Cotton prices down 40 percent

Cotton farmers, facing prices down 40 percent since 1995, need a safety net from the Congress to stay in business.

Without government payments the past few years, farm income would have been dismal, says Mark Lange, vice president of policy analysis and program coordinator for the National Cotton Council.

Lange told participants in the recent Texas Gulf Coast Cotton Conference at Corpus Christi that unsettled farm legislation and a contracting world economy concern the entire cotton industry.

“Considering the cost of production, net receipts for U.S. farmers have been negative since 1998 and are going lower,” Lange said. “Without government payments this year, farmers would have had a $15 billion loss.”

He said the Council hopes the Senate will pass legislation that resembles the bill passed by the house in October.

Several bills have been offered, but a recent one mirrors the House. “Bi-partisan support will be a key factor,” Lange said. “We (the NCC) are working hard to generate support for the House bill and a Senate package that is similar.”

Justification for counter-cyclical support that kicks in during times of low commodity prices comes from the rapid deterioration of cotton and other markets. Lange said corn and soybeans are off 70 percent since 1998. Cotton has dropped from 66 cents a pound early in 2001 to 35 cents, he said.

“The U.S. economy is contracting slightly,” he said. “And our economy affects countries that sell to us and buy from us. The 2001 world crop could hit 96.1 million bales and could be a record. Mill use is estimated at 92.1 million bales, but we don't think we'll hit that. A 90 million-bale figure is more likely.”

Lange said 30 cents cotton could “begin to push polyester out of the market.”

China continues to work off a huge 1998 crop. “And China appears to have little change in production this year.”

He said during past over-supply periods, China and the United States would react to low prices with significant reductions. “That's not happening now. From the seven major cotton producers, we see no indication of major reductions fro 2002.”

Lange also expressed concern over the continuing decline of the U.S. textile industry. “We've been hurt by imports, and we expect Pakistan to receive trade concessions, including increased quota and reduced tariffs.”

Lange said of the two, reduced tariffs would be the more damaging.

“If we lower tariffs for Pakistan, other (trading partners) will demand it, and that will produce more problems for the U.S. cotton industry.”

Domestic use, Lange said, will not hit the USDA 8.3 million-bale estimate. “It will be closer to 8 million,” he said. “We need exports, but selling 9 million bales into a weak market will be tough. Contract sanctity and quality may be less important than price,” he said. “A U.S. crop premium may not be there.”

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