ANALYSIS OF WORLD MARKET DEMAND, SUPPLY AND PRICE OF SUDAN'S ELS COTTON, 1956-1977

Foreign trade in agricultural products is considered the mainstay of Sudan's economy with extra long staple (ELS) cotton lint dominating the export mix. For the last two decades, however, the export performance of Sudan's ELS cotton has been aggravated by decline in world demand and beset by the twin problems of price instability and a downward trend in real prices.;Using Ordinary Least Squares, the statistical analysis entails the estimation of individual import demand functions for the major consuming countries of Sudan's ELS cotton, France, West Germany, Italy, United Kingdom, Japan, and India. Employing seasonally adjusted quarterly data for the period 1956I-1977IV, a dynamic partial adjustment lagged model is formulated that allows the estimation of short-run and long-run values of direct price, cross-price, and income elasticities of demand.;Additional analysis is undertaken to present single equation statistical models that could explain variations in such major components as aggregate mill consumption, total imports, production, and price of Sudan's ELS cotton.;For the price model it is hypothesized that stocks held in major importing countries were significant in the price determination mechanism. To explain changes in price, models are formulated with variables such as stock adjustment, flow adjustment, and a combination of the two-stock flow adjustment.;This study discusses and statistically estimates the supply and demand factors that adversely affected the price of Sudan's ELS cotton. The supply factors include yields, acreage and volume of stocks held in Sudan. The major demand factors, in addition to price, population and incomes, involve elements of substitution: Egypt's long varieties of cotton, United States medium varieties, and man-made fibers.;This study has shown that the continuous shifts in the inelastic supply curve of Sudan's cotton, due mainly to variations in crop yields, is a major cause of price instability which is mitigated to some degree by the elastic nature of the demand curve. This elastic response of demand to changes in price confirms the hypothesis that U.S. upland cotton, polyester synthetics, and Egypt's long varieties of cotton, are the three major competitors of Sudan's ELS cotton.;The prospects of Sudan's cotton lie in its competition on the basis of price and the enhancement of productivity, allowing for a permanent rightward shift in the supply curve, which together with the elastic nature of the demand curve will permit an increase in total revenues.