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According
to figures from the USDA, US Cotton planted area is expect to drop by 20%
in 2007, the fewest acres since 1989. It is assumed that the difference
will need to be made up in imports from other countries, which have
already been on the rise. Cotton imports from 1996-2006 are up roughly
250%. However, despite increases in world cotton output, demand is still
outpacing production. This has already caused an increase in world cotton
prices, but less so then for other commodities.
Not surprisingly, China plays a large role in this equation for the
US. In January 2007, cotton imports from China increased by 64%
year-over-year. Helping buy China’s cotton output has been this strong
demand and a seed subsidy from the government.
The Chinese government is beginning to take on its growing
trade surplus by decreasing many of its domestic subsidies that have been
helping its local industries.
So, it is very possible that apparel manufacturers and retailers
will both face increasing prices in 2007.
If this is the case, they will face shrinking margins or the
conundrum of passing along the increase to the consumers at a time when
they will already be pinched by gasoline prices.
The key factor in this for US based farmers and companies will be China,
who could significantly alter these forecasts in either way.
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