Long-term trends indicate that many major cotton producing countries are withholding cotton to satisfy domestic requirements, preferring to export value-added cotton products instead of raw cotton. In recent years, production difficulties have forced many of these regions, particularly India, Pakistan, and China, to become cotton net importers in order to support domestic spinning industries. This baseline allows the yield problems in India and Pakistan to improve beginning in 1996/97, with stocks rebuilding which keeps significant amounts of cotton from export. Initially this trend increases the prospects for U.S. cotton as importers at the raw level search for alternative sources of cotton. But beginning in 1996/97, the less expensive textiles and apparel produced by low-cost regions begin to dampen the market for raw cotton as cotton importers are unable to compete globally, causing U.S. exports to decrease gradually.
Due to poor weather conditions and disease, China, typically a net exporter, will become a net importer in 1994/95, retaining that status throughout the projection period. One key assumption is the rate of depletion of stocks in China. Given the large import figure for 1994/95, the immense amounts of stocks maintained in China are assumed unusable or unattainable, so they are depleted only minimally from current levels. Domestic mill use continues to increase as China's income growth remains optimistic.
In 1994/95, India again experiences severe disease setbacks in production, but is able to rely on stocks to maintain a respectable level of exports at 320,000 metric tons. In 1995/96, however, the production problems remain, causing exports to decline to 197,000 metric tons, subject to policies which can halt the flow of exports at any time. Gradually India is able to rebuild its exportable surplus, but only following a lean period as stocks are refurbished and the domestic spinning industry is satisfied.
Pakistan is fighting the leaf curl virus and heliothis which, along with slowly increasing acreage, are forcing production to very low levels. Exports in 1994/95 drop to 2,000 metric tons and never regain historical levels. Pakistan announced imports during the year to support the domestic industry and build stocks which, given the high world prices at the time, only emphasized the degree of adversity in the region.
Producing mainly for export, Australia overcomes drought and decreased area in 1994/95 to retain historical levels of exports. Australia is one of the few cotton producing countries not pressing for increases in domestic spinning, instead preferring to export most of its raw cotton production.
Cotton production in Uzbekistan has been limited by government guidelines attempting to make the region self-sufficient in agriculture. Area decreases in 1994/95 to 1,500,000 hectares, and again in 1995/96 to 1,332,000 hectares, thereafter remaining virtually constant. The reasoning behind not allowing further reductions in acreage includes the dependency of the republic's government on revenue from raw cotton exports. It is assumed that the government simply cannot afford to decrease cotton acreage much further, especially when faced with attractive world prices, but neither does it allow acreage to increase substantially.
Non-cotton producing countries are afforded some reprieve as the cotton producing regions turn to the world market for cotton which removes many of the advantages of low-cost textile production. But by 1996/97, these regions are beginning to cut back imports of raw cotton as less expensive high value cotton products are once again placed on the world market, opting instead to import the finished product.