to produce cotton because alternative rotational crops such as corn and soybeans

provided even worse financial returns. Particularly in the Southeast, where tobacco acreage

declined and hog prices reached historic lows, cotton provided necessary cash flow because

government payments expanded.67 Another factor driving cotton prices down was that direct

production subsidies increased in major cotton-producing countries, creating disincentives for

farmers to cut production. Direct assistance to cotton farmers worldwide rose from $3.7

billion in MY 1997 to $4.7 billion in MY 1998.68 Futures markets were also forcing down

market prices during 1995-99 because of large cotton inventories in China. Although these
 

69 Ralph Bean and Freda Chao, “Peoples Republic of China, Cotton and Products Annual

2000,” FAS, USDA, June 30, 2000, pp. 1-2.

 

70

 Cotton: World Statistics, International Cotton Advisory Council, May 2000.

 

71 Cotton Program: Costly and complex government program needs to be reassessed, GAO

report, June 1995, p. 17.

 

72 House Report No. 104-62, pp. 43-44, as reprinted in 1996 U.S. Code Congressional and

Administrative News, Part 4, pp. 615-616.

 

73 Federal government fiscal years run Oct. 1-Sept. 30. For example, FY 1999 runs from 

Oct. 1, 1998 - Sept. 30, 1999.

22

inventories were not of the highest quality (and much of it had been stored for several years),

the uncertainty surrounding potential sales of additional cotton on world markets undercut

prices.69

On the demand side of the ledger, pricing was negatively impacted as global cotton

consumption declined in the wake of the East Asian financial crisis of 1997-98. Global mill

use, which climbed from 18.6 million metric tons in MY 1995 to 19.4 million metric tons in

MY 1996, fell over the next 2 marketing years to 19.0 million metric tons in MY 1998. By

MY 1999, global consumption had recovered to 19.8 million metric tons.70

U.S. Government Programs

The U.S. Government has attempted to raise farmers’ incomes and lessen the volatility of

cotton prices since the Great Depression, when farm commodity prices decreased by 50

percent.71 Congress enacted the Agricultural Adjustment Act of 1933, which attempted to

indirectly stabilize cotton prices by controlling production. Current cotton policy can be traced

back to this statute and the Agricultural Adjustment Act of 1938. The objectives of the current

cotton program, as embodied in the Federal Agriculture Improvement and Reform Act of 1996

(“FAIR Act”), are to protect U.S. farm income, allow markets to manage cotton supply levels,

and maintain competitive prices for domestically-produced cotton on world markets.72 The

current government programs pertaining to cotton are summarized in table 1.

Production flexibility contract (PFC) payments

In the FAIR Act, USDA established what is called the production flexibility contract (PFC)

program. Farmers were eligible to sign up for the 7-year program (fiscal years 1996-2002)73

if they had an established acreage base in wheat, corn, sorghum, barley, oats, upland cotton,

or rice during 1996. Farmers producing contract commodities (on a farm with a production

flexibility contract) are eligible to receive PFC payments, as well as marketing assistance

loans and loan deficiency payments for eligible crops. In return for PFC payments, farmers

must adhere to conservation and wetlands protection requirements, obtain catastrophic crop

insurance, and file annual acreage reports.
23

Table 1

Summary of U.S. Government Programs for Cotton

U.S. Government Program Description

Total Annual 

Payments (FY 2000)

Production Flexibility

Contract (PFC) Payments

7 year program (FY 1996-2002) of per acre

payments paid directly to farmers $616 million

Marketing Loss

Assistance Payments

Starting in FY 1999, additional direct

payments to farmers, proportional to PFC

payments

$613 million

Marketing Assistance (MA)

Loans

Nonrecourse loans which allow farmers to

default by forfeiting cotton to the CCC;

repayment of the loans is at the lower of two

defined prices

$2,547 million

($1,082 million in net

payments after loan

repayments by farmers)

Loan Deficiency Payments

Alternative to marketing assistance loans;

payments made to farmers when the

Adjusted World Price (AWP) is below the

marketing assistance loan rate

$672 million

Three Step Competitiveness

Process -- Step 1

Lowering of the AWP by USDA; provides an

additional windfall to farmers to discourage

defaulting of MA loans

No payments

Three Step Competitiveness

Process -- Step 2

(upland cotton only)

Payments to domestic textile mills and

exporters when U.S. cotton is consumed or

exported; helps keep U.S. cotton pricecompetitive with foreign cotton

$458 million

Three Step Competitiveness

Process -- Step 3

Special import quotas triggered by USDA

when certain price and inventory conditions

in the U.S. market are met; provides

additional access to imports for domestic

textile mills

No payments 

Storage and Interest Charges 

(Upland cotton only)

The CCC can waive storage charges and

interest on marketing assistance loans when

the AWP is below the loan rate, so that the

loans are payable at the AWP

$203 million

($128 million for storage

and $75 million for

interest)

ELS Competitiveness

Payment Program

Payments to domestic textile mills and

exporters when U.S. ELS cotton is

consumed or exported; helps keep U.S.

cotton price-competitive with foreign cotton

$350,000

Total program payments $3,634 million1

 1 Payments under individual cotton programs do not add to the total because proceeds ($9.5 million) from

sales of cotton defaulted to the CCC are netted against total program payments. CCC interest subsidies totaling

$75 million are included in the total.

Source: FSA, USDA.
 

74 PFC payments are based on a farmer’s cotton yield and acreage history in the marketing

years 1991 through 1995. Because the payments are not based on production in the current year,

a farmer receives the money even if no cotton is planted.

 

75 E-mail from Wayne Bjorlie, Director of Fibers Group, FSA, USDA, August 1, 2000.

 

76 “Fact Sheet: Production Flexibility Contracts, Marketing Loss Assistance Payments, and

Marketing Assistance Loans,” FSA, USDA, Feb. 1999, pp. 1-4, and e-mail from Brad Karmen,

FSA, USDA, Aug. 3, 2000.

 

77 Marketing assistance loans are available for all upland cotton produced on a farm with a

production flexibility contract, even if produced on noncontract acres.

 

78 “Fact Sheet: Production Flexibility Contracts, Marketing Loss Assistance Payments, and

Marketing Assistance Loans,” FSA, USDA, Feb. 1999, pp. 1-4, and e-mail from Brad Karmen,

FSA, USDA, Aug. 3, 2000. The effective limit for FY 1998 MLA payments was $19,888 per

person because the MLA rate was 49.7 percent of the PFC payment rate (4.06/8.17 cents per

pound, or alternatively, $19,888/$40,000).

24

PFC payments are paid from the Federal Government directly to farmers. The payments are

decoupled from production, meaning that the money is not contingent on planting and

harvesting a certain number of acres of cotton in the current year.74 (Prior to the FAIR Act,

farmers were given price deficiency payments (based on target prices) in return for leaving

certain acreage idle.75) The tabulation below lists PFC payments for fiscal years 1996-2000.

For fiscal year (FY) 1999, the PFC rate for upland cotton was 7.88 cents per pound, and for

current FY 2000, the PFC rate declined to 7.33 cents per pound. The FY 1999 and FY 2000

annual payment limits for flexible contracts remained $40,000 per person.76 Noncontract

commodities (e.g., ELS cotton) are not eligible for PFC payments. 

Marketing loss assistance payments77

In October 1998, in the wake of rapidly declining U.S. and world cotton prices, Congress

passed the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999,

which authorized additional payments to farmers, proportional to the amount of PFC (per

pound) payments received by farmers in the same fiscal year. For FY 1999, the loss assistance

payments equaled 7.88 cents per pound; however, no one person could receive more than

$40,000. The payment limit increased from FY 1998, when it was $19,888 per person.78

Production flexibility and marketing loss assistance payments, fiscal years,

1996-2000

(In cents per pound)

Title 19962 1997 1998 1999 2000

Production flexibility payments (PFC)1. . 7.7 7.6 8.17 7.88 7.33

Marketing loss assistance payments ... (

3

) (

3

) 4.06 7.88 7.88

 1 The production flexibility payments were instituted with the FAIR Act.

 2 The 1996 PFC excludes the amount of 1995 deficiency payments required to be repaid,

or 1.19 cents per pound.

 3 Not applicable. The marketing loss assistance payments were instituted in the Omnibus

Consolidated and Emergency Supplemental Appropriations Act of 1999.

Sources: USDA news releases, found at http://www.fsa.usda.gov, retrieved Aug. 1, 2000

and Wayne Bjorlie, FSA, USDA, received Aug. 1-3, 2000.
 

79

 Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments, FSA, USDA,

Mar. 19, 1998, p. 1.

 

80 “Nonrecourse” also means that farmers are not liable for any losses sustained by the CCC

when the cotton is resold. With 197,700 upland cotton bales outstanding under loan as of July 1,

2000, there were only 541bales in CCC-owned inventory. See “CCC Commodity Inventory,” July

1, 2000, found at http://www.usda.gov.

 

81 Grade is defined by color, trash content, and preparation (smoothness) of the cotton.

Official USDA cotton quality classifications include 44 upland cotton and 10 ELS cotton grades.

(See 57 FR 34495, Aug. 5, 1992.)

 

82 The base loan rate differentials are based on actual transportation costs, taking into account

transportation routes and modes of transport, as well as travel distance.

 

83 An example of CCC upland cotton loan rates is as follows: The MY 2000 loan rate for 41-

4-34 upland cotton with a micronaire (fineness) reading of 3.5-3.6, strength of 25.5-29.4 grams

per tex, no bark, and uniformity of 80-82 percent is 51.92 cents per pound, before taking into

account any regional variations in the base rate. Cotton fitting this description receives no

premiums or discounts under the loan program. (“41-4-34" refers to Strict Low Middling (SLM)

color (41), leaf content code of 4, and a staple length of 34/32 inches (1-1/16 in.)). On the other

hand, 31-5-36 upland cotton grown in El Paso, TX, with a micronaire reading of 3.3, strength of

24 grams per tex, a level 1 bark discount, and uniformity of 77 percent would start with a base

rate of 51.65 cents per pound (based on location), and then receive a discount totaling 7.30 cents

per pound (730 points). The discounts include 1.3 cents for color, leaf, and staple length

variations, 2.25 cents for bark content, 1.00 cent for subpar strength, 2.15 cents for a subpar

micronaire reading, and 0.60 cent for subpar uniformity. The total loan rate for this Texas cotton

would be 44.35 cents per pound (51.56 - 7.30). 

25

Marketing assistance loans

The Federal Government’s primary source of funding to farmers is provided through

marketing assistance loans (“loans”). The loans serve two purposes. The first is to provide

cotton farmers with timely cash flow and financial liquidity during the growing season and

immediately after harvest so that they are not forced to sell the crop during times of the year

when cotton prices are lowest. The second, somewhat related, purpose is to smooth out cotton

supplies to mills and brokers.79 The goal is to diminish price fluctuations in the U.S. market

by allowing farmers the financial flexibility to sell their product at any time of the year. 

Loans for both upland and ELS cotton are “nonrecourse,” meaning that farmers have the

option of delivering the cotton (used as collateral) to the Commodity Credit Corporation

(CCC), in lieu of repayment of the loan amount at maturity.80 Because the quality of cotton

fibers vary considerably, USDA maintains a system of loan premiums and discounts based

on cotton qualities assessed during classing. A schedule of premiums and discounts for

grade81, staple length, extraneous matter (trash), uniformity, micronaire, and strength are

annually provided for upland cotton, and a similar schedule is provided for staple length,

micronaire, and extraneous matter for ELS cotton (App. D). These premiums and discounts

are added or subtracted from the loan base rate, which is set on a county-by-county basis to

reflect transportation costs between warehouses and Carolina mills.82, 83

In order to qualify for either upland or ELS cotton loans from the CCC, cotton farmers must

retain what is called “beneficial interest” in the cotton from the time of harvest until either the

loan is repaid or the CCC takes title to the commodity. Retaining beneficial interest means that

the farmer retains control of, the risk of financial loss from, and title to the cotton.
 

84 The AWP is determined on a weekly basis and is the Friday through Thursday average of

the Cotlook A-Index, adjusted to the average U.S. location and to SLM 1-1/16 inch cotton. (See

app. E for a more detailed explanation of the adjustments.)

 

85 Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments, FSA, USDA,

Mar. 19, 1998, p. 3.

 

86 The actual average loan payment is 80.33 cents per pound, which includes a micronaire

premium not included in the statutory maximum loan rate.

 

87 “Fact Sheet: Production Flexibility Contract Data and Marketing Assistance Loan Rates --

Crop Years 1996-1998,” FSA, USDA, Feb. 1999, pp. 1-3, and E-mail from Wayne Bjorlie,

Director, Fibers Group, FSA, USDA on Aug. 3, 2000.

 

88 A marketing loan gain is the amount of principal waived when a farmer repays a loan at a

lower payment rate than the contract requires.

 

89 According to the Federal Register notice implementing the crop and market loss provisions

of the Agriculture, Rural Development, FDA, and Related Agencies Appropriations Act, 2000

(65 FR 7941, Feb. 16, 2000), the payment limit was doubled from the previous crop year to

$150,000 because at the old limit, some cotton farmers would have an incentive to obtain loans

on cotton ineligible for marketing loan gains or loan deficiency payments (due to the payment

limit) and forfeit the crop to the CCC. Forfeitures are not subject to payment limitations.

 

90 The three entity rule was established because of attempts by farmers to circumvent USDA

payment limits (first introduced in the 1970s) by creating legal entities such as partnerships and

corporations to collect additional payments. These entities were carefully designed to meet all

USDA land requirements and not exceed payment limits. To create a compromise between

larger farmers who claimed they could not survive under statutory limits and those in Congress

that wanted to restrict government largess to only needy farmers (although “those in need”

remained undefined), the three entity rule was established. A farmer can receive one set of

payments for himself, while owning up to 50 percent of 2 entities that also get payments. If the

farmer holds over 50 percent of either of the additional entities, he or she is combined with the

entity when calculating payment limits.

26

Repayment of the loans for upland cotton is the lower of two rates: 1) 85 percent of the

simple average price received by cotton producers during the marketing years for the

immediately preceding 5 crops, excluding the highest and lowest prices in those years; or 2)

the adjusted world price (AWP), as defined by the Secretary of Agriculture.84 However, the

rate may not be less than 50 cents per pound or more than 51.92 cents per pound.85 From the

first year of the program (1996) through 2000, the average upland base loan rate was 51.92

cents per pound. 

Marketing assistance loans for ELS cotton have no “lower of two rates” repayment provision.

ELS loans must be paid at the amount borrowed or forfeited to the CCC. The national loan

rate for ELS cotton can not be less than the 85 percent formula (see previous paragraph) but

may not be more than 79.65 cents per pound, which was the MY 1995 rate. During MY

1996-2000, the average ELS base loan rate was 79.65 cents per pound.86, 87

Loan deficiency payments (LDPs)

Upland cotton farmers are eligible to receive either a marketing assistance loan or loan

deficiency payments (LDPs). LDP provisions are designed to severely diminish delivery of

cotton to the CCC in lieu of repayment of marketing assistance loans. LDPs are payments

made to cotton producers when the AWP is below the loan rate. Marketing loan gains88 and

LDPs (for all crops on a given farm, including cotton) are limited to $150,000 per

person/corporation for MY 1999, although some farmers have established 2 additional

corporations/entities to collect more than the per person limit under the “three entity rule.”

89, 90 In that case, the limit for all three entities is $450,000. LDP provisions do not apply

to ELS cotton.
 

91 The U.S. northern Europe price is the lower of the California/Arizona or the Memphis

price listed in the Cotlook A-Index.

 

92 Step 2 was interrupted from Dec. 1994 through July 1997 because Step 3 was triggered.

Under statutory rules in effect at that time, Steps 2 and 3 could not operate simultaneously. See

Ann Murphy, “Step 2 Payments high and Running Out in MY 98/99," World and U.S. Cotton

Situation & Outlook, FAS, USDA, July 1998, pp. 3-6.

 

93 See http://www.fsa.usda.gov/daco/cotwhse.htm for a list of USDA-approved warehouses.

27

Three-step competitiveness process

In addition to allowing farmers to repay their loans at the AWP rather than at the original loan

rate, Congress authorized and the USDA implemented a “three-step competitiveness process”

in the early 1990s to promote sales of U.S. cotton to domestic mills and in export markets. 

Step 1 gives the Secretary of Agriculture discretionary authority to reduce the AWP at which

cotton loans can be repaid. By further reducing the AWP below the loan rate, cotton farmers

receive an additional windfall which discourages them from defaulting on the loan and

releasing their cotton to the CCC. Step 1 may be invoked if the AWP falls to less than 115

percent of the loan rate, or 59.71 cents per pound (1.15 x 51.92). The maximum amount of

the step 1 adjustment during any given week is the U.S. northern Europe price91 minus the

Cotlook A-Index. Step 1 is not currently being utilized by USDA.

Step 2 payments begin when the U.S. northern Europe price exceeds the Cotlook A-Index by

1.25 cents per pound for four consecutive weeks. Payments are made to domestic textile mills

based on the number of pounds of U.S. cotton they consume and to exporters based on the

number of pounds they load aboard ship for export. Step 2 payments are not provided if the

AWP exceeds 134 percent of the loan rate. Step 2 has not always been available for domestic

mills and exporters. It was interrupted between December 1994 and July 1997,92 and from

December 1998 until October 1999 because of expenditure caps in place at that time. The

program is currently funded without an expenditure cap through the end of MY 2002, which

ends July 31, 2003.

Step 3 deals with special import quotas which are triggered when the U.S. cotton price

(Middling 1-3/32 inch cotton, CIF northern Europe, adjusted for any Step 2 payments)

exceeds the Cotlook A-Index by more than 1.25 cents for 4 consecutive weeks. (For a more

detailed discussion, see “Step 3 program” under nontariff import measures below.)

Storage and interest charges for upland cotton

In order to receive marketing assistance loans, cotton farmers must store their cotton in

USDA-approved warehouses.93 As a general rule, cotton farmers must pay all interest and

storage charges at the time the marketing loan is repaid. However, when the AWP is below

the loan rate, the CCC waives some or all of these charges in order to make the loan repayable

at the AWP rate.
 

94 “Electronic CCC Cotton Catalog Sales and Storage Invoicing,” found at

http://www.fsa.usda.gov, retrieved July 31, 2000.

 

95 Discussion with Wayne Bjorlie, Director, Fibers Group, FSA, USDA, June 6, 2000.

 

96 The adjusted price quotation for foreign ELS growths is defined as the lower of the

following two prices (per pound): 1) Giza 70 cotton from Egypt minus 7.00 cents or 2) CIS Pima

cotton from central Asia minus 18.00 cents. Before comparing the foreign price to the U.S. price,

the foreign price is further adjusted downward by 13.16 cents per pound to account for the

average transportation cost between North Europe and the United States. (The transportation

adjustment was 14.05 cents per pound between Oct. 1, 1999, and Apr. 18, 2000, and has

remained at 13.16 cents per pound since Apr. 19, 2000.)

 

97 E-mail from Wayne Bjorlie, Director, Fibers Group, FSA, USDA, October 30, 2000.

28

The CCC has developed an electronic, Internet-based network to sell cotton from loan

forfeitures and transmit quarterly storage invoices to gins and warehouse operators. The

system, known as COPS (Cotton On-line Processing System), is reducing the CCC’s

operating costs, while at the same time expanding the number of potential bidders for CCCowned upland and ELS cotton forfeitures.94

ELS competitiveness payment program

The FAIR Act authorized support for domestically-produced ELS (American Pima) cotton

under what is called the ELS competitiveness payment program. The program pays domestic

mills and exporters on a per-pound basis to purchase American Pima cotton when world ELS

cotton prices are lower than domestic prices, in order to hold down domestic inventories.

Competitiveness payments stimulate exports and act as a safety valve for cotton forfeited to

the government when domestic prices drop below the ELS loan rate. USDA estimates that by

increasing demand for American Pima cotton through competitiveness payments, domestic

prices rise by roughly 2 cents per pound and U.S. Government costs of storing and selling

forfeited ELS cotton decline by approximately $25 million annually.95

Starting October 1, 1999, and running through July 31, 2003, payments are provided to U.S.

textile mills and exporters when the lowest weekly (Wednesday through Tuesday) average

adjusted price quotation for foreign ELS cotton (“foreign price”)96 is less than the weekly

adjusted average domestic spot price quotation for American Pima cotton (“U.S. price”),

grade 3, staple 44, micronaire 3.5 or higher, uncompressed, FOB warehouse, for 4

consecutive weeks. The price quotation for foreign ELS cotton must also not exceed 134

percent of the current crop year loan level for American Pima cotton grade 3, staple 44,

micronaire 3.5 or higher.

USDA allocated $10 million for ELS cotton competitiveness payments, to be used until July

31, 2003, or whenever the money is depleted. Table B-9 lists the prices and payment rates

from the week of March 14, 2000 to September 12, 2000. (No payments were made

(“triggered”) to mills or exporters between October 1, 1999 and April 4, 2000.) USDA

estimates are that payments made to mills and exporters during FY 2000 totaled $350,000.97
 

98 The Cotton Board comprises members from every cotton-producing State and importers.

 

99

 Report to the Secretary of Agriculture of the USDA Research and Promotion Task Force,

updated Mar. 6, 2000, found at http://www.ams.usda.gov/r&p/rpfinal.htm, retrieved Aug. 30,

2000.

 

100 See http://www.cottoninc.com.

29

Research and Development

Research and development in the U.S. cotton sector takes many forms and involves publicprivate partnerships. All of these programs encourage cotton use, either by increasing demand

or lowering the cost of supply. In general, U.S. research and development in cotton can be

divided into four areas: computer software development and end-use product design by cotton

industry organizations, seed research done by private biotechnology companies, pest control

programs operated by State and Federal agencies, and farming and ginning research done

through partnerships between USDA and universities.

Research and promotion assessments

All domestic cotton producers and importers participate in USDA’s research and promotion

(R&P) program, which is overseen by the Agricultural Marketing Service (AMS) and

administered by the Cotton Board.98 R&P assessments are collected on every bale of cotton

consumed in the United States and equal $1 per bale plus 0.5 percent of the cotton lint’s value.

Estimated FY 1999 collections totaled $55 million ($37 million from domestic producers and

$18 million from imports) and are currently used for consumer product marketing, farming

and fiber quality research, and textile development.99

Cotton Incorporated, a research and marketing organization affiliated with the NCC, receives

part of the R&P assessments each year, in conjunction with State and private funding, for use

in projects promoting U.S. cotton consumption. Among the recent projects by Cotton

Incorporated are (1) the Engineered Fiber Selection (EFS) system, a software package which

mixes cotton bales to meet narrow fiber requirements by mills; (2) COTMAN, a computer

program designed to aid cotton plant management and promote the efficient use of pesticides,

fertilizers, and water resources; and (3) the Engineering Knit Program, which attempts to

pinpoint and control shrinkage in cotton knit fabrics. The program uses test machines that

accelerate the wash, rinse, and dry cycles of fabrics to study shrinkage rates.100

Boll weevil eradication program

Over a century ago, the boll weevil (Anthonomus grandis) migrated from Mexico to the

United States. By 1958, Congress recognized the economic damage that this beetle was doing

to cotton throughout the South and appropriated funds for a USDA boll weevil research

laboratory. In 1978, a full scale eradication program was started by USDA’s Animal and

Plant Health Inspection Service (APHIS) on the North Carolina-Virginia border, which was

gradually extended to the rest of the Cotton Belt. Today, the boll weevil has been eliminated

from Alabama, Arizona, California, Florida, Georgia, North Carolina, South Carolina, and

Virginia. Cotton growers pay for approximately 70 percent of the program’s costs. APHIS
 

101 “Boll Weevil Eradication: Background,” found at http://www.aphis.usda.gov.

 

102 Transgenic seeds result from the insertion of genetic material from another organism so

that the plant will exhibit certain desired traits. Prior to the widespread introduction of transgenic

seed varieties, insects such as pink bollworm were controlled through mating disruption

techniques and monitoring traps using pheromones. (Pheromones are hormonal substances

secreted by insects which stimulate a physiological or behavioral response from other insects of

the same species). As late as 1996, approximately 800,000 acres (324,000 hectares) in Egypt and

250,000 acres (101,000 hectares) in the southwestern United States utilized sex pheromone lures.

See Linda McCandless, “Pursuing the Pheromone Plume,” Cornell Focus, Volume 9, Number 1,

Apr. 2000, pp. 20-21.

 

103 Jorge Fernandez-Cornejo and William D. McBride, “Genetically Engineered Crops for

Pest Management in U.S. Agriculture: Farm-Level Effects,” ERS, USDA, Apr. 2000.

 

104 See http://www.cotton.org.

 

105 Data from NASS and ERS, USDA, as reported in Cotton Gin and Oil Mill Press, August

26, 2000.

 

106 For the 1998 crop, Arizona farmers planted over 80 percent of their acreage with

transgenic varieties. Sixty percent was Bt cotton (Bt), 10 percent was Roundup Ready (RR), and

11 percent was stacked gene (Bt+RR). Nineteen percent of the acreage was planted with

conventional non-transgenic varieties. See Jeffrey C. Silvertooth, “Cotton: A College of

Agriculture Report,” University of Arizona, 1999, p. 1.

 

107 Cotton Seedling Diseases Research of the Cotton Foundation, found at

http://www.cotton.org/cf/seedling/-survey-10.cfm.

30

supplies equipment, technical and administrative support, and 30 percent of the program’s

funds.101 Growers are assessed for the eradication program on a per acre basis. 

Cottonseed Biotechnology

U.S. cotton production is now increasingly dependent on biotechnological solutions to age-old

problems such as low crop yields, insect infestation, and weeds. Over the last 10 years, the

scientific community has responded by developing transgenic cotton seeds.102 These seed

varieties are instrumental in boosting per acre yields and crop quality, while at the same time

alleviating crop damage due to bollworms and other natural pests. A study by Cornejo and

McBride has shown that the use of these transgenic seeds significantly increases net returns

for domestic farmers.103 The use of transgenic seeds is likely to continue as biotech companies

search for ways to lower the cost of new seeds, and cotton yields from these varieties inch

upward.

According to the National Cotton Council, 49 percent of the domestic crop was planted with

transgenic varieties in 1998,104 and USDA reports that 61 percent of the upland acreage used

them in 2000.105 The vast majority contained “input traits,” such as herbicide-resistance,

insect-resistance, or both. In certain areas of the country, use of these seeds is far higher.106

Scientific developments in transgenics have encouraged the re-introduction of cotton farming

into areas of the Southeast that were previously ravaged by insects such as the boll weevil and

bollworms. Large-scale cotton farming returned to southern Virginia in the mid-1980s after

years of virtually no cotton production.107
 

108 C.S. Prakash, “Boom and Bust of Insect Resistant Bt Cotton?,” Center for Plant

Biotechnology Research, Tuskegee University, July 1997, pp. 1-2.

 

109 USDA also allows farmers the alternative option of growing 25 acres of non-Bt cotton for

every 100 acres of Bt cotton, and not using foliar Bt sprays to control targeted worms on refuge

acres. The 4 percent rule and the 25 percent alternative rule are designed to delay insect

resistance to Bt varieties for 10 years or more. See “Refuge Rules Important When Planting Bt

Cotton,” The Cotton Gin and Oil Mill Press, June 3, 2000, p. 14.

 

110

 Cotton: Review of the World Situation, ICAC, Vol. 56-Number 6, July-Aug. 2000, p. 4.

 

111 “Value-Enhanced Crops: Biotechnology’s Next Stage,” Cotton Gin and Oil Mill Press,

July 17, 1999, and Susan V. Lawrence, “Colour of Money,” Far Eastern Economic Review, Sept.

28, 2000, p. 36.

 

112 “Chinese Give New Meaning to Cotton-Tail,” Texas Farmer-Stockman, Sept. 1999.

31

A prime example of trends in biotechnology is Bt cotton, created in the early 1990s by

Monsanto and made commercially available in 1996. Bt cotton provides resistance to pests

such as bollworms, pink bollworms, and tobacco budworms through the infusion of an

insecticidal gene of the bacterium Bacillus thuringiensis (Bt) into the seeds.108 A downside to

the use of transgenic seeds is the need for increased vigilance on the part of farmers against

insect and weed resistance to the new varieties. The Environmental Protection Agency requires

that cotton growers plant at least 4 percent of their acreage with non-transgenic cotton

(“refuge areas”) and not use chemical pesticides in those areas.109 By leaving part of the

acreage planted with non-transgenic varieties, scientists and farmers are hoping to slow the

natural development of resistance to the Bt gene. Only five countries are growing geneticallymodified (GM) cotton on a commercial scale: the United States, Australia, South Africa,

China, and Argentina, but several other countries (e.g., India and Egypt) are conducting

experimental trials. On the other hand, the European Union recently passed GMO regulations

forcing Greece to end all testing of GM cotton crops.110

Biotech researchers are beginning to focus on projects which provide product-enhancing traits

for consumers, the so-called “output traits.” Cotton fiber genetically-modified to grow in nonwhite colors, which would reduce the cost of chemical dyes in fabrics, is available in certain

niche markets.111 According to the National Cotton Council, Chinese scientists have created

cotton fibers which feel like rabbit fur by adding rabbit keratin genes to the cottonseed.112

U.S. MARKET

Consumer Characteristics and Factors Affecting Demand

Characteristics of consumers

Cotton is consumed by textile mills, which use the fibers as a raw input for the production of

yarns and non-woven products. A diagram showing the physical flow of U.S. cotton after

harvesting is listed in figure 2. Yarns are intermediate products created by carding cotton

fibers into strands (“slivers”) and then drawing, roving, and spinning those strands into thicker
 

113 “Drawing” blends as many as eight cotton strands together. “Roving” draws the slivers out

more evenly and adds a twist to them. “Spinning” further twists the strands and makes them

tighter and thinner until they reach the thickness (“count”) needed for particular fabrics. In openend spinning, the roving process is eliminated. See Cotton: From Field to Fabric, publication

from the National Cotton Council of America, pp. 13-14.

 

114 “World Cotton Crisis?” America’s Textiles International, Apr. 1999.

 

115 Sheila Jones and Richard McGregor, “Cotton industry in a spin over China joining WTO,”

Financial Times, Aug. 17, 2000, p. 6.

32

cords suitable for making weaving or knitting fabrics.113 Eventually, these fabrics are

consumed downstream in the production of apparel, home furnishings, and industrial products.

Roughly 59 percent of U.S. cotton eventually becomes wearing apparel (primarily men’s and

boys’ shirts, trousers, shorts, and underwear; and womens’ and misses’ slacks, dungarees,

jeans, blouses, shirts, and dresses), 35 percent goes into home furnishings (ranging from

bedspreads to draperies), and the rest is used for industrial products such as medical supplies,

industrial threads, tarpaulins, wall coverings, bookbindings, and zipper tapes (table B-1). As

a percentage of total cotton consumed, the share of cotton used for home furnishings has

increased, while the share used for apparel has declined. This shift is due to strong demand

for new homes and declining domestic apparel production. Uses for the average cotton bale

in the United States are illustrated in figure 1.

Factors affecting demand

Cotton demand is strongly influenced by global economic growth rates, fashion demands by

consumers, and comparative prices vis-a-vis man-made fibers such as polyester, nylon, and

rayon. Over the last 25 years, global cotton consumption has not grown in years when

worldwide economic growth fell below 2.3 percent.114 Cotton demand is also suppressed when

inventories rise in large cotton-producing countries such as China and the United States. (See

tabulations in “U.S. inventories” and “Market Profiles: China” for data on Chinese and U.S.

inventories.)

Comparative pricing between cotton and man-made fibers

Petroleum-based fibers face increased production costs as the world price for oil remains at

10-year highs. Input supply shocks to man-made fiber prices have lifted demand for cotton

to the extent that consumers are willing to use natural fibers as substitutes or switch to

different end-use products based on price considerations.115 Table B-10 lists prices for various

natural and man-made fibers in October 1998 and 1999. Note that while prices for certain

man-made fibers also decreased over the 1-year comparison period, cotton prices declined at

the fastest rate. Wool, acrylic, acetate, and nylon prices increased.
 

116 Karen S. Chambers, “Cotton’s Market Share,” American Sportswear & Knitting Times,

Dec. 1999.

 

117 “Sharing a Common Thread: Textiles Thrive on Cotton,” National Cotton Council of

America, found at http://www.cotton.org.

 

118 Dick Silverman, “Synthetics: Rising in Popularity,” Women’s Wear Daily, Oct. 26, 1999.

 

119 E-mail from Matt Laughlin, Supima Association of America, July 27, 2000.

33

Fashion shifts affecting cotton demand

Within the apparel market, cotton fiber use dominates T-shirts and underwear.116 Cotton knits

used for T-shirts account for one-third of all cotton consumed in the United States.117 The

share of cotton in the U.S. apparel market has grown from 53 percent to 60 percent

throughout the 1990s. Much of this increase can be attributed to more casual work attire for

men, a clothing segment where cotton is also used more than synthetic fibers, and a strong

marketing campaign by the cotton industry focusing on product comfort and cotton’s

“natural” qualities. However, a closer look at fashion segments shows a fragmentation and

specialization that may not benefit cotton demand in the long term. In women’s outerwear, the

market share for polyester fiber rose from 26.7 percent to 33.6 percent during 1995-98, while

cotton declined from 18.1 to 16.8 percent. Casual work attire for women increasingly uses

synthetic fibers which present a lightweight feel.118 In the aggregate, trends seem to indicate

that cotton is holding its own (and expanding) in traditional categories such as men’s casual

wear and underwear but losing ground in other sectors as fabrics become more specialized in

fashion niches. 

Substitution between upland and American Pima cotton

Because American Pima and upland cotton can be used interchangeably for some apparel and

home furnishings products, U.S. mills increase American Pima usage when its price premium

over upland cotton decreases. This is particularly true for high-end fashion where a softer feel

and added luster justify American Pima’s additional cost. But even at higher relative prices,

American Pima demand remains somewhat constant because there are no alternatives when

fabrics with finer counts are required. In overseas markets, industry sources suggest that

demand is likely to grow for American Pima as mills recognize that fabrics with finer counts

are more profitable than coarse and medium count fabrics traded in highly-competitive

markets.119

Consumption

Consumption trends and import penetration

According to USDA and Bureau of the Census data, overall U.S. cotton consumption declined

119,000 metric tons, or 5.1 percent, during MY 1995-99 (table B-11). U.S. shipments

dropped 1.9 percent over the 5-year period, from 3.9 million metric tons to 3.8 million metric

tons. Imports also declined from 88,832 metric tons in MY 1995 to 16,329 metric tons in MY

1999. As a percent of consumption, imports dropped from 3.8 percent to a negligible 0.7

percent. 
 

120

 Production Sharing: Use of U.S. Components and Materials in Foreign Assembly

Operations, 1995-1998, USITC Publication 3265, Dec. 1999, p. 3-21. 

 

121 Chuck Norton, “Success through partnership; Parras Cone gives its parent companies a

competitive edge,” America’s Textile Industries (ATI), Jan. 2000, p. 34.

 

122 Brenda Lloyd, “Buhler Bucks Trends and Doubles Yarn Production,” Daily News Record,

July 2, 1999.

 

123 T. Cotton Nelson,“COTTON USA Caribbean Initiative Aimed at Increasing U.S. Cotton

Consumption, Mar. 23, 2000, found at http://www.cottonusa.org, retrieved Sept. 21, 2000.

34

Domestic consumption of ELS cotton rose from 23,732 to 31,570 metric tons, an increase of

33 percent. U.S. shipments increased from 79,252 metric tons in 1995 to 115,395 metric tons

in 1999, and more than 70 percent of this increase was exported (table B-12). Increased

consumption of ELS cotton, both domestically and in foreign markets, was largely a factor

of increased demand for high-quality cotton fiber and substitution of ELS cotton for upland

cotton in some end uses as the price gap between the two varieties narrowed. (table B-13.)

Much of the overall decline in U.S. mill use of all cotton can be attributed to consumption

declines in U.S. weaving mills as domestic capacity is gradually moving to Mexico and the

Caribbean (table B-14). U.S. apparel producers have also expanded their use of assembly

operations in Mexico.120 One example of the capacity shift is the 1996 joint venture between

Cone Mills Corporation of Greensboro, NC and Compania Industrial de Parras, in Mexico.

The facility has an annual capacity of 30 million yards of denim fabric and 10 million pounds

of sales yarn. Cone Mills is also building an industrial park in Tamaulipas, Mexico, in

conjunction with Guilford Mills, also of Greenboro, NC. The park is designed specifically for

textile and apparel facilities.121 It should be noted that shifting textile mill capacity within

North America and the Carribean does not necessarily signal hard times for U.S. cotton

farmers. Unlike many Asian-produced textiles, Mexican facilities are using mostly U.S.

cotton, and in many cases, U.S.-produced fabrics and yarns.122 There are indications that

Mexican and Caribbean Basin demand for U.S. cotton will increase by over a million bales

(218,000 metric tons) next year.123

Conditions of competition between foreign and U.S. cotton

There is limited competition between foreign and domestically-produced cotton in the United

States. Imports totaled no more than 4.3 percent of domestic consumption by quantity in any

year during 1995-99, and in some years they were less than 1 percent (i.e., 1997 and 1999).

The close proximity of local production to domestic mills, Step 2 payments for mills that

consume U.S. cotton, and tariff-rate quotas on imported cotton make domestic cotton very

competitive in the U.S. market. (See section on tariff-rate quotas (TRQs) below). Step 2

payments were interrupted between December 1994 and July 1997, and from December 1998

until October 1999, because of federal government expenditure caps. Consequently, Step 2

was effectively disabled during marketing years 1995, 1996, and 1998. Imports during those

years were roughly 80,000 metric tons (3-4 percent of total domestic consumption) higher

than during the 2 marketing years (1997 and 1999) when the Step 2 program remained in

effect (table B-11).
 

124 Meeting with Wayne Bjorlie, Director, Fibers Group, FSA, USDA, Aug. 29, 2000.

 

125

 Cotton and Wool Outlook, ERS, USDA, Aug. 2000, p. 1.

 

126 Matt Laughlin, “U.S. Pima Producers Taking a Break,” The Cotton Gin and Oil Mill

Press, May 6, 2000, p. 13.

35

Production

Domestic production of upland and ELS cotton declined almost 203,000 metric tons from MY

1995 to MY 1999, from 3.9 million metric tons to 3.7 million metric tons (table B-3), or a

5.2 percent decline. A closer look at the data shows that nearly 60 percent of the production

shortfall from MY 1995 to MY 1999 is due to declines in upland production in California,

where production dipped from 503,400 metric tons in MY 1995 to 344,000 metric tons in MY

1999. By contrast, data on ELS cotton alone show that U.S. production increased 83 percent

by quantity over the last 5 years, from 80,000 metric tons to 147,000 metric tons. ELS cotton

production in California nearly tripled as farmers shifted on away from upland cotton and into

the higher-priced ELS cotton fiber. There is some indication that ELS cotton production is

shifting to California because Arizona farmers are now being forced to pay higher water costs

which reflect the actual costs of irrigating the land.124 In addition, California cotton farms are

closer to ports where much of the ELS cotton is shipped to foreign markets.

Estimates from the Supima Association of America indicate that ELS cotton production will

decline during MY 2000, as acreage in California is reconverted into upland cotton.125 Three

reasons support this conclusion. The first is that American Pima cotton prices have remained

depressed over the past 18 months due to large carryover stocks, with some farmers now

growing the product only to receive ELS marketing loans from the federal government. The

second is that production yield spreads between upland and American Pima cotton are the

highest since 1994, when upland cotton had an eight percent better yield than American

Pima.126 Lastly, the price premium paid for American Pima over upland cotton began to erode

in the marketplace during the planting season (February-June 2000), leaving American Pima

farmers with the prospect of significantly lower returns vis-a-vis upland varieties (table B-13).

U.S. Inventories

Total U.S. inventories of cotton have remained fairly constant during MY 1996 to MY 1999,

after rising 52 percent from MY 1995 to MY 1996. (See tabulation below.) The sharp rise

in inventories from MY 1995 to MY 1996 appears to parallel higher upland cotton prices

during that time, which stimulated supply and dampened demand. After watching upland

cotton prices average 94 cents in MY 1995, U.S. cotton farmers produced in excess of 1

million bales (218,000 metric tons) more in MY1996 than the prior year. Increased domestic

consumption only absorbed half of the additional production, and exports actually declined

as Franc-Zone Africa (FZA) and Australia increased their share of global exports (table B11). 
 

127

 Survey of the Cost of Production of Raw Cotton, International Cotton Advisory

Committee, Oct. 1998, p. 4.

 

128 Cotton grown in the Southeast region of the United States is primarily rainfed, while

cotton grown in the West region is irrigated.

 

129 Pre-sowing costs include land rent for cotton, land taxes, pre-soaking irrigation, and

plowing. Sowing costs include soaking irrigation, land preparation, seed, seed treatment, presowing herbicides, basal dose fertilizer, and drilling. Growing costs include thinning, weeding,

hoeing, post-sowing herbicides, fertilizer, irrigation, insecticides, defoliation, custom operations,

labor, and other (fuel, lube, and electricity). Harvesting costs include picking costs (either by

hand or by machine) and stick cutting/slashing.

36

Cotton Inventory of the United States, End of Marketing

Year (July 31), 1995-19991

(Thousands of metric tons)

Title 1995 1996 1997 1998 1999

Inventory 568 865 846 858 893

 1 The end of a marketing year is July 31 of the next calendar year.

For example, the end of MY 1995 is July 31, 1996.

Source: World Agricultural Production, FAS, USDA, July 2000.

Comparative Production Costs and Yields

According to the International Cotton Advisory Committee (ICAC), the United States is a

high-cost producer of cotton, particularly when calculated on a per hectare basis (table B-15).

Note that U.S. totals would be even higher if harvesting costs were included, as comparison

countries have done. A strong currency, relatively high labor costs, expenses tied to biotech

seeds (e.g., per acre technology fees for seed use), and additional costs due to irrigation

regulations are among the factors contributing to higher production expenses incurred by U.S.

farmers. Only some of these costs are offset by higher per hectare yields and better staple

quality, and Step 2 payments bridge the gap for purchasers between U.S. cotton prices and

world prices. (See section on “U.S. Government programs” above.) It should be noted that

data collection for the ICAC survey was hampered by the difficulty of estimating certain

production costs.127 In light of this, production cost data should be used only as a guidepost

for evaluating high- and low-cost cotton producers.

Table B-15 shows comparative production costs, subdivided into irrigated and rainfed (nonirrigated) regions. The listed areas include China, Egypt, India (both irrigated and rainfed

areas of the central south region), Pakistan (Punjab region), Senegal, Turkey (Curkurova

region), and the United States (Southeast and West regions).128 Reported costs are pre-sowing,

sowing, growing and harvesting costs.129 Ginning, fixed costs (e.g., farm machinery), interest

on debt, farming overhead costs (e.g., insurance), and administrative costs are not included

because reporting was spotty or non-existent from the larger cotton-producing countries.

U.S. growing areas have relatively higher production costs then most of their foreign

counterparts. Cotton farmers in the Western United States (Arizona, California, and New

Mexico) face higher cost structures compared to other irrigated cotton-producing areas of the
 

130

 Survey of the Cost of Production of Raw Cotton, International Cotton Advisory

Committee, Oct. 1998, p. 10.

 

131

 Survey of the Cost of Production of Raw Cotton, International Cotton Advisory

Committee, Oct. 1998, p. 12, and see section on “China” below.

 

132

 World Textile Demand, ICAC, Oct. 1999 (data updated May 1, 2000), pp. 13-16.

 

133

 World Textile Demand, ICAC, Oct. 1999 (data updated May 1, 2000), p. 13.

37

Mexico) face higher cost structures compared to other irrigated cotton-producing areas of the

world. When compared with other rainfed regions, the Southeast region of the United States

(Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia) is also a high-cost

producer.130

Table B-16 compares per-kilogram production costs between major cotton-producing areas

of the world. Although these data are only rough estimates of actual costs, considering the

wide range of staple lengths and varieties grown within regions, some relevant findings rise

to the surface. The first is that the United States is a high-cost producer on a per-kilogram

basis, which is a more useful measure of cost than per hectare. Higher U.S. production yields

have not completely offset the negative effects of a strong currency, higher labor costs, and

other costs specific to U.S. farmers. Secondly, China and Pakistan have the lowest perkilogram costs in the group of eight. This reflects an increased use of GM seeds (to control

weed and animal pest damage and increase yields) and the continued use of low-wage labor

to hand-pick the harvest.131 India has the highest per-kilogram costs, stemming largely from

slow government approval of GM cotton seeds and extremely low productivity (see section

on “India” below). India is rivaled only by sub-Saharan Africa in low per-hectare yields. 

U.S. TRADE

Overview

Upland and ELS cotton grown in the United States account for a significant portion of global

trade in cotton. The U.S. share of world exports by quantity was 25 percent in MY 1999,

down slightly from 28 percent in MY 1995. The U.S. trade surplus in raw cotton was sizable

in each year during 1995-99, but as export markets in East Asia dried up in the aftermath of

the regional financial crisis of 1997-99, the trade surplus narrowed. In calendar year 1995,

U.S. cotton exports exceeded imports by $3.7 billion. But in 1999, the United States exported

cotton worth only $832 million more than its imports (table B-17). Estimates by ICAC

indicate that U.S. cotton exports will increase during 2000, particularly to traditional markets

in East Asia and Mexico. Chinese, Indonesian, Japanese, and Korean mills will continue their

recovery as global demand for textiles and apparel continues unabated.132 In addition, the

combination of new weaving capacity in Mexico and the continued decline of Mexican cotton

production will create additional demand for U.S. cotton fiber.133
 

134 FAS, USDA estimates that imports were less than one percent of U.S. domestic use in MY

1999. See World Agricultural Production, FAS, USDA, July 2000, table 6.

 

135 The within-quota tariff-rate lines pursuant to TRQs for U.S. cotton imports are HTS

subheadings 5201.00.14, 5201.00.24, 5201.00.34, and 5201.00.60. Over-TRQ shipments enter

under HTS subheadings 5201.00.18, 5201.00.28, 5201.00.38, and 5201.00.80.

38

U.S. Imports

Products imported

The U.S. farming sector produces a full range of cotton grades and varieties, and imports are

a small fraction of the total cotton consumed in the United States.134 In 1999, U.S. imports of

cotton were valued at $136.2 million (table B-18). Imports were heavily concentrated ($109.6

million, or 80.5 percent) under HTS subheading 5201.00.12, which covers short staple length

cotton permitted duty-free entry outside TRQs established under the GATT Uruguay Round

Agreement (URA). Along with longer staple length imports entered under HTS subheadings

5201.00.22 and 5201.00.55, these over-quota shipments fall under special upland cotton

import quotas opened and monitored by the Secretary of Agriculture. (See section on Step 3

program below.) Taken together, special quota imports accounted for 83.5 percent of total

U.S. imports in 1999. Imports (of any staple length) under the TRQs totaled $17.1 million in

1999, or 12.6 percent of total imports.135 The remainder of U.S. cotton imports outside TRQs

and special import quotas were valued at approximately $5.4 million. Nearly all U.S. imports

enter duty-free, with all imports under certain HTS subheadings (e.g., 5201.00.12) or imports

from certain nations (e.g., Mexican cotton under HTS subheading 5201.00.80) receiving such

treatment.

Import levels and trends

U.S. imports of cotton increased from $10.4 million in 1995 to $136.2 million in 1999, an

increase of over 1,200 percent by value. By quantity, imports increased nearly 2,900 percent,

from 3.5 million kilograms (3,500 metric tons) to 103.9 million kilograms (103,900 metric

tons). But the upward trend has not been consistent over the five-year period (table B-19).

Imports have fluctuated with the availability of Step 2 funding for U.S. cotton. (See section

on conditions of competition between U.S. and foreign cotton above.) 

Short-staple cotton imported under special import quotas accounted for nearly all of the

import growth (90.9 percent by value and 99.1 percent by quantity) in U.S. imports from

1995-99. The residual growth came from longer-length staple cotton under special import

quotas and extra-long staple cotton imported from Egypt under the TRQ.

Principal import suppliers

U.S. imports of cotton fluctuate from year to year according to the needs of domestic textile

mills and supplies from U.S. farmers. Similarly, import suppliers continually shift as the

availability and price of cotton changes during any given year. Table B-19 lists selected

foreign suppliers from 1995-1999. In 1999, Greece was the largest supplier of imported

cotton, valued at nearly $65 million. This figure represented 48 percent of total U.S. imports
 

136 HTS subheadings 5201.00.18, 5201.00.28, 5201.00.38, and 5201.00.80 are the over-quota

categories for cotton.

 

137 A tariff-rate quota (TRQ) allows a defined quantity of imports into the United States at a

low rate of duty, while imports over that defined quantity are entered at a higher rate of duty. 

 

138

 Uruguay Round Agreement Act, Statement of Administrative Action, p. 712. 

39

by value, and was nearly three times the value of imports from the second-largest supplier,

China. However, Greece shipped only $4.7 million worth of cotton and China shipped no

cotton into the U.S. market during the previous 4 years. Syria was the third-largest supplier

of U.S. imports in 1999, with a value of $15.5 million. The most consistent supplier during

the last 5 years was Egypt, which supplied the United States more than $6 million in cotton

during 1996, 1998, and 1999. Other suppliers in 1999 included Argentina, Mexico, Benin,

and Uzbekistan.

U.S. Trade Measures

Tariff and nontariff measures

Table B-18 lists the column 1 and bound rates of duty for cotton, as of January 1, 2000, and

U.S. imports in 1999. The aggregate trade-weighted import duty rate in 1999 for all cotton

was 0.1 percent ad valorem, while the average trade-weighted import duty rate for dutiable

products was 1.7 percent ad valorem. Nearly 93 percent of cotton imports entered the United

States duty-free in 1999, although this understates the trade barriers facing cotton imports.

Because the U.S. government has established TRQs in chapter 52 of the HTS, cotton imported

over certain quantity thresholds faces a duty equaling 31.4 cents per kilogram (69.2 cents per

pound).136 At current world prices of approximately 60 cents per pound, a 69.2 cent per pound

duty equals an ad valorem equivalent (AVE) of 115 percent. Very few imports are entered

under these subheadings (less than 4 percent of total imports in 1999), and nearly all of the

shipments come from Mexico, which was granted lower over-quota duty rates under the

NAFTA agreement (table B-20).

Tariff-rate quotas (TRQs)137

Under the URA Agreement on Agriculture, which entered into force on January 1, 1995,

countries that had limited cotton imports with nontariff measures such as quotas and import

licenses were required to convert these restrictions into tariff-equivalent measures that were

transparent and could be eliminated over time. The U.S. government converted its quantitative

import restrictions maintained under section 22 of the Agricultural Adjustment Act (7 U.S.C.

624) into TRQs at that time.138 U.S. TRQs for cotton imports during 1995-2000 are listed in

table B-21. The same TRQs, as provided in the HTS and in some cases allocated by country,

are listed in Table B-22 for MY 1999 and MY 2000. Under Additional U.S. note 5 of chapter

52 of the HTS, certain countries are allocated portions of the aggregate cotton quota based

on traditional trading relationships with the United States. Under NAFTA provisions, Mexico

receives a separate, 10,000 metric ton quota at a duty-free rate, in addition to unrestricted

access to unallocated TRQs. Mexican cotton entered over-quota is charged a lower duty than
 

139 The over-quota duty rates for Mexican cotton are 4.9 cents per lb. or roughly 8 percent ad

valorem at current prices for upland cotton. The over-quota duty rate for non-NAFTA countries

is 69.2 cents per pound, a figure well over 100 percent AVE at current price levels. Special

provisions for Mexico are set forth in subchapter VI of chapter 99 of the HTS.

 

140 For each quota, the importer must purchase the foreign cotton within 90 days of the quota

date and must import the quota within 180 days of the quota date.

 

141 E-mail from Wayne Bjorlie, Director, Fibers Group, FSA, USDA, May 22, 2000.

 

142

 Upland Cotton: Summary of 1998 Commodity Loan and Payment Program, FAS, USDA,

Oct. 1999, p. 3.

 

143 E-mail from Wayne Bjorlie, Director, Fibers Group, FSA, USDA, May 23, 2000.

40

similar shipments from non-NAFTA countries139 (tables B-18 and B-20). Other U.S. TRQs

on cotton imports are covered by additional U.S. notes 6-10 of chapter 52. Over-trigger-level

duty rates must also be reduced over time. Table B-23 lists U.S. tariff reduction commitments

during 1995-2000 for over-quota cotton imports.

Step 3 program

Step 3 is part of the Three Step Competitiveness Process operated by USDA to encourage

consumption of U.S. cotton. (See section on U.S. Government programs above.) The program

creates special import quotas which are triggered by USDA when the U.S. cotton price

(Middling 1-3/32 inch cotton, CIF northern Europe) exceeds the Cotlook A-Index by more

than 1.25 cents for 4 consecutive weeks. When these conditions are met, and the projected

ratio of U.S. ending stocks to total cotton use for the marketing year is more than 16 percent,

an import quota is set equal to the estimated quantity of cotton consumed by domestic mills

during one week. A new quota is announced each week in which the price condition is met for

ten consecutive weeks, and up to 26 quotas can be in effect simultaneously.140 Total imports

under the special import quotas cannot exceed 5 weeks use by domestic mills, which is

approximately 1 million bales (218,000 metric tons) per marketing year. These “hard” quotas

are permitted under WTO rules because they do not limit trade but instead facilitate it.141 Step

3 quotas are implemented in response to market situations where the domestic price is too high

and U.S. textile mills require additional imports beyond the TRQs established under the URA.

Limited global (“spot market”) import quota

If the U.S. spot price for cotton (at the base quality) during a given month is more than

130 percent of the average for the previous 36 months, USDA is required by section 136(c)

of the FAIR Act to establish a limited global import quota, equal to 21 days of upland cotton

consumption by domestic mills. Unlike special import (step 3) quotas, limited global quota

periods can not overlap, and they are not permitted if a special import quota is already in

effect.142 In recent years, the limited global quota has not been triggered because the spot

market price for cotton has remained at less than 110 percent of its 36-month average.143
 

144 Additional duties may be charged if (1) the price of an individual shipment of the

imported product falls below the average price for similar goods imported during the years 1986-

88 by a specific percentage or (2) the volume of imports exceeds the average of the most recent

three years, normally 5, 10, or 15 percent. The Agreement allows only one of the two triggers,

price or quantity, to be used at any given time. Provisions to allow safeguards on U.S. imports

were proclaimed by the President and added to HTS chapter 99, subchapter IV. (See Proc. 6763,

60 FR 1007 (Dec. 23, 1994)). In the United States, price-based duties are automatically effective

unless the Secretary of Agriculture chooses to switch to volume-based safeguards. At this time,

cotton imports are subject to price-based safeguards, and all shipments triggering safeguards are

reported annually to the WTO’s Committee on Agriculture.

 

145 The exception was MY 1998, when the East Asian financial crisis dampened demand for

all U.S. products, including cotton. See World Agricultural Production, FAS, USDA, July 2000,

Table 2.

 

146 It is not surprising that the majority of exports fall within that staple length range because

more than 95 percent of U.S. upland cotton grows to staple lengths of 1 inch to 1-5/32 inches in

any given year. (See section on Upland Cotton above.)

 

147 Schedule B numbers 5201.00.2030 and 5201.00.9000.

41

Safeguards

As a general rule, over-quota cotton imports are subject to special price-based safeguards

authorized by the WTO Agreement on Agriculture, invoked automatically on a shipment-byshipment basis. These safeguards are authorized under the WTO Agreement on Agriculture.

Article 5 of the Agreement allows safeguard duties to be imposed on certain agricultural

imports, in addition to tariff levels negotiated during the Uruguay Round, if certain conditions

(“triggers”) are met.144 These safeguards levy additional tariffs on cotton imports based on the

customs value of the imported cotton – the lower the value of the imported product, the higher

the safeguard duty (See table B-24 for a complete listing of possible price-based safeguards

on cotton in 2000). Table B-25 lists the U.S. import quantities subject to safeguards during

1995-99. Under NAFTA provisions, Mexico and Canada are not subject to safeguards on

agricultural products.

U.S. Exports

Products exported

The U.S. cotton industry exports roughly 40 percent of its domestic production by quantity,

a figure that has remained stable during most of the last 5 years.145 U.S. exports of cotton

totaled $968 million in 1999. More than 60 percent of U.S. exports ($585 million) were

shipped under Schedule B number 5201.00.1090, which includes raw cotton having a staple

length equal to or over 25.4 mm (1 inch), but under 28.575 mm (1-1/8 inch) (table B-26).146

In addition, exports of long-staple upland and American Pima cotton totaling $262 million

were shipped in 1999.147 As a proportion of the quantities grown, U.S. exports of cotton with

longer-staple lengths have been larger than those of other lengths because of the high demand

for these products in upscale textiles and fabrics produced overseas. Because of good growing

climates and state-of-the-art irrigation systems in Arizona and California, as well as

genetically-modified seeds for higher yields, the United States is one of the few countries that

produces longer-staple cotton in sufficient quantities to satisfy demand in overseas markets.
42

Export levels and trends

During 1995-99, the value of U.S. cotton exports declined in all categories of upland and ELS

cotton, for any staple length. Aggregate exports declined 74 percent by value between 1995

and 1999, from $3.7 billion to $968 million. Nearly two-thirds of the decline in value can be

accounted for by the decreases in cotton exports with a staple length equal or greater to

25.4 mm (1 in.) but less than 28.575 mm (1-1/8 in.). It should be noted that the decline in

value is not fully explained by steep declines in world prices during the period. By quantity,

exports declined 65 percent during 1995-99 (table B-27). 

Principal export markets

U.S. cotton exports are shipped to countries with sizable textile industries but without cotton

production sufficient to meet the local demand. Southeast Asian countries, such as Indonesia

and Korea, and NAFTA members Canada and Mexico dominate the list. Currency

devaluations and an economic crisis faced by most of Southeast Asia from the latter half of

1997 through 1999 explains, at least in part, why dollar-denominated exports such as cotton

declined in 1998 and 1999. Mexico is quickly becoming the largest single export market for

U.S. cotton, particularly in long staple varieties. In 1999, Mexican textile mills consumed

more than six times the value of U.S. long staple cotton than the next largest export market

(Indonesia). While it unlikely that Mexico will continue to play such a dominant role in U.S.

export sales as Southeast Asia recovers from its financial troubles, it appears that lower trade

barriers under NAFTA are providing increased trade links for U.S. cotton farmers and

Mexican mills (table B-28).

U.S. Export Trade Measures

The primary mechanism through which the U.S. government encourages exports of

domestically-produced cotton is the Step 2 program for upland cotton and the ELS

competitiveness payments program for American Pima cotton. (See section on U.S.

government programs above.) In addition, USDA facilitates export sales through credit

guarantees which minimize repayment risk for exporters and lower financing costs for foreign

buyers.

GSM-102/103 Export Credit Guarantees and the Supplier

Credit Guarantee Program (SCGP)

The CCC administers export credit guarantee programs for selected U.S. agricultural exports,

including cotton. The Export Credit Guarantee Program (GSM-102) deals with commercial

financing on credit terms of up to 3 years. The Intermediate Export Credit Guarantee Program

(GSM-103) administers coverage on credit with terms longer than 3 years. Under both

programs, the CCC does not extend credit. Rather, it guarantees payments due from foreign

banks, typically covering 98 percent of the loan principal and some of the interest (at an

adjustable rate). With the CCC acting as guarantor, lenders in the United States bear little risk

when offering competitive credit terms to foreign banks. CCC-backed credit usually carries

interest rates based on the London Inter-bank Offered Rate, or LIBOR.
 

148 See http://www.fas.usda.gov/info/factsheets/scgp.html and

http://www.fas.usda.gov/excredits/reg.htm.

 

149

 World Agricultural Production, FAS, USDA, July 2000, p. 10.

 

150 E-mail from James Johnson, FAS, USDA, on Sept. 19, 2000.

43

Under the Supplier Credit Guarantee Program (SCGP), the CCC guarantees payments due

from foreign importers to U.S. exporters under short-term financing of up to 180 days, for

transactions in which exporters have extended credit directly to importers for the purchase of

U.S. agricultural products, including cotton. However, unlike in GSM-102 and GSM-103, the

CCC does not guarantee substantially all of the value of the exports; currently, only 65

percent of the value is guaranteed under the SCGP program. Exporters who qualify for GSM102 and 103 are automatically eligible for SCGP.148

Between October 1, 1999, and June 30, 2000, cotton exports to Turkey and Mexico were

granted over 65 percent of the credit guarantees under the GSM-102 program. The value of

these exports were $115.3 million and $106.8 million, respectively. Other countries receiving

U.S. exports under GSM-102 included Korea, Indonesia, Brazil, and Argentina. While most

countries can receive export credit terms (“tenors”) of up to 36 months, Korea and Mexico

are among the cotton-importing countries receiving maximum terms of only 24 months.149

Tenor limits are set during negotiations with foreign governments, with some countries

preferring shorter limits to maximize the usage at a given bank limit. For example, a total

GSM-102 limit of $150 million would allow a $50 million annual limit with a 36-month tenor

or a $75 million annual limit with a 24-month tenor.150

Foreign Export Trade Measures

Tariff measures

Foreign tariffs on cotton are relatively low in countries with local textile mills and little or no

indigenous cotton production. On the other hand, countries with planted acreage that can

supply the local textile sector often levy higher ad valorem tariffs to keep imports at a

minimum. Tables B-29 and B-30 list cotton import tariff-rates (HTS heading 5201) for

selected countries.

Nontariff measures

There are few nontariff trade barriers (NTBs) impacting U.S. cotton exports, particularly in

countries where cotton production is insufficient to satisfy the fiber needs of local textile mills.

All but a few of the U.S. trading partners in East Asia, North America, and the Caribbean

Basin fall into this category. At one time, NTBs predominated in countries with developed

cotton farming sectors. The URA, which entered into force in 1995, limited the use of NTBs

and converted many of them into tariffs or TRQs. Tariffs and TRQs are now the primary

import barrier against cotton imports worldwide. Because China has not yet become a member

of the WTO, and is therefore not subject to the URA, the Chinese Government has retained

certain NTBs, including import licenses and restrictions on trade to state trading agencies

only. In 1996, China created TRQs on a wide array of agricultural products, including cotton.

But because the TRQ quantities are not regularly announced and regulations surrounding

administration of the program are unclear, exporting cotton to China remains somewhat risky.
 

151 2000 National Trade Estimate Report on Foreign Trade Barriers: China, USTR, found at

http://www.ustr.gov/html/2000_contents.html, retrieved Sept. 21, 2000.

 

152

 Cotton: Review of the World Situation, ICAC, Volume 53-Number 2, Nov.-Dec. 1999, 

p. 16-17.

 

153

 Cotton: Review of the World Situation, ICAC, Volume 53-Number 2, Nov.-Dec. 1999,

p. 17.

 

154

 Cotton: Review of the World Situation, ICAC, Volume 53-Number 2, Nov.-Dec. 1999, 

p. 18.

44

In its recent bilateral agreement with the United States on accession to the WTO, China

agreed to phase out restrictions on importing and distributing cotton within 3 years after

accession, establish increasing TRQs with in-quota duties ranging from 1-10 percent ad

valorem, and reallocate unused quotas to countries which request additional exports into

China.151

Production subsidies

According to ICAC, trade flows in cotton continue to be indirectly distorted through the use

of production subsidies.152 In MY 1986, an estimated 69 percent of global production received

income and/or price supports from governments. By MY 1997, only 50 percent of global

production was receiving these payments. However, because prices declined throughout the

latter half of the 1990s, production subsidies began increasing once again. In MY 1998, the

last year such data was compiled, 53 percent of world production was subject to incomeand/or price-support programs, led by China, the United States, Greece, Turkey, and Spain

(table B-31).

As illustrated in table B-31, payments by the Chinese Government to local cotton farmers

amounted to more than half of total production subsidies worldwide. Payments were given in

the form of procurement prices which overpaid farmers for the costs of ginning, packaging,

storage, and transporting their cotton. Late in 1999, the Chinese government announced

changes to the program, effectively dropping procurement prices and allowing buyers and

sellers to negotiate prices below the government’s reference price.153

Under the Common Agricultural Policy (CAP) of the European Union, cotton gins in Greece

and Spain are given support payments before the harvest based on estimates of seed cotton

production and the difference between market prices and an established reference price.

Ginners are required to remit these payments to the farmers in the form of artificially high

prices for harvested cotton. The CAP does, however, set maximum quantities of seed cotton

for which production subsidies are granted. Because the cotton-growing regions of Greece and

Spain are below the average per capita income of the European Union as a whole, these

subsidies are considered by the European Commission to be just another form of economic

assistance.154
 

155

 World Agricultural Production, FAS, USDA, July 2000, Table 2.

 

156

 Cotton: World Markets and Trade, Production Estimates & Crop Assessment Division,

FAS, USDA, Apr. 2000, table 2.

 

157 Sheila Jones and Richard McGregor, “Cotton industry in a spin over China joining WTO,”

Financial Times, Aug. 17, 2000, p. 6.

45

FOREIGN INDUSTRY PROFILE

Overview of World Market

Cotton is grown in nearly every region of the world, including six continents and dozens of

countries. However, roughly 65 percent of world production is concentrated in four countries

-- China, the United States, India, and Pakistan -- and 75 percent is concentrated in six

countries (the first four and Uzbekistan and Turkey). Each of these countries is discussed in

more detail below. In addition, cotton production in Franc-Zone Africa (FZA) merits mention

as one geographic entity, and Egypt is included as a major producer of ELS cotton.

In general, the largest cotton-producing countries also maintain large textile manufacturing

sectors, and are therefore significant cotton consumers. In MY 1999, 61 percent of global

cotton production was consumed by the four largest cotton-producing countries.155 However,

not all major cotton-producing countries have well-developed textile and apparel sectors.

Uzbekistan exported 79 percent of its crop in MY 1999 and FZA exported 92 percent of its

cotton (table B-32). More than half of the world’s cotton exports are produced by the United

States, Uzbekistan and FZA, with the United States by far the largest exporting nation.

Market Profiles

China

China currently produces more cotton than any other country in the world and has been the

largest producer over the last 5 marketing years. U.S. Foreign Agricultural Service (FAS)

estimates that China harvested and ginned 20.7 million bales during MY 1999, or 24.5 percent

of total world output. However, with a large and expanding textile sector in China, only 9.7

percent of total production was exported (table B-32).156 With China’s accession to the WTO

nearly certain, western cotton associations such as the Liverpool Cotton Association (LCA)

are making overtures to Chinese suppliers in the hopes that global cotton markets will not be

swamped in the future by inexpensive Chinese-grown fiber.157
 

158 Freda Chao, “Peoples Republic of China, Cotton Production and Marketing Update,” FAS,

USDA, Feb. 15, 2000.

 

159 Ralph Bean and Freda Chao, “Peoples Republic of China, Cotton and Products Annual

2000,” FAS, USDA, June 30, 2000, pp. 1-2.

 

160 Ralph Bean and Freda Chao, “Peoples Republic of China, Cotton and Products Annual

2000,” FAS, USDA, June 30, 2000, pp. 1-2.

 

161

 Cotton and Wool Yearbook 2000, ERS, USDA, May 15, 2000, table 23.

46

Reports from FAS also indicate that strong demand from local textile mills is permitting the

Chinese Government to draw down its national cotton reserves, as shown in the following

tabulation:158

Total Cotton Inventories in China, End of Marketing Year (July 31),

1995-1999

(Thousands of metric tons)

Title 1995 1996 1997 1998 1999

Inventory ...... 3,059 3,626 4,345 4,601 3,328

Source: World Agricultural Production, FAS, USDA, July 2000.

In February 2000, the National Cotton Exchange sold off the last of the 1993 crop held in

reserve, which amounted to sales of 130,000 metric tons (nearly 600,000 bales). Additional

sales followed in May 2000, with Beijing selling reserves from later years at market prices and

absorbing any losses. Drawing down government stocks lowered overall Chinese inventories

by nearly 700,000 metric tons and enabled cotton prices to rise. In addition, unfavorable

weather conditions in the Yangtze River Valley dampened production of higher-grade cotton.

Consequently, the Chinese government bowed to pressure from the domestic textile industry

and expanded the import quota for high-quality cotton to 70,000 metric tons (10,000 metric

tons of ELS cotton and 60,000 metric tons for other cotton) during MY 1999.159

Production of Bt cotton is not widespread in China, but it accounts for 92 percent of the

cotton area planted in Hebei province, where Monsanto operates a joint venture, and is also

grown in Henan province.160 Chinese scientists are continuing research on genetically-modified

(GM) cotton varieties, and it appears that Beijing is committed to using GM crops to boost

agricultural yields and lower production costs. (See section on biotechnology above.)

India

India devotes more land to cotton production than any other country and more than twice the

acreage of the largest fiber producer, China. In MY 1999, Indian farmers planted 21.5 million

acres (8.7 million hectares) of cotton. However, at 320 kilograms per acre, India’s average

yield is less than half that of the United States (682 kilograms per acre) and less than a third

of China’s (1,022 kilograms per acre).161 In terms of output, India ranks only behind
 

162

 World Agricultural Production, FAS, USDA, July 2000, table 4.

 

163 Santosh K. Singh, “India, Cotton and Products, Annual 2000,” FAS, USDA, June 1, 2000.

 

164 Santosh K. Singh, “India, Bt Cotton Moves Closer to Commercial Production,” FAS,

USDA, May 15, 2000.

 

165

 World Agricultural Production, FAS, USDA, July 2000, table 2.

 

166 Asif Farrukh, “Pakistan: Cotton and Product, Cotton Update 2000,” FAS, USDA, June 2,

2000, pp. 1-3.

47

China and the United States in total bales produced. At 12.3 million bales (2.7 million metric

tons) during MY 1999, Indians produced 14.2 percent of global output.162

Despite the resources devoted to production, India is currently a net importer of raw cotton.

Between MY 1995 and MY 1998, annual production in India remained at least 22,000 metric

tons (100,000 bales) greater more than domestic consumption. But as cotton consumption

increased from 2.7 million metric tons (12.6 million bales) in MY 1998 to 2.9 million metric

tons (13.3 million bales) in MY 1999, Indian cotton production could not keep pace. Indian

producers are in short supply of domestically-produced ELS cotton and longer length upland

varieties. Most of the necessary imports come from Franc-Zone Africa, Egypt, Australia and

central Asia because a weak rupee, higher freight costs and longer delivery times keep U.S.

cotton uncompetitive.163

In May 2000, Monsanto received a “bio safety” clearance from India’s Department of

Biotechnology for Bt cotton.164 The clearance permits Monsanto’s Indian partner Mahyco to

approach the government’s Genetic Engineering Approval Committee for final approval to

commercially cultivate and market this genetically-modified organism (GMO). The decision

is significant because no other GMO has received such a clearance and it opens the way for

other bio-engineered crops. More importantly for Indian cotton farmers, Bt cotton would

increase production yields.

Pakistan

Pakistan produced nearly 10 percent of global cotton production in MY 1999. Cotton

production increased by 1.9 million bales (414,000 metric tons) from MY 1998 to MY 1999

to 8.4 million bales (1.8 million metric tons). The additional supply was largely exported or

consumed in domestic mills, but Pakistani inventories also increased by more than 700,000

bales (152,000 metric tons).165

Textile mills in Pakistan continue to be in short supply of higher-quality cotton, including ELS

and strict middling grades of upland cotton. Domestic textile plants are focusing on highercount yarns and upscale fabrics for export markets, and domestic cotton supplies are unable

to meet their needs. In addition, the Pakistani government imposed a 15-percent duty on

imported cotton in September 1999 to encourage a draw down of domestic stocks.166

As part of continuing reforms in the cotton sector, the Pakistan government has eliminated

export quotas, and export limits late in the marketing year. Gathering accurate data on cotton

sales continues to be a problem for analysts because unreported sales by ginners have grown

each year since MY 1995, when a 15-percent sales tax was applied to cotton lint. Stricter tax

enforcement by Pakistan’s military regime has not discouraged these illegal sales
 

167 Asif Farrukh, “Pakistan: Cotton and Product, Cotton Update 2000,” FAS, USDA, June 2,

2000, pp. 1-3.

 

168 Mike Collet-White, “Uzbek gradualism arouses criticism, jealousy,” The Middle East

Times, July 19, 1998, pp. 1-2, found at http://www.metimes.com.

 

169 Nizam Yuldashbayev, “Republic of Uzbekistan: Cotton Annual 1999,” FAS, USDA, May

15, 1999, pp. 1-4.

 

170 What unites FZA is the decision to maintain a fixed exchange rate with the French franc

since independence.

 

171 Andrew Manley, “Africa’s Franc Zone - a tale of two regions,” BBC News On-line, Sept.

29, 1999, found at http://news.bbc.co.uk. 

48

because the tax collection mechanism, whereby taxes are collected and then rebated as cotton

is consumed in downstream production, is viewed as extremely cumbersome.167

Uzbekistan

Uzbekistan is the fifth-largest producer of cotton in the world, accounting for more than

6 percent of global output. Almost all of the planted acreage is flood irrigated. The

government in this former Soviet republic has maintained strict controls on cotton production

and trade, buying most of the cotton from producers and retaining rights as the only legal

exporter. Because the textile industry is not well-developed, most of the cotton is produced for

export markets and accounts for over half of the country’s overall export earnings.168 In MY

1999, Uzbekistan exported 914,000 metric tons of cotton, placing it second among exporting

countries (behind the United States). 

According to reports by USDA, Uzbek cotton is perceived to be of poor quality by overseas

buyers because of trash found in bales, an increasing number of seeds found in the lint, and

poor seed varieties being planted. The government has taken steps over the past 2 years to

speed the development of new cottonseed (including the use of Australian varieties) and

improve ginning of the final product.169

Franc-Zone Africa (FZA)

Franc-Zone Africa (FZA) accounted for almost 5 percent of global output of cotton in MY

1999. FZA is a region consisting of approximately 80 million people in the former French

colonies of west and central Africa.170 The participating countries are Benin, Burkina Faso,

Cameroon, Central African Republic (CAR), Chad, Comoros Islands, Congo (Brazzaville),

Cote d’Ivoire, Equatorial Guinea, Gabon, Guinea Bissau, Mali, Niger, Senegal, and Togo.

Much of the cotton exported from the region is produced in a subsection of FZA called the

West African Economic Monetary Union (UEMOA), consisting of Benin, Burkina Faso,

Guinea-Bissau, Cote d’Ivoire, Mali, Niger, Senegal and Togo, although Cameroon, CAR, and

Chad also export in limited quantities. UEMOA countries are achieving faster economic

growth and better export prospects than their FZA neighbors due to greater political stability

and IMF adjustment aid.171

Four UEMOA members, Benin, Burkino Faso, Cote d’Ivoire, and Mali, accounted for over

70 percent of the cotton harvested and baled in FZA during MY 1999. Mali was the largest

producer, with over 201,000 metric tons baled. Cote d’Ivoire produced 163,000 metric tons

of cotton, and Benin and Burkino Faso baled 145,000 and 125,000 metric tons, respectively.
 

172

 World Agricultural Production, FAS, USDA, July 2000, table 2.

 

173 Ibrahim Sirtioglu, “Turkey: Cotton and Products, Annual 2000,” FAS, USDA, June 19,

2000, p. 2.

 

174 Ibrahim Sirtioglu, “Turkey: Cotton and Products, Cotton Situation Update 2000,” FAS,

USDA, Feb. 29, 2000, p. 1.

49

Total exports from FZA were over 800,000 metric tons in MY 1999, making the region the

third-largest exporter in the world (table B-32).172

U.S.-sub-Saharan Africa trade legislation

In May 2000, President Clinton signed into law the Trade and Development Act of 2000,

which grants quota-free and/or duty-free treatment on hundreds of goods from 48 countries

in sub-Saharan Africa (SSA). In particular, this legislation reduces U.S. barriers on imports

of textiles and apparel from SSA (including FZA) to the United States, making the prospect

of lower cotton exports from FZA a possibility, as the region develops an internal demand for

cotton yarn for textile and apparel paroduction.

Although the HTS subheadings for raw cotton are not part of the duty-free benefits of the bill,

given the TRQs, cotton seeds (HTS subheading 1207.20.00) and many other field crops are

included. By lowering U.S. import tariffs on alternative crops and providing greater access

to some U.S. agricultural markets, the Trade and Development Act of 2000 may also alter the

cotton acreage planted by FZA farmers.

Turkey

Cotton production in Turkey currently equals 4 percent of global output. In MY 1999, cotton

production declined to 791,300 metric tons from 840,000 the year before, in large part

because of lower acreage planted and lower per acre yields in the Anatolian region of

southeastern Turkey. Even though Turkish farmers are, as a group, one of the world’s ten

largest producers, Turkey remains a net importer because domestic textile and yarn production

overreaches the domestic cotton supply. According to FAS, cotton farmers are switching to

less intensive crops such as wheat, corn, and horticulture as labor costs for harvesting

continue to escalate. Labor costs constitute roughly 45 percent of the total production costs

for cotton in Turkey, and there is now growing interest in mechanical harvesting.173 During

the first half of MY 1999, Turkey became the second largest buyer of U.S. upland cotton,

after Mexico, with over 115,000 metric tons in import contracts.174

Cotton textiles and ready-to wear products together account for 40 percent of Turkey’s overall

exports. In light of declining overseas demand for these products, caused by the Asian

financial crisis, the Turkish government announced a program in December 1998 to provide

cheap cotton to textile manufacturers through agricultural sales cooperatives. The plan

involves releasing 117,000 metric tons of cotton and allowing these manufacturers to pay 6

months after the sale with no interest charged during that time. Officials at the local
 

175 “Turkish farmers protest over cotton subsidy,” The Middle East Times, date unlisted, pp.

1-2, found at http://www.metimes.com.

 

176 Both American Pima and Egyptian varieties such as Giza-70 and Giza-86 are members of

the Gossypium barbadense cotton species, but they are not identical varieties, differing slightly in

grade, staple and micronaire. Other Egyptian varieties include Gossypium vitifolium, also known

as Sea Island cotton. Egyptian cotton growers also produce long staple and short staple varieties,

but these are primarily consumed in domestic textile mills.

 

177 Matt Laughlin, “Prospects Dim for Nearby Return of ELS Program Payments,” June 5,

2000, pp. 1-3, found at http://www.supimacotton.org.

 

178 Hassan Ahmed & Sharif Ibrahim, “Egypt: Cotton and Products, Cotton Annual Report

2000”, May 30, 2000, pp. 2-7.

 

179 Hassan Ahmed & Sharif Ibrahim, “Egypt: Cotton Annual Report 1999”, June 1, 1999, pp.

1-7.

 

180 Egypt had U.S. cotton import quotas totaling 12,000 metric tons for yarn and 100 million

sq. meters for fabrics and 1999, and EU quotas of 55,000 metric tons for yarn and 20,000 metric

tons for fabrics. Because Egyptian mills are no longer price-competitive vis-a-vis India and

Pakistan, only 20 percent of the quotas were filled. See Hassan Ahmed & Sharif Ibrahim,

“Egypt: Cotton and Products, Cotton Annual Report 2000”, May 30, 2000, pp. 2-7.

50

cotton exchange (IZMIR) noted that this will force farmers to accept lower prices and

encourage many more to shift acreage into alternative crops.175

Egypt

Egypt is one of the world’s largest exporters of ELS cotton, although Egyptian ELS varieties

differ from American Pima grown in the United States.176 American Pima and Giza-86 (one

of the Egyptian cotton varieties sold in export markets) are comparable in price and quality.177

The other main Egyptian ELS varieties grown are Giza-45, Giza-70, and Giza-88, although

Giza-70 is the primary cotton exported, by weight.178

Egyptian farmers planted approximately 32,400 hectares (80,000 acres) of ELS cotton in MY

1999, compared with 85,300 hectares (210,000 acres) in MY 1998. The sharp decline in land

use is attributed to three converging issues: the government implemented land reforms that

allow land owners to charge market rents; the government separately eliminated a pesticide

subsidy to cotton farmers; and there were large carryover stocks of ELS varieties from MY

1998. In the aftermath of smaller planted areas in MY 1999, the government established

assistance programs that pay for land preparation, two-thirds of pesticide costs, and half of

the cost of cottonseed.179

Domestic consumption of ELS cotton varieties is rapidly declining, due to the combination of

an increased use of synthetic yarns in Egyptian fabrics and increased competition from

imported Indian and Pakistani cotton yarns. Many Egyptian textile mills are uncompetitive

because of burdensome debt loads, a relatively high labor content in their yarns, and outdated

equipment. Consequently, some mills are operating at capacity levels approaching 10 percent

or less.180 These mills are now under pressure to use cheaper inputs and become price

competitive again on world markets. Cotton is now being sourced from the cheapest suppliers,

regardless of location and long-standing relationships with local farmers. FAS reported in

May 2000 that Egyptian textile mills were putting out a tender offer to import
 

181 Hassan Ahmed & Sharif Ibrahim, “Egypt: Cotton and Products, Cotton Tender Issues”,

May 10, 2000, p. 1.

 

182 Yasmin Salem, “Farmers pin hopes on genes,” The Middle East Times, June 28, 1998, pp.

1-3, found at http://www.metimes.com.

 

183

 Seventeenth Annual Report from the Commission to the European Parliament on the

Community’s Anti-dumping and Anti-subsidy Activities, 1998, Dec. 13, 1999, pp. 22-23.

 

184 Christine Hauser, “Cotton exporters, hurt by Euro-duties, eye new markets in US,” The

Middle East Times, July 17, 1998, pp. 1-2, found at http://www.metimes.com.

51

20,000 metric tons of short staple cotton, the first Egyptian imports of raw cotton in 12

months.181

Egyptian scientists at the Agricultural Genetic Engineering Research Institute (AGERI) are

developing transgenic cotton plants which are genetically-resistant to the cotton leaf worm,

a major pest to Egyptian cotton farmers. It is estimated by AGERI that the development of

transgenic Egyptian cotton varieties could save $50 million in chemical insecticide costs

annually.182 The Egyptian cotton industry is utilizing scientific breakthroughs to remain cost

competitive in cotton production.

Foreign Trade Investigations Impacting U.S. Cotton

On April 10, 1998, the executive body of the European Union, the European Commission,

imposed provisional antidumping (AD) duties on imports of unbleached cotton fabrics from

China, Egypt, India, Indonesia, Pakistan, and Turkey. After the injury phase of the

proceedings in June of that year, duties were set at 0 percent to 14.3 percent for Turkey, 4.9

percent to 16.9 percent for India, 11.7 to 32.5 percent for Pakistan, 15.7 percent for China,

19 to 31.7 percent for Indonesia, and 20.6 percent for Egypt.183

Although unbleached cotton fabric is not directly part of this summary, the effects of AD

duties levied by the European Union on downstream cotton products could have a long-term

impact on U.S. cotton farming. Before the imposition of the AD duties, Egypt exported

approximately 20,000 metric tons of unbleached fabric. Nearly all of it was shipped to the

European Union because an annual EU-wide quota equaling that amount had been granted to

Egyptian suppliers. Since the imposition of AD duties, the EU markets have been effectively

closed to Egyptian producers, and officials from the Textile Consolidation Fund, Egypt’s

association of spinners and weavers, have promoted this material in other export markets,

particularly in the United States.184

Although the United States maintains country-specific import quotas (at least through 2004)

on unbleached cotton fabrics, AD actions in third-country markets such as the European

Union could have a limited adverse effect on domestic cotton consumption in two ways. The

first is that additional fabric imports using unfilled U.S. quotas could dampen demand for

cotton in domestic textile mills, as cheaper foreign fabric crowds out demand for goods made

from U.S. cotton. The second possible effect is that prices for cotton could fall as Egypt,

China, Pakistan, and Turkey export additional raw cotton onto world markets rather then

converting it into fabric.

APPENDIX A

EXPLANATION OF TARIFF AND TRADE

AGREEMENTS TERMS
A-2

TARIFF AND TRADE AGREEMENT

TERMS

In the Harmonized Tariff Schedule of the United States (HTS), chapters 1 through 97 cover

all goods in trade and incorporate in the tariff nomenclature the internationally adopted

Harmonized Commodity Description and Coding System through the 6-digit level of product

description. Subordinate 8-digit product subdivisions, either enacted by Congress or

proclaimed by the President, allow more narrowly applicable duty rates; 10-digit

administrative statistical reporting numbers provide data of national interest. Chapters 98 and

99 contain special U.S. classifications and temporary rate provisions, respectively. The HTS

replaced the Tariff Schedules of the United States (TSUS) effective January 1, 1989.

Duty rates in the general subcolumn of HTS column 1 are normal trade relations rates, many

of which have been eliminated or are being reduced as concessions resulting from the Uruguay

Round of Multilateral Trade Negotiations. Column 1-general duty rates apply to all countries

except those listed in HTS general note 3(b) (Afghanistan, Cuba, Laos, North Korea, and

Vietnam) plus Serbia and Montenegro, which are subject to the statutory rates set forth in

column 2. Specified goods from designated general-rate countries may be eligible for reduced

rates of duty or for duty-free entry under one or more preferential tariff programs. Such tariff

treatment is set forth in the special subcolumn of HTS rate of duty column 1 or in the general

notes. If eligibility for special tariff rates is not claimed or established, goods are dutiable at

column 1-general rates. The HTS does not enumerate those countries as to which a total or

partial embargo has been declared.

The Generalized System of Preferences (GSP) affords nonreciprocal tariff preferences to

developing countries to aid their economic development and to diversify and expand their

production and exports. The U.S. GSP, enacted in title V of the Trade Act of 1974 for 10

years and extended several times thereafter, applies to merchandise imported on or after

January 1, 1976 and before the close of September 30, 2001. Indicated by the symbol "A",

"A*", or "A+" in the special subcolumn, the GSP provides duty-free entry to eligible articles

the product of and imported directly from designated beneficiary developing countries, as set

forth in general note 4 to the HTS.

The Caribbean Basin Economic Recovery Act (CBERA) affords nonreciprocal tariff

preferences to developing countries in the Caribbean Basin area to aid their economic

development and to diversify and expand their production and exports. The CBERA, enacted

in title II of Public Law 98-67, implemented by Presidential Proclamation 5133 of November

30, 1983, and amended by the Customs and Trade Act of 1990, applies to merchandise

entered, or withdrawn from warehouse for consumption, on or after January 1, 1984.

Indicated by the symbol "E" or "E*" in the special subcolumn, the CBERA provides duty-free

entry to eligible articles, and reduced-duty treatment to certain other articles, which are the

product of and imported directly from designated countries, as set forth in general note 7 to

the HTS.
A-3

Free rates of duty in the special subcolumn followed by the symbol "IL" are applicable to

products of Israel under the United States-Israel Free Trade Area Implementation Act of

1985 (IFTA), as provided in general note 8 to the HTS. 

Preferential nonreciprocal duty-free or reduced-duty treatment in the special subcolumn

followed by the symbol "J" or "J*" in parentheses is afforded to eligible articles the product

of designated beneficiary countries under the Andean Trade Preference Act (ATPA), enacted

as title II of Public Law 102-182 and implemented by Presidential Proclamation 6455 of July

2, 1992 (effective July 22, 1992), as set forth in general note 11 to the HTS.

Preferential free rates of duty in the special subcolumn followed by the symbol "CA" are

applicable to eligible goods of Canada, and rates followed by the symbol "MX" are applicable

to eligible goods of Mexico, under the North American Free Trade Agreement, as provided

in general note 12 to the HTS and implemented effective January 1, 1994 by Presidential

Proclamation 6641 of December 15, 1993. Goods must originate in the NAFTA region under

rules set forth in general note 12(t) and meet other requirements of the note and applicable

regulations.

Other special tariff treatment applies to particular products of insular possessions (general

note 3(a)(iv)), products of the West Bank and Gaza Strip (general note 3(a)(v)), goods

covered by the Automotive Products Trade Act (APTA) (general note 5) and the Agreement

on Trade in Civil Aircraft (ATCA) (general note 6), articles imported from freely

associated states (general note 10), pharmaceutical products (general note 13), and

intermediate chemicals for dyes (general note 14).

The General Agreement on Tariffs and Trade 1994 (GATT 1994), pursuant to the

Agreement Establishing the World Trade Organization, is based upon the earlier GATT 1947

(61 Stat. (pt. 5) A58; 8 UST (pt. 2) 1786) as the primary multilateral system of disciplines

and principles governing international trade. Signatories' obligations under both the 1994 and

1947 agreements focus upon most-favored-nation treatment, the maintenance of scheduled

concession rates of duty, and national treatment for imported products; the GATT also

provides the legal framework for customs valuation standards, "escape clause" (emergency)

actions, antidumping and countervailing duties, dispute settlement, and other measures. The

results of the Uruguay Round of multilateral tariff negotiations are set forth by way of

separate schedules of concessions for each participating contracting party, with the U.S.

schedule designated as Schedule XX. Pursuant to the Agreement on Textiles and Clothing

(ATC) of the GATT 1994, member countries are phasing out restrictions on imports under

the prior "Arrangement Regarding International Trade in Textiles" (known as the Multifiber

Arrangement (MFA)). Under the MFA, which was a departure from GATT 1947

provisions, importing and exporting countries negotiated bilateral agreements limiting textile

and apparel shipments, and importing countries could take unilateral action in the absence or

violation of an agreement. Quantitative limits had been established on imported textiles and

apparel of cotton, other vegetable fibers, wool, man-made fibers or silk blends in an effort to

prevent or limit market disruption in the importing countries. The ATC establishes

notification and safeguard procedures, along with other rules concerning the customs

treatment of textile and apparel shipments, and calls for the eventual complete integration of

this sector into the GATT 1994 over a ten-year period, or by Jan. 1, 2005.

APPENDIX B

STATISTICAL TABLES
B-2

Table B-1

Primary end uses for cotton in the United States, 1995-991

(As percent of total cotton consumed)

Products 1995 1996 1997 1998 1999

Apparel:

Men’s and boys’ apparel ................. 37.5 37.9 34.7 31.3 31.7

Women’s and misses’ apparel ............ 20.7 20.4 20.5 19.2 19.2

Children’s and infants’ apparel ............ 6.1 5.6 6.7 7.5 7.8

Subtotal, apparel ................... 64.3 63.9 61.8 58.0 58.7

Home furnishings ........................ 29.7 30.2 32.2 35.8 34.9

Industrial uses .......................... 6.0 5.9 6.1 6.3 6.5

Total .............................. 100.0 100.0 100.0 100.0 100.0

1

 Totals may not add due to rounding.

Source: Cotton Counts Its Customers, National Cotton Council, editions 1997-2000.

Table B-2

Number of U.S. cotton farms, acres harvested, average acres per farm, number of bales

produced, and yield, selected years

Year

Number of U.S.

cotton farms

Acres

harvested 

Average acres

per farm

Number of 

bales produced Yield

Millions Millions Bales per acre

1949 ......... 1,110,876 26.6 24 (

1

) (

1

)

1969 ......... 199,784 11.5 58 (

1

) (

1

)

1974 ......... 89,536 12.2 137 (

1

) (

1

)

1978 ......... 52,628 12.7 241 (

1

) (

1

)

1982 ......... 38,266 9.8 256 11.4 1.16

1992 ......... 34,812 11.0 315 15.4 1.40

1997 ......... 31,456 13.2 420 17.9 1.35

1

 Not available.

Sources: Thomas M. Bell and Fred E. M. Gillham, The World of Cotton; 1992 Census of Agriculture; and 1997

Census of Agriculture.
B-3

Table B-3

Upland and ELS cotton: U.S. production, marketing years 1995-19991

(Metric tons)

2

Product 1995 1996 1997 1998 19993

Percentage

change

1995-1999

Upland cotton

Delta region:

Arkansas ............... 319,623 356,201 366,434 263,231 310,914 -2.7

Louisiana ............... 299,374 279,996 214,678 139,563 196,172 -34.5

Mississippi .............. 400,835 408,455 396,480 314,397 376,885 -6.0

Missouri ................ 111,694 128,676 123,016 76,204 102,767 -8.0

Tennessee .............. 157,634 146,965 144,135 118,879 129,547 -17.8

Subtotal ............ 1,289,159 1,320,294 1,244,743 912,274 1,116,284 -13.4

Southeast region:

Alabama ................ 107,121 171,786 119,750 120,403 136,079 27.0

Florida ................. 23,340 28,392 25,931 17,745 24,821 6.3

Georgia ................. 422,607 452,654 417,817 335,734 341,178 -19.3

North Carolina ........... 173,746 218,162 202,486 223,387 177,665 2.3

South Carolina ........... 81,865 99,066 89,268 76,204 61,181 -25.3

Virginia ................. 29,829 34,619 29,872 31,592 31,091 4.2

Subtotal ............ 838,509 1,004,677 885,124 805,066 772,015 -7.9

Southwest region:

Kansas ................. 218 893 1,894 3,026 4,768 2,087.2

Oklahoma ............... 26,780 29,175 39,844 30,482 31,353 17.1

Texas .................. 971,061 946,022 1,119,115 783,816 1,099,519 13.2

Subtotal ............ 998,059 976,090 1,160,853 817,324 1,135,640 13.8

West region:

Arizona ................. 172,657 169,391 184,414 132,378 155,892 -9.7

California ............... 503,384 520,367 477,039 249,515 344,008 -31.7

New Mexico ............. 15,459 18,289 20,249 17,505 23,732 53.5

Subtotal ............ 691,500 708,047 681,702 399,398 523,632 -24.3

Total, upland cotton .......... 3,817,226 4,009,108 3,972,421 2,934,062 3,547,571 -7.1

ELS cotton:

Arizona ................. 15,720 16,199 9,101 5,835 3,549 -77.4

California ............... 48,880 81,647 95,190 76,814 131,224 168.5

New Mexico ............. 4,115 4,137 3,201 2,177 2,330 -43.4

Texas .................. 11,322 13,085 11,823 11,474 9,711 -14.2

Total, ELS cotton ............. 80,036 115,068 119,314 96,300 146,813 83.4

Total ....................... 3,897,262 4,124,177 4,091,735 3,030,362 3,694,384 -5.2

1 A marketing year starts Aug. 1. Marketing year 1999 runs from Aug. 1, 1999 until July 31, 2000. Totals may

not add due to rounding.

2 Converted from 480 lb.-net weight bales.

3 Estimated.

Source: USDA, NASS, Agricultural Statistics Board, Crop Production Reports.
B-4

Table B-4

Upland and American Pima cotton gins, by state and U.S. total, selected years

MY AL AR AZ CA FL GA KS LA MO MS NC NM OK SC TN TX VA

U. S.

total

1980 ... 110 196 120 223 (

1

) 58 (

1

) 98 72 297 40 42 88 56 90 761 (

1

) 2,251

1985 ... 84 132 91 163 (

1

) 61 (

1

) 89 50 237 36 31 71 50 75 601 (

1

) 1,771

1990 ... 72 122 90 138 2 59 (

1

) 80 48 192 39 26 63 40 70 494 (

1

) 1,535

1995 ... 61 100 63 109 4 79 1 75 35 137 57 18 52 40 48 391 4 1,274

1996 ... 56 104 54 103 4 79 1 72 35 129 54 16 45 38 47 372 5 1,214

1997 ... 51 94 51 97 4 77 1 68 36 127 50 16 39 36 41 360 5 1,153

1998 ... 51 91 49 86 4 77 1 61 35 116 53 16 38 34 41 354 6 1,113

1999 ... 51 88 47 79 4 70 2 67 35 114 51 14 33 35 40 348 6 1,084

1 No gins.

Sources: Statistics from 1980 and 1985–U.S. Bureau of Census; Statistics from 1990–USDA, ERS; and

Statistics from 1995-1999–USDA, NASS.

Table B-5

Cotton ginnings: Number of U.S. gins, total running bales ginned (excluding linters) in the

United States, and average number of running bales ginned per facility, selected years 

MY

Number of gins Running bales ginned

Average number of

running bales ginned per

facility 

Upland Pima Total Upland Pima Total Upland Pima Total

1985 ... (

1

) (

1

) 1,771 12,837,086 150,748 12,987,834 (

1

) (

1

) 7,334

1990 ... 1,487 48 1,535 14,716,356 347,987 15,064,343 9,897 7,250 9,814

1995 ... 1,242 32 1,274 17,113,850 354,650 17,468,500 13,779 11,083 13,712

1996 ... 1,182 32 1,214 17,928,550 510,000 18,438,550 15,168 15,938 15,188

1997 ... 1,119 34 1,153 17,769,850 531,200 18,301,050 15,880 15,624 15,873

1998 ... 1,081 32 1,113 13,107,200 426,750 13,533,950 12,125 13,336 12,160

1999 ... 1,051 33 1,084 15,877,900 650,150 16,528,050 15,107 19,702 15,247

1 Not available.

Sources: U.S. Department of Commerce, Bureau of the Census; Agricultural Statistics Board, NASS, USDA; and

Supima Association of America. 
B-5

Table B-6

Cotlook A-Index and USDA's adjusted world cotton price (AWP) for upland cotton, monthly, Jan. 1995-July 20001

(Cents per pound)

Year Company Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. Average2

1995 .... Cotlook A-Index3 86.20 85.00 83.20 82.80 82.95 82.95 79.75 85.05 91.20 91.15 89.20 87.90 85.61

AWP 79.96 85.83 96.27 94.44 87.04 76.10 73.76 70.05 74.87 77.31 74.47 73.20 80.28

1996 .... Cotlook A-Index3 79.90 80.45 80.60 78.90 79.35 80.60 81.36 76.35 75.35 75.35 76.05 79.20 78.62

AWP 70.99 71.00 68.23 68.53 69.69 68.96 64.55 61.82 60.55 60.60 60.71 64.21 65.82

1997 .... Cotlook A-Index3 79.90 80.40 80.63 78.92 79.28 80.51 81.34 81.28 79.61 77.55 77.22 74.48 79.26

AWP 64.99 65.96 66.24 64.87 65.99 66.59 66.77 66.99 65.40 63.73 62.99 60.14 65.06

1998 .... Cotlook A-Index 71.34 68.86 68.43 65.48 64.37 67.97 69.51 68.16 65.81 60.29 56.39 56.03 65.22

AWP 57.10 55.14 54.14 51.36 51.39 55.02 56.06 54.11 51.84 46.50 42.26 41.96 51.41

1999 .... Cotlook A-Index 55.78 56.16 56.73 57.88 59.88 58.50 54.41 50.98 49.35 47.44 46.13 44.21 53.12

AWP 41.71 42.11 42.67 43.97 45.39 43.38 39.07 36.92 35.31 33.32 32.18 29.86 38.82

2000 .... Cotlook A-Index 47.61 53.73 57.46 58.72 60.53 59.54 58.38 56.57

AWP 32.74 39.11 43.02 45.01 46.85 46.81 45.51 42.72

1

 Cotlook A-Index is priced based on Middling 1-3/32" cotton; AWP is priced based on Strict Low Middling (SLM) 1-1/16" cotton.

2

 Simple average of the corresponding calendar months.

3 Cotlook A-Index prices for Jan. 1995 -Jan. 1997 was taken from the Cotlook Ltd. found at http://www.cotlook.com. Cotlook A-Index prices for all other

months taken from FAS, USDA cotton reports.

Source: Compiled from statistics in Cotton: World Markets and Trade, FAS, USDA, various months, Cotlook Ltd. found at http://www.cotlook.com, and

FSA, USDA.
B-6

Table B-7

U.S. price for upland cotton, monthly, Jan. 1995-Aug. 20001

(Cents per pound)

Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Avg.2

1995 .......... 88.0 92.0 103.0 106.0 104.0 107.0 94.0 86.0 93.0 86.0 86.0 85.0 94.2

1996 .......... 81.0 81.0 78.0 79.0 77.0 72.0 68.0 69.0 71.0 70.0 70.0 73.0 74.1

1997 .......... 70.4 69.6 69.3 67.7 67.2 70.4 70.7 70.0 70.0 70.5 70.2 65.9 69.3

1998 .......... 64.6 64.7 68.4 63.2 65.8 74.8 75.8 72.9 73.8 69.4 66.1 60.7 68.4

1999 .......... 55.9 55.0 57.2 55.1 53.8 51.5 46.9 47.9 47.4 49.5 48.3 47.6 51.3

2000 .......... 53.7 56.1 59.6 55.1 58.2 54.3 55.1 59.5 56.5

1 Prices quoted are averages between desert southwest and SLV regions, for Upland SLM 41, with a staple length of 34 inches.

2

 Simple average of the calendar months.

Source: Supima Association of America.

Table B-8

U.S. price for ELS cotton, monthly, Jan. 1995-Aug. 20001

(Cents per pound)

Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Avg.2

1995 .......... 108.0 112.0 114.0 123.0 126.0 131.0 134.0 135.0 136.0 144.0 160.0 167.0 132.5

1996 .......... 166.0 161.0 161.0 163.0 154.0 140.0 133.0 117.0 108.0 98.0 97.0 109.0 133.9

1997 .......... 110.0 113.0 114.0 116.0 114.3 107.0 108.2 107.3 102.5 98.9 99.5 102.5 107.8

1998 .......... 101.9 99.0 99.4 101.8 102.9 102.6 102.6 102.4 103.6 103.1 99.0 98.2 101.4

1999 .......... 96.1 92.2 85.5 83.5 81.2 81.0 81.3 81.3 81.0 80.8 80.6 80.3 83.7

2000 .......... 79.4 80.5 81.8 82.8 82.9 84.0 86.9 89.4 83.5

1 Prices quoted are averages between desert southwest and SLV regions, for Grade 3 Pima, staple length of 46 inches.

2

 Simple average of the calendar months.

Source: Supima Association of America.
B-7

Table B-9

ELS competitiveness payments for the weeks of Mar. 14, 2000 through Sept. 12, 2000

(Cents per pound, unless indicated)

Week ending U.S. price

Foreign 

price

U.S. price less 

foreign price Payment rate

Applicable dates

for payments

Mar. 14, 2000 ......... 81.30 80.70 0.60 0.00

Mar. 21, 2000 ......... 82.30 80.70 1.60 0.00

Mar. 28, 2000 ......... 82.50 81.50 1.00 0.00

Apr. 4, 2000 ........... 83.30 81.70 1.60 0.60 (4/5-4/11)

Apr. 11, 2000 .......... 83.00 81.70 1.30 1.30 (4/12-4/18)

Apr. 18, 2000 .......... 83.00 81.70 1.30 1.30 (4/19-4/25)

Apr. 25, 2000 .......... 83.00 82.59 0.41 0.41 (4/26-5/2)

May 2, 2000 ........... 83.00 82.34 0.66 0.66 (5/3-5/9)

May 9, 2000 ........... 83.00 83.84 -0.84 0.00

May 16, 2000 .......... 83.00 83.84 -0.84 0.00

May 23, 2000 .......... 82.70 84.04 -1.34 0.00

May 30, 2000 .......... 82.81 84.84 -2.03 0.00

June 6, 2000 .......... 83.28 84.84 -1.56 0.00

June 13, 2000 ......... 83.78 86.59 -2.81 0.00

June 20, 2000 ......... 84.18 86.59 -2.41 0.00

June 27, 2000 ......... 84.38 86.59 -2.21 0.00

July 4, 2000 ........... 84.38 86.59 -2.21 0.00

July 11, 2000 .......... 84.38 86.59 -2.21 0.00

July 18, 2000 .......... 84.78 86.59 -1.81 0.00

July 25, 2000 .......... 88.75 86.59 2.16 0.00

Aug. 1, 2000 .......... 90.50 86.59 3.91 0.00

Aug. 8, 2000 .......... 90.28 86.59 3.69 0.00

Aug. 15, 2000 ......... 89.38 87.49 1.89 1.89 (8/16-8/22)

Aug. 22, 2000 ......... 88.88 88.84 0.04 0.04 (8/23-8/29)

Aug. 29, 2000 ......... 88.88 88.84 0.04 0.04 (8/30-9/5)

Sept. 5, 2000 .......... 88.88 88.84 0.04 0.04 (9/6-9/12)

Sept. 12, 2000 ......... 88.88 92.04 -3.16 0.00

Source: Draft news release from Wayne Bjorlie, FSA, USDA, June 6, 2000; tables generated by Mr. Bjorlie

throughout the year; and press release found at http://www.fsa.usda.gov, retrieved Sept. 22, 2000.
B-8

Table B-10

Comparison of fiber prices, Oct. 23, 1998 and Oct. 22, 1999

(Dollars per pound)

Fiber Oct. 23,1998 Oct. 22, 1999 Percent change

Cotton ..................... 0.7664 0.5531 -27.8

Wool ...................... 1.37 1.65 20.4

Polyester staple .............. 0.60 0.53 -11.7

Polyester filament ............ 0.79 0.69 -12.7

3-denier acrylic .............. 1.06 1.09 2.8

150-denier acetate ............ 2.14 2.17 1.4

Rayon staple ................ 1.11 0.91 -18.0

40-denier nylon .............. 2.38 2.42 1.7

Spandex ................... 14.00 14.00 0.0

Source: Women’s Wear Daily, Oct. 26, 1999.

Table B-11

Cotton: U.S. shipments, imports, exports, and consumption, marketing years 1995-19991

(Metric tons)

Item 1995 1996 1997 1998 1999

U.S. shipments2.......................... 3,906,232 4,124,177 4,091,735 3,030,318 3,833,512

U.S. exports ............................. 1,671,051 1,494,693 1,632,949 945,804 1,654,722

U.S. imports ............................ 88,832 87,744 2,830 96,453 16,329

Apparent U.S. consumption3................ 2,318,135 2,422,426 2,470,979 2,264,574 2,199,038

Ratio of imports to consumption (percent) ...... 3.8 3.6 0.1 4.3 0.7

1

 Marketing year runs August 1-July 31. Data converted from 480-lb. bales.

2

 U.S. shipments equal production plus beginning stocks minus ending stocks.

3

 Data may not add to apparent U.S. consumption totals due to cotton unaccounted for by USDA.

Source: USDA.
B-9

Table B-12

ELS (American Pima) cotton: U.S. shipments, imports, exports, and consumption, marketing

years 1995-19991

(Metric tons)

Item 1995 1996 1997 1998 19992

U.S. shipments3......................... 79,252 118,443 116,266 87,962 115,395

U.S. exports ............................ 65,318 101,461 95,800 62,705 91,445

U.S. imports ........................... 1,742 0 0 2,613 5,443

Apparent U.S. consumption4............... 23,732 23,079 25,039 32,006 31,570

Ratio of imports to consumption (percent) ..... 7.3 0.0 0.0 8.2 17.2

1

 Marketing year runs Aug. 1-July 31. Data converted from 480-lb. bales.

2

 Preliminary.

3

 U.S. shipments equal production plus beginning stocks minus ending stocks.

4

 Data may not add to apparent U.S. consumption totals due to cotton unaccounted for by USDA..

Source: USDA.
B-10

Table B-13

U.S. price ratio of American Pima to upland cotton, monthly, January 1995-August 2000

Ratio (in percent)

Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. Avg.1

1995 .......... 123 122 111 116 121 122 143 157 146 167 186 196 143

1996 .......... 205 199 206 206 200 194 196 170 152 140 139 149 180

1997 .......... 156 162 165 171 170 152 153 153 146 140 142 156 156

1998 .......... 158 153 145 161 156 137 135 140 140 149 150 162 149

1999 .......... 172 168 149 152 151 157 173 170 171 163 167 169 163

2000 .......... 148 143 137 150 142 155 158 150 148

1

 Simple average of the calendar months.

Source: Supima Association of America.
B-11

Table B-14

Consumption of domestic and foreign cotton, by U.S. industry group, 1995-99

(Thousands of bales, unless otherwise noted)

Title 1995 1996 1997 1998 1999

Weaving mills1..................... 5,993 5,942 6,071 5,864 5,231

Yarn and thread mills2............... 4,124 4,302 4,616 4,463 4,667

Other industry groups ............... 294 235 189 166 137

Total3........................ 10,411 10,479 10,876 10,493 10,035

Percentage of total consumption:

Weaving mills ................... 57.6 56.7 55.8 55.9 52.1

Yarn and thread mills .............. 39.6 41.1 42.4 42.5 46.5

Other industry groups ............. 2.8 2.2 1.7 1.6 1.4

Total3...................... 100.0 100.0 100.0 100.0 100.0

1

 Broadwoven fabric mills (NAICS code 31321) composed of establishments engaged in weaving only,

weave and finish, or weave, finish, and further fabricate fabric products.

2

 Fiber, Yarn, and Thread Mills (NAICS code 31311) composed of establishments engaged in one or more of

the following: (1) spinning yarn; (2) manufacturing thread of any fiber; and/or (3) texturing, throwing, twisting,

and winding purchased yarn.

3

 Totals may not add due to rounding.

Source: Current Industrial Reports, Bureau of the Census, Department of Commerce.
B-12

Table B-15

Cotton: Comparative cross-regional costs of producing one hectare of cotton, marketing year

1997/1998

(Dollars per hectare)

Country Pre-sowing Sowing Growing Harvesting Total

Irrigated areas:

China .................... 74.09 387.01 308.44 86.89 856.43

Egypt .................... 362.85 128.73 300.42 239.16 1,031.16

India (Central south) ......... 127.38 158.33 291.07 247.62 824.40

Pakistan (Punjab) ........... 153.57 22.40 252.35 55.13 483.45

Turkey (Curkurova) .......... 471.91 126.57 657.10 251.08 1,506.66

United States (West) ......... 194.81 41.51 1,211.93 N/A 1,448.25

Rainfed areas:

India (Central south) ........ 101.19 116.67 225.00 92.86 535.72

Senegal .................. 33.33 109.08 118.25 50.00 310.66

United States (Southeast) .... 86.68 25.15 562.62 N/A 674.45

Source: Survey of the Cost of Production of Raw Cotton, International Cotton Advisory Committee, Oct. 1998.

Table B-16

Cotton: Production costs per hectare, production yields, and estimated production costs per

kilogram, by region, marketing year 1998/1999

Region

Production cost

 per hectare1

Production yield

(Kilograms per hectare)

Estimated production cost2

 (Dollars per kilogram)

Africa (except Egypt)3..... $310.66 118 - 435 (range) 1.12

China .................. 856.43 1,011 0.85

Egypt .................. 1,031.16 816 1.26

India .................. 680.06 298 2.28

Pakistan ............... 483.45 473 1.02

Turkey ................. 1,506.66 1,107 1.36

United States ............ 1,061.36 701 1.51

1

 Production costs per hectare were taken from the previous table. For India and the United States, the costs

were calculated as the simple average of the regional data.

2

 Estimated per kilogram production costs were calculated by dividing the production costs in dollars per

hectare by the kilograms per hectare yield.

3

 Africa’s production costs per hectare are from Senegal only. The African production yields are ranged based

on data from Cameroon, Chad, Nigeria, South Africa, Sudan, Tanzania, Zimbabwe, and an “Other” category.

Africa’s estimated production cost per kilogram was calculated using the mean of the production yield range

(277).

Source: Cotton: World Markets and Trade, FAS, USDA, June 12, 2000, and Survey of the Cost of Production of

Raw Cotton, International Cotton Advisory Committee, Oct. 1998.
B-13

Table B-17

Cotton: U.S. exports of domestic merchandise and imports for consumption, by selected

countries, and total merchandise trade balance, 1995-991

(In million dollars)

Market 1995 1996 1997 1998 1999

Percentage

change

1995-99

U.S. exports of domestic merchandise:

Mexico ........................... 190.5 257.2 354.1 615.7 285.4 49.8

Japan ............................ 408.7 318.0 247.2 251.8 96.1 -76.5

Indonesia ......................... 377.2 279.8 210.8 151.2 80.5 -78.7

Korea ............................ 361.5 256.6 223.5 266.4 65.3 -81.9

Canada .......................... 91.7 99.7 86.4 120.7 61.9 -32.5

Taiwan ........................... 141.7 77.5 111.3 122.5 57.1 -59.7

Turkey ........................... 81.9 30.5 165.3 171.8 46.4 -43.3

Bangladesh ....................... 62.4 35.9 62.1 70.9 28.5 -54.3

Thailand .......................... 178.6 86.2 79.7 65.3 28.1 -84.3

Hong Kong ........................ 134.2 42.2 51.3 91.3 26.2 -80.5

All other .......................... 1,652.7 1,231.7 1,090.4 617.7 192.7 -88.3

Total .......................... 3,681.1 2,715.3 2,682.1 2,545.3 968.2 -73.7

U.S. imports for consumption:

Greece ........................... 0 2.0 0 2.7 64.9 (

2

)

China ............................ 0 0 0 0 23.9 (

2

)

Syria ............................ 0 0.1 0 0 15.5 (

2

)

Egypt ............................ 1.1 6.2 0 6.9 6.6 500.0

Argentina ......................... 0.1 86.2 0 2.7 6.0 5900.0

Mexico ........................... 2.3 16.0 0.2 0.1 5.3 130.4

Benin ............................ 0 0 0 0 5.2 (

2

)

Uzbekistan ........................ 0 133.6 1.2 0.3 3.4 (

2

)

Burkina Faso ...................... 0 3.6 0 0 2.5 (

2

)

Mali ............................. 0 0.9 0 0 1.6 (

2

)

All other .......................... 6.9 34.5 1.6 0.8 1.4 -79.7

Total .......................... 10.4 283.1 3.0 13.5 136.2 1,209.6

U.S. merchandise trade balance:

Total .......................... 3,670.7 2,432.2 2,679.1 2,531.8 832.0 -77.3

1 Import values are based on customs value; export values are based on f.a.s. value, U.S. port of export.

Figures may not add to totals shown due to rounding.

2

 Not applicable.

Source: Compiled from official statistics of the U.S. Department of Commerce.
B-14

Table B-18

Cotton: Harmonized Tariff Schedule subheadings; description; HTS description; U.S. column 1 rate of duty as of Jan. 1, 2000; Uruguary Round bound concession rate of

duty; 1999 U.S. imports; and ad valorem equivalent (AVE) rates of duty for 1999

Column 1 rate of duty,

as of Jan. 1, 2000

Bound

duty,

Uruguay

Round

U.S. 

imports,

1999

AVE duty

 rates based

on customs

HTS subheading Description HTS description General Special value 1

Million

dollars Percent

5201.00.05 Harsh or rough

short staple

cotton under

3/4 inch

Cotton not carded or combed:

Having a staple length under 28.575 mm

(1-1/8 inches):

Harsh or rough, having a staple length

under 19.05 mm (3/4 inch) ............. Free Free 0.5 0.0

5201.00.12 Short staple cotton

entered under Special

Import Quotas (Step 3)

Cotton not carded or combed:

Having a staple length under 28.575 mm

(1-1/8 inches):

Other:

Described in general note 15 of the tariff

schedule and entered pursuant to its

provisions2....................... Free (

3

) 109.6 0.0

5201.00.14 Short staple cotton

entered under TRQs

under the Uruguay

Round Agreement

Cotton not carded or combed:

Having a staple length under 28.575 mm

(1-1/8 inches):

 Other:

Described in additional U.S. note

5 to this chapter and entered

pursuant to its provisions4........... Free Free 11.3 0.0

5201.00.18 Short staple cotton

entered outside subheadings 5201.00.12

and 5201.00.14

Cotton not carded or combed:

Having a staple length under 28.575 mm

(1-1/8 inches):

 Other:

Other ............................... 31.4¢/kg See 9906.52.01, 

9906.52.05 - 9906.52.07

(MX)5

 31.4¢/kg 3.1 1.4

5201.00.22 Long staple cotton

entered under Special

Import Quotas (Step 3)

Cotton not carded or combed:

Having a staple length under 28.575 mm

(1-1/8 inches) or more but under

34.925 mm (1-3/8 inches):

Described in general note 15 of the tariff

schedule and entered pursuant to its

provisions2......................... 4.4¢/kg Free (CA, E, IL, J, MX) (

3

) 3.3 3.4

See footnotes at end of table.
B-15

Table B-18—Continued

Cotton: Harmonized Tariff Schedule subheadings; description; HTS description; U.S. column 1 rate of duty as of Jan. 1, 2000; Uruguary Round bound concession rate of

duty; 1999 U.S. imports; and ad valorem equivalent (AVE) rates of duty for 1999

Column 1 rate of duty,

as of Jan. 1, 2000

Bound

duty,

Uruguay

Round

U.S. 

imports,

1999

AVE duty

 rates based

on customs

HTS subheading Description HTS description General Special value 1

Million

dollars Percent

5201.00.24 Harsh or rough cotton

of 1-5/32 inches or

more entered under

TRQs under 

Uruguay Round

Agreement

Cotton not carded or combed:

Having a staple length of 28.575 mm 

(1-1/8 inches) or more but under

34.925 mm (1-3/8 inches):

Other, harsh or rough, having a staple length

of 29.36875 mm (1-5/32 inches) or

more and white in color (except cotton

of perished staple, grabbots and cotton

pickings):

Described in additional U.S. note 6 to this

chapter and entered pursuant to its

provisions6.......................... 4.4¢/kg Free (CA, E, IL, J) 4.4¢/kg 0 (

7

)

5201.00.28 Harsh or rough cotton

of 1-5/32 inches or

more entered outside

subheading 5201.00.24

Cotton not carded or combed:

Having a staple length of 28.575 mm

(1-1/8 inches) or more but under

34.925 mm (1-3/8 inches):

Other, harsh or rough, having a staple length

of 29.36875 mm (1-5/32 inches) or 

more and white in color (except cotton

of perished staple, grabbots and cotton

pickings):

Other ............................. 31.4¢/kg See 9906.52.05 -

9906.52.07 (MX)5

31.4¢/kg 1.4 7.3

5201.00.34 Long staple cotton

entered under TRQs

under the Uruguay

Round Agreement

Cotton not carded or combed:

Having a staple length of 28.575 mm

(1-1/8 inches) or more but under

34.925 mm (1-3/8 inches):

Other:

Described in additional U.S. note 7 to

this chapter and entered pursuant to

its provisions8..................... 4.4¢/kg Free (CA, E, IL, J) 4.4¢/kg 0 (

7

)

5201.00.38 Long staple cotton

entered outside subheadings 5201.00.22

And 5201.00.34

Cotton not carded or combed:

Having a staple length of 28.575 mm

(1-1/8 inches) or more but under

34.925 mm (1-3/8 inches):

Other:

Other ............................. 31.4¢/kg See 9906.52.01,

9906.52.05-9906.52.07

(MX)5

31.4¢/kg 0 (

7

)

See footnotes at end of table.
B-16

Table B-18—Continued

Cotton: Harmonized Tariff Schedule subheadings; description; HTS description; U.S. column 1 rate of duty as of Jan. 1, 2000; Uruguary Round bound concession rate of

duty; 1999 U.S. imports; and ad valorem equivalent (AVE) rates of duty for 1999

Column 1 rate of duty,

as of Jan. 1, 2000

Bound

duty,

Uruguay

Round

U.S. 

imports,

1999

AVE duty

 rates based

on customs

HTS subheading Description HTS description General Special value 1

Million

dollars Percent

5201.00.55 Extra-long staple

cotton entered under

Special Import Quotas

(Step 3)

Cotton not carded or combed:

Having a staple length of 34.925 mm

(1-3/8 inches) or more:

Described in general note 15 of the tariff

schedule and entered pursuant to its

provisions2.......................... 1.5¢/kg Free (CA, E, IL, J, MX) (

3

) 0.7 0.5

5201.00.60 Extra-long staple

cotton entered under

TRQs under the 

Uruguay Round

Agreement

Cotton not carded or combed:

Having a staple length of 34.925 mm

(1-3/8 inches) or more:

Described in additional U.S. note 8 to this

chapter and entered pursuant to its

provisions9......................... 1.5¢/kg Free (CA, E, IL, J) 1.5¢/kg 5.8 0.6

5201.00.80 Extra-long staple

cotton entered outside

subheadings

5201.00.55 and

5201.00.60

Cotton not carded or combed:

Having a staple length of 34.925 mm

(1-3/8 inches) or more:

Other ................................ 31.4¢/kg See 9906.52.05 - 

9906.52.07 (MX)5

31.4¢/kg 0.5 15.4

Total .................................... 136.2 1.7

1

 Programs under which special tariff treatment may be provided, and the corresponding symbols for such programs as they are indicated in the "special" column, are as follows: North

American Free Trade Agreement--goods of Canada (CA), goods of Mexico (MX); Caribbean Basin Economic Recovery Act (E); United States-Israel Free Trade Area (IL); and Andean Trade

Preference Act (J). See Appendix A for more details on these programs.

2 General note 15 of the HTS states that "whenever any agricultural product of chapters 2 through 52, inclusive, is of a type (i) subject to a tariff rate quota and (ii) subject to the provisions

of subchapter IV of chapter 99 [safeguard triggers], entries of such products described in this note shall not be counted against the quantity specified as the in-quota quantity for any such

products." The products described in the note include cotton entered under the provisions of U.S. note 6 to subchapter III of chapter 99 and subheadings 9903.52.00 through 9903.52.26,

inclusive, covering products covered by safeguard measures.

3

 HTS subheadings 5201.00.12, 5201.00.22, and 5201.00.55 were created after Uruguay Round staging documents had already been submitted to the WTO. They follow the bound rates

applied to subheadings 5201.00.14, 5201.00.24, and 5201.00.60, respectively. 

4

 For a description of note 5 of chapter 52 of the Harmonized Tariff Schedule, see table B-22.

5

 See table B-20 for a full explanation of the HTS subheadings referenced. Mexican imports were excluded from the AVE duty rates computation because those imports receive duty-free

treatment.

6

 For a description of note 6 of chapter 52 of the Harmonized Tariff Schedule, see table B-22.

7

 Not applicable.

8

 For a description of note 7 of chapter 52 of the Harmonized Tariff Schedule, see table B-22.

9 For a description of note 8 of chapter 52 of the Harmonized Tariff Schedule, see table B-22.

Source: Compiled from official statistics of the U.S. Department of Commerce, Schedule XX of the GATT Uruguay Round, and USITC,Harmonized Tariff Schedule of the United States

(2000), USITC publication 3249, Nov. 1999.
B-17

Table B-19

Cotton: U.S. imports for consumption, by principal markets, 1995-991

Market 1995 1996 1997 1998 1999

Percentage

change

1995-99

–––––––– Quantity (million kilograms) –––––––

Greece ............................ 0 1.2 0 2.1 49.1 (

2

)

China .............................. 0 0 0 0 17.5 (

2

)

Syria .............................. 0 (

3

) 0 0 13.9 (

2

)

Egypt .............................. 0.5 1.6 0 2.4 2.6 420.0

Argentina ........................... 0.1 56.1 0 2.1 6.3 6,200.0

Mexico ............................. 0.6 10.2 0.2 0.1 3.5 483.3

Benin .............................. 0 0 0 0 4.0 (

2

)

Uzbekistan .......................... 0 82.8 1.1 0.2 2.5 (

2

)

Burkina Faso ........................ 0 2.3 0 0 2.0 (

2

)

Mali ............................... 0 0.5 0 0 1.3 (

2

)

All other ............................ 2.3 19.7 0.9 0.5 1.2 -47.8

Total ............................ 3.5 174.4 2.2 7.4 103.9 2,866.8

––––––––––– Value (million dollars) –––––––––––

Greece ............................ 0 2.0 0 2.7 64.9 (

2

)

China .............................. 0 0 0 0 23.9 (

2

)

Syria .............................. 0 0.1 0 0 15.5 (

2

)

Egypt .............................. 1.1 6.2 0 6.9 6.6 500.0

Argentina ........................... 0.1 86.2 0 2.7 6.0 5,900.0

Mexico ............................. 2.3 16.0 0.2 0.1 5.3 130.4

Benin .............................. 0 0 0 0 5.2 (

2

)

Uzbekistan .......................... 0 133.6 1.2 0.3 3.4 (

2

)

Burkina Faso ........................ 0 3.6 0 0 2.5 (

2

)

Mali ............................... 0 0.9 0 0 1.6 (

2

)

All other ............................ 6.9 34.5 1.6 0.8 1.4 -79.7

Total ............................ 10.4 283.1 3.0 13.5 136.2 1,209.6

–––––– Unit value (dollars per pound) –––––––

Greece ............................ (

2

) 0.76 (

2

) 0.58 0.60 (

2

)

China .............................. (

2

) (

2

) (

2

) (

2

) 0.62 (

2

)

Syria .............................. (

2

) (

2

) (

2

) (

2

) 0.51 (

2

)

Egypt4............................. 1.00 1.76 (

2

) 1.30 1.15 15.4

Argentina ........................... 0.45 0.70 (

2

) 0.58 0.43 -4.8

Mexico ............................. 1.74 0.71 0.45 0.45 0.69 -60.5

Benin .............................. (

2

) (

2

) (

2

) (

2

) 0.59 (

2

)

Uzbekistan .......................... (

2

) 0.73 0.49 0.68 0.62 (

2

)

Burkina Faso ........................ (

2

) 0.71 (

2

) (

2

) 0.57 (

2

)

Mali ............................... (

2

) 0.82 (

2

) (

2

) 0.56 (

2

)

All other ............................ 1.36 0.79 0.81 0.73 0.53 -61.1

Total ......................... 1.35 0.74 0.62 0.83 0.59 -55.9

1 Import values are based on customs value. Figures may not add to totals shown due to rounding.

2

 Not applicable.

3

 Less than 50,000 kilograms.

4

 Egypt’s aggregate unit values are often higher than other countries because Egypt ships more higher-priced

ELS cotton to the United States.

Source: Compiled from official statistics of the U.S. Department of Commerce.
B-18

Table B-20

Cotton: Harmonized Tariff Schedule subheadings for cotton in chapter 99 subchapter VI,

pertaining to goods from Mexico; description; U.S. special rates of duty as of Jan. 1, 2000

Column 1 rate of duty, as of Jan. 1, 2000

HTS subheading Description Special

9906.52.01 Cotton, whether or not carded or combed 

(provided for in heading 5201 or 

 5203) or cotton waste (provided for in 

subheading 5202.99):

Specified in U.S. note 24 to this

subchapter1................... Free

9906.52.05 Cotton, whether or not carded or combed

(provided for in heading 5201 or

5203) or cotton waste (provided for in

subheading 5202.99):

Other:

Subject to the quantitative limits

specified in U.S. note 25 to this

subchapter2................. Free

9906.52.06 Cotton, whether or not carded or combed

(provided for in heading 5201 or

5203) or cotton waste (provided for in

subheading 5202.99):

Other:

Not subject to notes 24 or 25 of this

subchapter and not valued over

$1.36/kg ................... 10.7¢/kg

9906.52.07 Cotton, whether or not carded or combed

(provided for in heading 5201 or

5203) or cotton waste (provided for in

subheading 5202.99):

Other:

Not subject to notes 24 or 25 of this

subchapter and valued over

$1.36/kg ................... 7.8%

1

 Note 24 of this subchapter states that “subheading 9906.52.01 covers only cotton, not carded or combed, harsh

or rough, of perished staple, grabbots and cotton pickings, having a staple length of 29.36875 mm (1-5/32 inches)

or more but under 34.925 mm (1-3/8 inches) and white in color (provided for in subheading 5201.00.38).”

2

 Note 25 of this subchapter states that “the aggregate quantity of goods entered under subheadings 9906.52.02

[lap waste, silver waste, and roving waste] and 9906.52.05 in any calendar year shall not exceed following: 1995-

10,300,000 kg; 1996-10,609,000 kg; 1997-10,927,000 kg; 1998-11,255,000 kg; 1999-11,593,000 kg; 2000-

11,941,000 kg; 2001-12,299,000 kg; 2002-12,668,000 kg. Beginning in calendar year 2003 quantitative limitations

shall cease to apply on these goods from Mexico.”

Source: USITC, Harmonized Tariff Schedule of the United States (2000), USITC publication 3249, Nov. 1999.
B-19

Table B-21

Cotton products: U.S. commitments on tariff-rate quotas under the Uruguay Round Agreement,

1995-2000 (and beyond)

(Metric tons)

Product

Quota quantity 

1995 1996 1997 1998 1999

2000 and

beyond

Aggregate quota:

(Note 5)1, 2................ 41,926.8 48,850.4 55,773.9 62,697.5 69,621.0 76,544.6

Note 63.................. 8,495.05 10,837.45 13,179.85 15,522.25 17,864.65 20,207.05

Note 74.................. 900 1,000 1,100 1,200 1,300 1,400

Note 85.................. 5,200 6,460 7,720 8,980 10,240 11,500

Note 96.................. 25,500 28,420 31,340 34,260 37,180 40,100

1

 Note 5 permits imports of an aggregate quantity of cotton, entered under the provisions of notes 6-11 of not less

than the total quantity specified. (Notes 10 and 11 are outside the scope of this industry and trade summary.) Part

of the note 5 quota is country-specific (table B-22).

2

 Mexico receives an additional aggregate quantity of 10,000 metric tons.

3

 Note 6 permits imports of an aggregate quantity of cotton, not carded or combed, having a staple length under

28.575 mm (1-1/8 inches) (except harsh or rough cotton, having a staple length under 19.05 mm (3/4 inch)),

entered under HTS subheading 5201.00.14 during the 12-month period beginning Sept. 20 in any year, of not less

than the total quantity specified.

4

 Note 7 permits imports of an aggregate quantity of harsh or rough cotton, not carded or combed, having a

staple length under 29.36875 mm (1-5/32 inches) or more but under 34.925 mm (1-3/8 inches) and white in color

(except cotton of perished staple, grabbots and cotton pickings), entered under HTS subheading 5201.00.24 during

the 12-month period beginning Aug. 1 in any year, of not less than the total quantity specified.

5

 Note 8 permits imports of an aggregate quantity of cotton, not carded or combed, having a staple length of

28.575 mm (1-1/8 inches) or more but under 34.925 mm (1-3/8 inches) (except harsh or rough cotton, not carded

or combed, having a staple length of 29.36875 mm (1-5/32 inches) or more and white in color), but including cotton

of perished staple, grabbots and cotton pickings, entered under HTS subheading 5201.00.34 during the 12-month

period beginning Aug.1 in any year, of not less than the total quantity specified.

6

 Note 9 permits imports of an aggregate quantity of cotton, not carded or combed, having a staple length of

34.925 mm (1-3/8 inches) or more, entered under HTS subheading 5201.00.60 during the 12-month period

beginning Aug. 1 in any year, of not less than the total quantity specified.

Source: Schedule XX, United States Implementation of the GATT Uruguay Round.
B-20

Table B-22

Cotton: Tariff-rate quota triggers listed in notes 5-8 of chapter 52 of the Harmonized Tariff

Schedule

(In kilograms)

HTS subheading Country Marketing year Quantity

5201.00.141, 2 (note 5) Total quota .............................. 9/20/99 - 9/19/00

9/20/00 - 9/19/01

17,864,650

20,207,050

Argentina ................................ 2,360

Brazil ................................... 280,648

British East Africa ......................... 1,016

British West Africa (except Nigeria and Ghana) ... 7,259

British West Indies (except Barbados, Bermuda,

Jamaica, Trindad, and Tobago) ............. 9,671

China ................................... 621,780

Colombia ................................ 56

Ecuador ................................. 4,233

Egypt & Sudan (aggregate) .................. 355,532

Haiti .................................... 107

Honduras ................................ 341

India & Pakistan (aggregate) ................. 908,764

Indonesia & Netherlands New Guinea

(aggregate) ............................ 32,381

Iraq .................................... 88

Nigeria .................................. 2,438

Paraguay ................................ 395

Peru ................................... 112,469

Armenia, Azerbaijan, Belarus, Estonia, Georgia,

Kazakhstan, Kyrgyzstan, Latvia, Lithuania,

Moldova, Russia, Tajikistan, Turkmenistan,

Ukraine and Uzbekistan (aggregate) .......... 215,512

5201.00.243 (note 6) Total quota .............................. 8/1/99 - 7/31/00

8/1/00 - 7/31/01

1,300,000

1,400,000

5201.00.343 (note 7) Total quota .............................. 8/1/99 - 7/31/00

8/1/00 - 7/31/01

10,240,000

11,500,000

5201.00.603 (note 8) Total quota .............................. 8/1/99 - 7/31/00

8/1/00 - 7/31/01

37,180,000

40,100,000

1

 Under the quantitative limitations set forth under subheading 5201.00.14, the countries listed are permitted

imports under that subheading at least equal to the listed quantities. However, all WTO member countries are

permitted to import cotton under that subheading up to the total import quota.

2 For the individual country import quotas listed under subheading 5201.00.14, the quantitative limitations apply

to both marketing years.

3

 Only WTO member countries are permitted to import cotton under the quantitative limitation.

Source: USITC, Harmonized Tariff Schedule of the United States (2000), USITC publication 3249, Nov. 1999.
B-21

Table B-23

Cotton: U.S. commitments on over-quota tariff rates under the Uruguay Round Agreement1

(Cents per pound)

2

HTS item 1995 1996 1997 1998 1999

2000 and

beyond

5201.00.183............ 79.4 77.4 75.4 73.2 71.2 69.2

5201.00.284............ 79.4 77.4 75.4 73.2 71.2 69.2

5201.00.385............ 79.4 77.4 75.4 73.2 71.2 69.2

5201.00.806............ 79.4 77.4 75.4 73.2 71.2 69.2

1

 Over-quota imports of cotton from Mexico receive lower duty rates under NAFTA (table B-20).

2

 Converted from cents per kilogram at 1 kg = 2.2046 lbs.

3

 Imports entered under HTS subheading 5201.00.18 are over-quota quantities of cotton, not carded or combed,

having a staple length under 28.575 mm (1-1/8 inches) (except harsh or rough cotton, having a staple length under

19.05 mm (3/4 inch)).

4

 Imports entered under HTS subheading 5201.00.28 are over-quota quantities of harsh or rough cotton, not

carded or combed, having a staple length 29.36875 mm (1-5/32 inches) or more but under 34.925 mm (1-3/8

inches) and white in color (except cotton of perished staple, grabbots and cotton pickings).

5

 Imports entered under HTS subheading 5201.00.38 are over-quota quantities of cotton, not carded or combed,

having a staple length of 28.575 mm (1-1/8 inches) or more but under 34.925 mm (1-3/8 inches) (except harsh or

rough cotton, not carded or combed, having a staple length of 29.36875 mm (1-5/32 inches) or more and white in

color), but including cotton of perished staple, grabbots and cotton pickings.

6

 Imports entered under HTS subheading 5201.00.80 are over-quota quantities of cotton, not carded or combed,

having a staple length of 34.925 mm (1-3/8 inches) or more.

Source: Schedule XX, United States Implementation of the GATT Uruguay Round.
B-22

Table B-24

Cotton: Price-based safeguard triggers for U.S. imports over the tariff rate quotas in 20001

HTS

subheading Description Value range duty

5201.00.18 Cotton not carded or combed, the product of any country or

area including the United States, having a staple length

under 28.575 mm (1-1/8 inches) (except harsh or rough

cotton, having a staple length under 19.05 mm (3/4 inch)) ......... Less than 35¢/kg 51.5¢/kg

35¢/kg or more but less than 55¢/kg 36.6¢/kg

55¢/kg or more but less than 75¢/kg 24.8¢/kg

75¢/kg or more but less than 95¢/kg 14.8¢/kg

95¢/kg or more but less than $1.15/kg 8.6¢/kg

$1.15/kg or more but less than $1.25/kg 5.6¢/kg

$1.25/kg or more but less than $1.35/kg 2.6¢/kg

$1.35/kg or more No additional duty

Harsh or rough cotton, not carded or combed, the product

of any country or area including the United States, having

a staple length of 29.36875 mm (1-5/32 inches) or more

 but under 34.925 mm (1-3/8 inches) and white in color

 (except cotton of perished staple, grabbots and cotton

 pickings) ..............................................

5201.00.28

Less than 10¢/kg 49.1¢/kg

10¢/kg or more but less than 30¢/kg 31.5¢/kg

30¢/kg or more but less than 50¢/kg 18.6¢/kg

50¢/kg or more but less than 70¢/kg 9.2¢/kg

70¢/kg or more but less than 90¢/kg 3.2¢/kg

90¢/kg or more No additional duty

See footnotes at end of table.
B-23

Table B-24—Continued

Cotton: Price-based safeguard triggers for U.S. imports over the tariff rate quotas in 20001

HTS

subheading Description Value range duty

5201.00.38 Cotton, not carded or combed, the product of any country or 

area including the United States, having a staple length

of 28.575 mm (1-1/8 inches) or more but under 34.925 mm

(1-3/8 inches) (except harsh or rough cotton, not carded

or combed, having a staple length of 29.36875 mm (1-5/32

inches) or more and white in color) but including cotton of

perished staple, grabbots and cotton pickings ............. Less than 20 ¢/kg 44.2¢/kg

20¢/kg or more but less than 40¢/kg 28.3¢/kg

40¢/kg or more but less than 60¢/kg 16.7¢/kg

60¢/kg or more but less than 80¢/kg 8.3¢/kg

80¢/kg or more but less than $1.00/kg 2.3¢/kg

$1.00/kg or more No additional duty

5201.00.80 Cotton, not carded or combed, the product of any country or

area including the United States, having a staple length of

34.925 mm (1-3/8 inches) or more .......................... Less than 50 ¢/kg 98.1 ¢/kg

50 ¢/kg or more but less than 80 ¢/kg 73.3 ¢/kg

80 ¢/kg or more but less than $1.10/kg 52.3 ¢/kg

$1.10 ¢/kg or more but less than $1.40/kg 37.3 ¢/kg

$1.40 ¢/kg or more but less than $1.70/kg 23.3 ¢/kg

$1.70 ¢/kg or more but less than $2.00/kg 14.3 ¢/kg

$2.00 ¢/kg or more but less than $2.20/kg 8.3 ¢/kg

$2.20 ¢/kg or more but less than $2.30/kg 5.3 ¢/kg

$2.30 ¢/kg or more but less than $2.40/kg 2.3 ¢/kg

$2.40/kg or more No additional duty

1

 Safeguards for cotton are located in chapter 99, subchapter IV of the Harmonized Tariff Schedule (subheadings 9904.52.01-9904.52.34).

Source: USITC, Harmonized Tariff Schedule of the United States (2000), USITC publication 3249, Nov. 1999.
B-24

Table B-25

Cotton: U.S. imports subject to safeguards, 1995-1999

(In kilograms)

Over-quota HTS subheadings 1995 1996 1997 1998 1999

5201.00.18 (staple length under 28.575 mm

(1-1/8 in.)) ......................... 0 150 0 0 0

5201.00.28 (harsh or rough, staple length of

29.36875 mm (1-5/32 in.) or more but

under 34.925 mm (1-3/8 in.), and white in

color) ............................. 0 0 0 0 0

5201.00.38 (staple length of 28.575 mm 

1-1/8 in.) or more but under 34.925 mm

(1-3/8 in.) .......................... 0 0 0 0 0

5201.00.80 (staple length of 34.925 mm

(1-3/8 in.) or more) ................... 0 0 0 0 0

Source: World Trade Organization, Committee on Agriculture.

Table B-26

Cotton: Schedule B numbers; description; U.S. exports, 1999

(In million dollars)

Schedule B numbers

U.S. exports

Description 1999

5201.00.1025 Cotton not carded or combed:

Having a staple length under 25.4 mm (1 inch) .............. 122.0

5201.00.1090 Cotton not carded or combed:

Having a staple length under 28.575 mm and over

25.4 mm (less than 1-1/8 inches but greater than

1 inch) .......................................... 584.6

5201.00.2030 Cotton not carded or combed:

Having a staple length 28.575 mm (1-1/8 inches) or more,

American Pima .................................... 85.1

5201.00.9000 Cotton not carded or combed:

Having a staple length 28.575 mm (1-1/8 inches)

or more, except American Pima ....................... 176.4

Total ................................................ 968.2

Source: Compiled from official statistics of the U.S. Department of Commerce. Figures may not add to totals

shown due to rounding.
B-25

Table B-27

Cotton: U.S. exports 1995-19991

(In metric tons)

Market 1995 1996 1997 1998 1999

Percentage

change

1995-1999

Short staple cotton2........... 252,064 192,849 198,451 150,061 83,555 -66.9

Percent of total ......... 12.4 12.9 12.7 9.2 11.8

Long staple cotton3 1,288,515 991,180 1,088,777 1,169,223 469,275 -63.6

Percent of total ......... 63.2 66.2 69.4 72.0 66.3

Extra-long staple cotton4....... 498,121 313,097 280,762 304,579 154,938 -68.9

Percent of total ......... 24.4 20.9 17.9 18.8 21.9

Total exports ................ 2,038,700 1,497,126 1,567,990 1,623,863 707,768 -65.3

1

 Export values are based on f.a.s. value, U.S. port of export.

2

 Staple length under 25.4 mm (1 in.) (Schedule B number 5201.00.1025).

3

 Staple length of 25.4 mm (1 in.) or higher, but less than 28.575 mm (1-1/8 in.) (Schedule B number

5201.00.1090).

4

 Staple length 28.575 mm (1-1/8 in.) or more (Schedule B numbers 5201.00.2030 and 5201.00.9000).

Source: Compiled from official statistics of the U.S. Department of Commerce.
B-26

Table B-28

Cotton: U.S. exports, by principal markets, 1995-19991

(In million dollars)

Market 1995 1996 1997 1998 1999

Percentage

change

1995-1999

Short staple cotton2:

Korea ............................. 35.8 29.5 42.7 59.5 22.3 -37.7

Indonesia ........................... 54.1 42.9 49.3 21.2 14.1 -73.9

Japan ............................. 89.2 52.2 48.9 34.5 13.4 -85.0

Taiwan ............................ 29.7 18.6 19.9 18.4 12.9 -56.6

Turkey ............................. 0.2 0.4 13.6 9.7 11.3 5550.0

Thailand ........................... 29.6 18.2 19.0 15.0 7.5 -74.7

Switzerland ......................... 1.1 3.4 1.0 1.6 6.2 463.6

Colombia ........................... (

3

) 2.1 1.3 0.9 5.5 511.4

Mexico ............................. 3.8 7.8 5.0 9.1 4.8 26.3

Ecuador ............................ 0 1.1 2.1 2.5 4.1 (

4

)

All other ............................ 185.3 155.4 151.1 65.0 19.9 -89.3

Total ............................ 428.8 331.6 353.9 237.4 122.0 -71.5

Percent of total ....................... 11.6 12.2 13.2 9.3 12.6

Long staple cotton5:

Mexico ............................. 159.6 223.3 340.4 558.9 248.7 55.8

Indonesia ........................... 216.8 169.3 114.4 82.9 40.0 -81.5

Turkey ............................. 72.5 28.4 145.8 160.8 32.0 -55.9

Korea ............................. 150.5 113.4 94.8 79.2 29.8 -80.2

Taiwan ............................ 79.3 45.6 63.7 86.7 28.9 -63.6

Canada ............................ 67.8 64.5 60.8 70.0 28.6 -57.8

Japan ............................. 151.3 127.5 119.1 124.7 26.4 -82.6

Hong Kong ......................... 120.5 36.0 47.7 67.2 24.8 -79.4

Thailand ........................... 111.4 51.1 47.4 39.1 12.2 -89.0

Colombia ........................... 25.6 15.6 40.6 23.2 11.7 -54.3

All other ............................ 1,157.2 883.4 731.4 488.2 101.5 -91.2

Total ............................ 2,312.5 1,758.1 1,806.1 1,780.9 584.6 -74.7

Percent of total ....................... 62.8 64.7 67.3 70.0 60.4

Extra-long staple cotton6:

Japan ............................. 168.2 138.3 79.3 92.7 56.3 -66.5

Canada ............................ 23.2 33.0 23.7 49.2 32.4 39.7

Mexico ............................. 27.2 26.1 8.7 47.7 31.9 17.3

Indonesia ........................... 106.3 67.6 47.1 47.2 26.4 -75.2

Bangladesh ......................... 27.6 20.3 27.6 21.4 18.3 -33.7

Taiwan ............................ 32.8 13.3 27.7 17.4 15.2 -53.7

Korea ............................. 175.3 113.7 86.0 127.7 13.1 -92.5

Thailand ........................... 37.7 17.0 13.3 11.2 8.5 -77.5

Peru .............................. 2.6 0.5 2.2 12.4 8.1 211.5

Pakistan ........................... 31.6 6.6 11.8 5.2 6.7 -78.8

All other ............................ 307.3 189.2 194.7 95.0 44.7 -85.5

Total ............................ 939.8 625.6 522.1 527.1 261.6 -72.2

Percent of total ....................... 25.5 23.0 19.5 20.7 27.0

Total ............................ 3,681.1 2715.3 2682.1 2545.4 968.2 -73.7

1

 Export values are based on f.a.s. value, U.S. port of export.

2

 Staple length under 25.4 mm (1 in.). (Schedule B number 5201.00.1025).

3

 Less than $50,000.

4

 Not applicable.

5

 Staple length of 25.4 mm (1 in.) or higher, but less than 28.575 mm (1-1/6 in.). (Schedule B number

5201.00.1090).

6

 Staple length 28.575 mm (1-1/8 in.) or more. (Schedule B numbers 5201.00.2030 and 5201.00.9000).

Source: Compiled from official statistics of the U.S. Department of Commerce. Figures may not add to totals

shown due to rounding.
B-27

Table B-29

Foreign import tariffs on cotton for selected countries with domestic cotton production to meet

most or all of total demand from local textile mills

(Percent ad valorem)

Latest year available Applied rates

China ....................................... 1998 3.0

Egypt ....................................... 1999 5.0

India ....................................... 1999 0.0

Mexico1..................................... 2000 3.0-13.0

Pakistan .................................... 1998 10

Turkey ...................................... 1997 0

1

 Under WTO staging, actual and bound rates for Mexico in 1996 were 50 percent and 45 percent ad valorem

respectively, with an implementation period of 1995-2004. Under NAFTA, U.S. and Canadian exports of cotton to

Mexico received a bound rate of duty-free, implemented from 1994-2003. Currently, in 2000, the actual duty rate is

3 percent.

Sources: World Trade Organization and NAFTA-Schedule of Mexico, 1994.

Table B-30

Foreign import tariffs on cotton for selected countries without domestic cotton production to

meet total demand from local textile mills

(Percent ad valorem)

Latest year available Applied rates

Canada ..................................... 2000 0

European Union ............................... 1999 0

Indonesia .................................... 1999 0

Japan ...................................... 1999 0

Korea ...................................... 1999 1.0

Source: World Trade Organization.
B-28

Table B-31

Production subsidies to cotton farmers through price or income programs, MY 1997-981

Country

Average subsidies

(Cents per pound

produced) 

Subsidies to cotton

production

(Million dollars) 

1997 1998 1997 1998

China ............................ 20 27 2,013 2,648

United States ...................... 7 14 597 953

Greece .......................... 86 74 659 660

Turkey ...........................

(2)

11

(2)

220

Spain ............................ 82 89 211 204

Egypt ............................ 39 13 290 66

Brazil ............................ 4 5 29 49

Mexico ........................... 3 3 13 15

Total ......................... 17 22 3,811 4,814

1

 Income and price support programs only. Credit and other assistance not included. Totals may not add

due to rounding.

2 Not available.

Source: ICAC.

Table B-32

Cotton: Production, exports and ratio of exports to production, for selected countries, MY 1999

(1,000 metric tons, unless otherwise indicated)

Title Production Exports

Ratio of exports 

to production

Percent

China ........................... 3,832 370 9.7

United States ..................... 3,694 1,481 40.1

India ........................... 2,678 11 0.4

Pakistan ........................ 1,829 109 6.0

Uzbekistan ....................... 1,154 914 79.2

Franc-Zone Africa ................. 870 804 92.4

Turkey .......................... 800 38 4.8

Egypt ........................... 229 93 40.6

Source: FAS, USDA.
APPENDIX C

GROWTHS USED TO CALCULATE

COTLOOK “A” INDEX
C-2

1. African Franc Zone Middling 1-3/32"

2. Australian Middling 1-3/32" 

3. California/Arizona DPLMiddling 1-3/32"

4. Uzbekistan Middling 1-3/32"

5. Chinese Type 329

6. Greek Middling 1-3/32"

7. Indian Hybrid-4, 1-3/32"

8. Memphis Territory Middling 1-3/32"

9. Mexican Middling 1-3/32"

10. Pakistan Punjab SG 1503 1-3/32"

11. Paraguayan Middling 1-3/32"

12. Syrian Middling 1-3/32"

13. Spanish Middling 1-3/32"

14. Tanzanian ‘AR’ Type 3

15. Turkish Izmir/Antalya I white, 1-3/32" RG
APPENDIX D

SCHEDULE OF LOAN PREMIUMS AND

DISCOUNTS FOR UPLAND AND ELS

COTTON
D-2
D-3
D-4
D-5
D-6
D-7
D-8
D-9
D-10
D-11

APPENDIX E

EXAMPLE CALCULATION OF THE

ADJUSTED WORLD PRICE (AWP) FOR

UPLAND COTTON
E-2