US COTTON EXPORTS POISED FOR STRONG EXPANSION GROWER LOOKS TO E. EUROPE

US COTTON EXPORTS POISED FOR STRONG EXPANSION GROWER LOOKS TO E. EUROPE

U.S. cotton exports in the 1990-91 export season should be almost as strong as during the past year, when exports totaled a robust 7.7 million bales.

Exports this coming season will total 6.8 million bales but could exceed that amount if Eastern Europe increases its purchases of U.S. cotton, said Larry La Touf, executive vice president of Calcot Ltd., a Bakersfield, Calif.- based cooperative of 3,400 cotton growers.Mr. La Touf told the International Trade Club of Southern California that export prices also will remain strong as world consumption and supply reach equilibrium this year.

In fact, if Congress this fall passes a farm bill patterned after the 1985 Food Security Act, which enhanced the competitiveness of U.S. cotton in the world market, the next four years should be prosperous for cotton exporters, Mr. La Touf said.

"I would not be surprised to see cotton exports exceed 8 million bales (a year) during the life of this new bill," he said.

Mr. La Touf is optimistic about export potential to Eastern Europe in the coming year. The market is more of a long-term prospect, according to Carol Whitton of the Economic Research Service of the U.S. Department of Agriculture in Washington.

"Over the last year we have seen that democracy is contagious," Mr. La Touf said. "We have already seen Eastern Europe purchase over 200,000 bales of U.S. cotton. With the new-found freedom, many of these countries will become major markets for our cotton," he said.

The Soviet Union has been the traditional supplier of cotton to Eastern Europe, Mr. La Touf said, but Soviet concerns over crop rotation and water may limit such exports.

Also, the Soviets announced they are moving away from the barter system and this year will require hard currency transactions from Eastern Europe. Such a requirement could force these nations to seek inclusion under U.S. assistance programs. Poland has already received some of this aid.

Ms. Whitton was not as optimistic about short-term prospects in Eastern Europe, suggesting that the Soviet insistence on hard currency may not be strictly enforced.

In the long term, Ms. Whitton said, Eastern Europe should develop as a good market for U.S. cotton. For the coming year at least, most of its cotton imports will come from the Soviet Union, she said.

The cotton industry in the first half of the 1980s suffered from low prices, large stocks and weak demand. U.S. exports during the period averaged only 5 million bales a year.

In 1985, Congress passed the Food Security Act, which established a loan program to guarantee that U.S. cotton prices would be maintained at the world market level. That bill, plus shifts in market conditions, resulted in a steady rise in U.S. exports.

The outlook for the 1990-91 season, which begins on Aug. 1, looks promising, Mr. La Touf said.

Cotton stocks will be at the tightest level since records were kept in 1920, and world consumption should balance with supply at 86 million bales, he added.

Ms. Whitton expects the low world stocks of cotton to contribute to another buoyant season in 1990-91.

The service does not make its world projections until May, but Ms. Whitton said the current firm prices will encourage strong production.

Yet another factor that should contribute to strong U.S. exports is the Targeted Export Assistance Program, which provides financial support for the marketing of cotton in Western Europe, Japan, South Korea and Taiwan.

Mr. La Touf said that program, which is funded jointly by the federal government and the private sector, has resulted in increased sales to foreign

mills.

"Instead of competing solely on a price basis, U.S. cotton is attempting to build a brand identity," he said.

US COTTON SUPPLY AND DEMAND

(Millions of Bales)

87/88 88/89 89/90 90/91

Carryover from previous year 5.0 5.8 7.1 3.5

Production 14.8 15.4 12.2 14.6

Supply 19.8 21.2 19.3 18.1

Consumption 7.6 7.8 8.1 7.8

Exports 6.6 6.2 7.7 6.8

Offtake 14.2 14.0 15.8 14.6

(Domestic consumption

plus exports)

Offtake/Supply 72 percent 66 percent 82 percent 81 percent

(Consumption plus exports as a

percentage of total supply)

Source: Calcot Ltd., Bakersfield, Calif.