Speaking at the annual summer conference of the Southern Cotton Ginners Association at Franklin, Tenn., he said the “wild card” is consumption – how much and where it will occur.
“We now know how many acres there are in most of the world, and July-November weather will determine what the final production numbers will be.”
Jernigan, chairman and chief executive officer of Globecot, which provides information and analyses to the fiber/textile industry and handles cotton futures trading worldwide, said China, Pakistan, and Turkey will be the three most influential countries affecting consumption.
“China is the real star, with consumption projected by USDA at a record 25.75 million bales” (he thinks it could top 26 million bales, while the rest of Asia is basically stagnant).
China is quickly moving toward status as the largest supplier of textiles/apparel to the U.S. market, he said. “They’re rapidly taking market share away from all cotton-producing countries as a result of increases allowed through their membership in the World Trade Organization.”
China’s exports to the U.S. are up more than 70 percent in volume, Jernigan said. At the same time, its domestic consumption will be robust – “higher than anyone has forecast.”
Additionally, a more competitive currency situation than other countries vis-a-vis the dollar, abundant cheap labor, political stability, and reliable shipping will help make China a formidable competitor for the lucrative U.S. market. “They’ve quickly learned to become the Wal-Mart of the textile/apparel business.”
Turkey, which continues to dominate in sales to the European Union, is trying to join the EU, Jernigan said, but is having problems with its currency, which “has weakened dramatically.”
Consumption is expected to be down sharply in the EU - from 20 percent to 50percent - and “there’s not much potential” for the U.S. to compete with Turkey in that market.
Pakistan is significantly boosting its yarn exports to China and other countries, including increases in the U.S. market. The remaining cut-and-sew operations in the U.S. “are operating almost at capacity, he said, “and a lot of their yarn is coming from Pakistan.”
The much-vaunted Caribbean Basin Initiative (CBI) is “seeing its influence waning” in terms of cotton use, “with little room to grow,” Jernigan said. Mexico, too, holds little growth potential for U.S. cotton.
Russia, on the other hand, “shows surprising potential for expanding usage.” Consumption is increasing, the country has made new investment in textile manufacturing facilities, with fabric output up by 24 percent, “and they pay on time.”
The outlook for world ending stocks for the 2002/3 marketing period “looks a lot more promising than for the past two years,” Jernigan said. Projections are that they carryover will be 41.182 million bales compared to 47.056 last season.
Factors influencing the outlook are reduced production in the U.S. (17.5 million bales versus 20.3 million last year) and China (20.4 million versus 24.4 million), expected reductions in India’s crop due to lack of monsoon rains, and potentially greater consumption in China, Turkey, and Pakistan.
Member ginners from Missouri, Arkansas, Tennessee, Louisiana, and Mississippi attended the SCGA conference.