Dynamic Transition of World Cotton Market: Impact on U.S. Cotton Industry for 1986-87

Dean T. Chen


 
ABSTRACT

The world cotton market is in the midst of a dynamic transition. A dramatic shift in supply-demand conditions during the mid-1980's has led to a sharp decline in world carryover stocks from an abundant 46 million bales at the start of the 1986 season to 26 million projected by July 1988. This reduction was largely due to rising world consumption, weather-induced 1986 crop shortfalls in the U.S., and an unusually large revision of China's consumption and stocks data. A steady drop in value of U.S. dollar in the international markets and implementation of the marketing loan program have created an open and competitive market environment for U.S. cotton exports.

The effects of world market transition on the U.S. cotton industry are analyzed using a microcomputer-based econometric model, AGGIES (AGricultural Globally Integrated Econometric System)/Cotton. Key economic variables selected for simulation analysis include weighted average exchange rates of six major countries, cotton yield per acre and harvest-to-planting ratio for 1986/87 U.S. crop, and April 1987 revision of China's consumption and stocks data. Strong impacts were indicated by these simulation experiments particularly with respect to U. S. cotton production, exports, farm and spot prices, and producers' income.



Reprinted from 1988 Proceedings: Beltwide Cotton Production Research Conferences pp. 478 - 483
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998