· Under new regime, 65 percent of subsidy payments will be de-coupled and included in the Single Farm Payment (SFP). The remaining support will be integrated in the country's “financial envelope,” and paid to the farme rs on a cultivated area-basis.
The CAP reform converted the maximum guaranteed quantity regime in place until the end of 2005, into an area-based system. For base (guaranteed) areas and subsidies in place under new cotton regime.
Consumption · Iberian MY 2005/06 raw cotton consumption suffered a significant reduction from previous year levels, due to the continuing closing of spinners in both Portugal and Spain. According to local industry contacts, these closures are affecting primarily carded yarn manufacturers.
· We anticipate another reduction in Iberian raw cotton consumption for MY 2006/07. Many local textile units are still affected by financial problems, and more will shut down in the coming year.
· According to our sources, the industry should start soon to trend towards a new stability, and mills closures should start to slow down soon.
· High imports of cheap yarn from India, Pakistan or Turkey continue to displace locally produced yarn.
· Cotton demand continues to be dominated by SM cotton (1.3/32 and 1.1/16) for ring spinning, which accounts for some 70 percent of total cotton use. The remaining 30 percent consists in SLM cotton (1.1/16 and 1.1/8) for open-end use.
Demand for ELS cotton represents a market niche. In Portugal, the industry estimates this niche to represent some 1,500 to 2,000 tons annually.
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