Higher ocean rates for U.S. cotton exports

Higher ocean rates for U.S. cotton exports

LOS ANGELES - U.S. cotton exports to China will continue to provide carriers in the westbound Pacific with a solid cargo base during the coming year, according to a major cotton cooperative.

China has emerged as the swing player in the global cotton trade. When China's domestic crop is weak and it imports heavily, as it is doing this year, U.S. cotton exports soar.

U.S. cotton exports for the current crop that was harvested in the fall of 2003 will total about 13 million bales, said John Burch, vice president of sales at Calcot Ltd., a cooperative of cotton shippers based in Bakersfield, Calif.

China will account for more almost a third of total U.S. cotton exports.

China is expanding domestic cotton acreage this year. If the weather cooperates, China will not import as much cotton in the 12 months beginning in the fall of 2004, but its imports will still be high by historical standards, Burch said.

China over the past two years has emerged as the single most important market for U.S. cotton, thanks to the spectacular growth of its textile industry, Burch told the International Trade Club of Southern California Tuesday in Long Beach. China's production of cotton yarn has increased at an annualized rate of 11 percent a year since 1998.

Burch noted that China has the world's largest textile mill, with 5 million spindles, two power plants and 50,000 workers. The mill will be expanded further to 7 million spindles.

Although it is a large consumer of cotton, China is also the world's largest grower. China's crop totaled 22 million bales in 2003, and it is expected to consume 30.2 million bales in 2004.

China this fall is expected to produce 27.2 million bales, but will have to import almost 4 million bales to keep up with consumption during the cotton shipping season that begins in the fall of 2004, so U.S. exports next year will remain strong, Burch said.

The U.S., by contrast, produced 18.2 million bales in 2003, but domestic consumption of cotton will total only 6.2 million bales. "That means there's a heck of a lot of cotton to export," Burch said.

The U.S. is considered a dependable producer of high-quality cotton. The long-staple pima cotton grown in California and Arizona commands the highest price for cotton in the global market. Growers of pima cotton are expanding their acreage this year, Burch said.

U.S. cotton planting is expected to drop slightly this year, while China is increasing its cotton planting by about 6.5 percent, Burch said. Initial forecasts call for China to have a bigger crop and better yields-per-acre than in 2003, a disappointing year.

Shipping lines value cotton because it commands higher freight rates than commodities such as hay and wastepaper that dominate the trade in the westbound Pacific. Lines in the carrier discussion group known as the Westbound Transpacific Stabilization Agreement announced in September they intended to raise their rates $200 per 40-foot container for the Dec. 1, 2003-to-Nov. 30, 2004, shipping season.

The WTSA lines at the time set their suggested base port-to-port rates in a range of $700 to $1,300 per FEU, depending upon the destination in Asia.