February 11, 2004

Foreign Cotton Area and Production for 2004/05 Expected to Rise Following 2003/04 Higher World Cotton Prices

Global financial conditions, government policies, and weather each influence foreign cotton area, but for cotton exporting nations, world cotton prices and prices of competing crops play an even greater role in determining the area planted to cotton.  Farmers often use the Cotlook A-Index as an indication of the profitability of producing cotton.  The A-index is an average of the five lowest-priced, out of 15 comparable world cotton varieties, offered for sale by cotton exporting countries.  Generally, a direct relationship exists between cotton area and the price index for the previous year.  The price line on the graph shows an average annual marketing year price beginning in 1995/96, and includes an average price from August-January for 2003/04.  During the first six months of the current marketing year, the price index averaged 70 cents per pound, nearly 20 cents above the same period a year earlier, indicating that foreign cotton area in 2004/05 will in all likelihood be above last year.  Area shifts also depend upon competing crop prices, currency relationships, government policies encouraging or restricting planted area, and availability of inputs.  Accounting for these factors, preliminary indications suggest that foreign cotton area will be about 29.8 million hectares, with production estimated at 83-87 million bales in 2004/05, compared with 28.1 million and 74.4 million for 2003/04.

To derive this projection, USDA reviewed producer prospects in countries accounting for over 80 percent of foreign area.

The estimates in this report and the following table reflect official USDA estimates as of February 2004.  For more detail on country forecasts see Agricultural Attachés Cotton Reports for 2004/05 (http://www.fas.usda.gov/scriptsw/attacherep/default.asp).  The table below presents the 2004/05 forecast with the most recent 5-year average and an 11-year history of foreign area, yield, and production.

For more information, contact Paul Provance
with the Production Estimates and Crop Assessment Division, at (202) 720-0881