U.S. cotton production for 2002/03 is projected at 17.6 million bales on 14.46 million acres, Memphis cotton merchant William Dunavant told producers and ginners at the 2002 Mid-South Farm and Gin Show, in Memphis. In January, the merchant projected an 18 million-bale crop on 14.6 million acres, two million fewer acres than in 2001. One reason for the continuing decline in projected acreage is a less attractive crop insurance program for cotton, according to the merchant. "The projected crop insurance price is 50 cents, compared to 63 cents last year. That will be positive for getting acreage down." Dunavant projected U.S exports at 10.3 million to 10.5 million bales and domestic consumption of around 7.5 million to 7.6 million bales for 2002. Combined projected U.S. exports and domestic use adds up to 17.9 million bales of offtake, according to Dunavant. "The U.S. carryover goes from 8.2 million bales (2001) to 7.9 million bales next year. That’s truly a step in the right direction. But 7.9 million bales is still way too much cotton for a carryover." Meanwhile, world cotton numbers are changing significantly, according to Dunavant. "Production will drop to 90 million bales, a 6.7 million bale reduction. Most of the reduction will come out of the United States and China. China will produce slightly over 21 million bales in 2002, versus 24.4 million in 2001." World carryover will decrease from 44.4 million bales in 2001 to 42.2 million in 2002. "That’s 2.2 million bales less cotton in the world. If something dramatic happens, we could get a spurt in prices. Anytime you get close to 39 million bales in the world, you’re getting close to a good balance. We need a production crisis to drive prices sharply higher. I don’t think it will come from a bump in consumption demand." World consumption will rise slightly in 2002, from 91.3 million bales to 92.1 million bales, according to Dunavant. "We’re going in the right direction." While Dunavant pointed out that U.S. producers took huge discounts on quality in 2001, he noted, "What has sold in foreign markets has been low strength, high micronaire, low micronaire, short staple, low grade cotton. That the reason exports are going to be as high as they are. "The coarse count yarn companies have bought lots and lots of the discounted cotton," Dunavant told producers. Dunavant says the cotton industry is facing more difficult times, "than I’ve seen in my 50 years in the cotton business. I support large strong payments to cotton producers through farm bill subsidies to assist them in the production of their crops. "But I also would like a mechanism that will not continue to encourage overproduction. That’s what we have seen the last couple of years – overproduction and at the same time consumption going down. "U.S. cotton producers are not sending a clear signal to the rest of the world. They see us overproducing and they see the U.S. government encouraging overproduction. Cotton prices will not return to the 60-cent or above level until we get some equilibrium between supply and demand." Dunavant also expressed his concern over, "the destruction of the domestic textile mill industry due to the strength of the U.S. dollar and the flood of cheap imports into the United States. "In two and a half years, we have witnessed 75 cotton mill plants close in the United States. Two weeks ago, another major mill filed for Chapter 11 bankruptcy. It was a mill that consumed about 300,000 bales annually. I expect to see 1-3 more going into reorganization in the next 2-3 months." On the other hand, Dunavant says the industry is showing signs of turning around. "For the last two or three weeks we’ve seen a good surge in the domestic textile use. Mexican mills are also beginning to sell their goods and they are starting to make some money. Those are the good things. "Another bright spot is that cotton today is cheaper than polyester fiber, not only in this country but around the world. We are seeing some changes in the blends back into more cotton away from polyester." More on world trade from Dunavant: China will import about two million bales of cotton in 2002. "It’s going to be the highest quality cotton produced in the United States and Australia. I don’t look for much volume of Memphis Territory or west Texas cotton." "Mexico will buy 1.75 million bales from the United States as their textile mills continue to revitalize. Mexico will be a very aggressive buyer. They love Memphis cotton. They love Southeast cotton. "Turkey will import one million bales of U.S. cotton. This year, most of the cotton they bought was cotton heavily discounted qualities of low strength, short staple and high mike." India and Pakistan will not be strong importers this year, according to Dunavant. "They have big textile consumption and can eat up production quickly unless they have problems with their own crop." Korea, Japan, Taiwan, Thailand, Hong Kong will continue to be big buyers from the United States. Dunavant noted that another "positive" about low prices, "is that the southern hemisphere countries – Argentina, Paraguay, Brazil and Australia – will produce two million less bales this year, purely and strictly on the low prices. There are no major subsidies in any of those countries. "Australia keeps competing and competing well," he said. "But they don’t have full water supplies lined up for next year’s production."