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USDA Cotton & Wool Outlook


15 July 2013

USDA Cotton & Wool Outlook - July 2013USDA Cotton & Wool Outlook - July 2013


USDA Cotton & Wool Outlook

The latest U.S. Department of Agriculture (USDA) projections for 2013 indicate that world cotton production is forecast at 118.0 million bales, about 3 percent below the 2012 estimate of 121.2 million bales. Although below that of a year ago, the global cotton crop is still forecast above projected consumption, resulting in 2013/14 ending stocks rising for the fourth consecutive season to a new record.

Cotton crop estimates for the leading suppliers are mixed, with an increase in India more than offsetting a decline in China. The top five cotton-producing countries consistently account for about 80 percent of total world production, with 2013 projected at 78 percent. . 2012 2013 Figure 1 Share of total cotton production by major producer Percent Source: USDA, World Agricultural Supply and Demand Estimates reports. 

Domestic

 U.S. Cotton Production Projection Unchanged Despite Higher 2013 Area

The U.S. cotton crop forecast for 2013 remains at 13.5 million bales this month and is projected 3.8 million bales below 2012. Despite an increase in planted area based on the June Acreage report (see table 10), the crop was left unchanged as area abandonment was adjusted based on current conditions. Drought conditions have continued in the Southwest region this season, while rainfall has alleviated dry conditions across most of the remaining Cotton Belt in 2013. Abandonment and yield projections are based on 2010-12 averages, weighted by region. However, harvested area in the Southwest is further adjusted to include an estimated abandonment of 40 percent for the region.

Based on the June Acreage report, U.S. producers indicated that they had planted or intended to plant 10.25 million acres to cotton in 2013, 2 percent above the March Prospective Plantings report but 17 percent below 2012. Harvested area is also projected below last season as the persistent drought in the Southwest continues for a third consecutive season. Nationally, U.S. abandonment for 2013 is projected at 24 percent (2.45 million acres). The expected 2013 abandonment is similar to last season’s 24 percent (2.9 million acres) but well below 2011’s record of 36 percent (5.3 million acres) (fig. 2).

Upland cotton area projections are reduced for each region of the Cotton Belt for 2013, ranging from 8 percent to 36 percent lower, as relatively higher alternative crop prices reduced the incentive to plant cotton. Area in the Southwest was reported at nearly 5.9 million acres (15 percent lower); this region is expected to once again have an above-average abandonment in 2013. In the Southeast and Delta regions, area is estimated at 2.5 million acres (8 percent lower) and 1.3 million acres (36 percent lower), respectively. Upland cotton area in the West is estimated to decline 17 percent from 2012 to 320,000 acres. In addition, extra-long staple acreage—most of which is in the West—is forecast to reach 226,000 acres, about 5 percent below 2012.

U.S. cotton crop development in 2013 continues to lag behind both last season and the 5-year average. As of July 7th, 51 percent of the crop was squaring, compared with 67 percent a year earlier and the 2008-12 average of 63 percent. Similarly, area setting bolls had reached only 10 percent as of early July, compared with 21 percent in 2012 and the 5-year average of 18 percent. Meanwhile, early season U.S. cotton crop conditions are similar to both last season and the 5-year average (fig. 3). As of July 7th, 44 percent of the U.S. cotton area was rated “good” or “excellent,” equal to a year earlier, while 24 percent was rated “poor” or “very poor,” compared with 28 percent in 2012.

The U.S. yield is currently forecast at 831 pounds per harvested acre, 6 percent below last season’s record of 887 pounds per harvested acre but above the 2008-11 average of 798 pounds. In August, USDA’s National Agricultural Statistics Service will publish its first survey-based results for cotton production in 2013.

Cotton Stocks Revised; 2012/13 Demand Adjusted

As the end of the 2012/13 season approaches, the demand estimate was revised due to the recent slowdown in U.S. export shipments. The export estimate was lowered 300,000 bales this month to 13.3 million bales. Despite this reduction, U.S. exports remain well above the 11.7 million bales shipped in 2011/12. As a result, ending stocks for 2012/13 were increased to 3.9 million bales—a 23 percent stocks-touse ratio.

For 2013/14, demand projections were unchanged in July, with U.S. exports forecast at 11.0 million bales and mill use projected at 3.5 million bales. Exports are expected to be limited by both the lower U.S. crop and the reduced forecast for foreign import demand—particularly from China. Although a smaller global cotton trade is projected for 2013/14, the U.S. share of world trade is forecast at 28.7 percent, nearly identical to the 2012/13 estimate.

Based on the latest supply and demand estimates, 2013/14 ending stocks are forecast at only 2.9 million bales, 1 million bales below the beginning level and the lowest since 2010/11. The stocks-to-use ratio is also expected to decrease 3 percentage points from 2012/13 to 20 percent in 2013/14. Meanwhile, the 2013/14 upland cotton farm price is expected to range between 70 and 90 cents per pound, compared with the 2012/13 estimate of 72.0 cents and 2011/12’s 88.3 cents.

International Outlook

World Cotton Production To Decline in 2013/14

World 2013/14 cotton production is forecast at 118.0 million bales, a 3-percent decrease from a year ago due to less favorable market conditions. Production decreases in major cotton growers such as China and the United States are expected to more than offset increases in others such as Brazil and India. Brazil is forecast to produce 7.0 million bales in 2013/14, up 21 percent from a year earlier. India and Pakistan are forecast to produce 28.0 million bales and 9.5 million bales in 2013/14, up 6 percent and 2 percent, respectively, from the preceding year. Availability of new information necessitated a revision in India’s 2013/14 crop estimate in July to 28.0 million bales, up 1.0 million bales from the previous month. India’s 2013/14 harvested area is forecast at 12.0 million hectares, up 2 percent from the preceding year but unchanged from the previous month.

China—the world’s largest cotton producer—is forecast to produce 34.0 million bales in 2013/14, down 3 percent from the previous year, as China’s official domestic price support policy appears insufficient to motivate expanded production. The United States is expected to produce 13.5 million bales in 2013/14, down 22 percent from the previous year due to lower planted area across all regions and severe drought affecting production in the Southwest. Australia’s 2013/14 crop of 4.5 million bales is now forecast to decline only 2 percent from a year ago due to this month’s 300,000-bale increase in the 2012/13 estimate.

Global cotton harvested area is forecast at 33.7 million hectares in 2013/14, down 2 percent from the preceding year, while global yield is forecast at 762 kg/hectare.

World Cotton Consumption To Continue Rebound in 2013/14

World 2013/14 cotton consumption is forecast at 109.8 million bales, an increase of 2 percent (2.4 million bales) from a year ago. India and Pakistan are expected to consume 23.3 million bales and 11.7 million bales in 2013/14, up 3 percent and 6 percent, respectively, from the preceding year. India’s 2012/13 mill use estimate was reduced by 250,000 bales from the previous month’s estimate, while Pakistan’s 2012/13 and 2013/14 mill use estimates were reduced 500,000 bales and 300,000 bales, respectively, from the previous month. India and Pakistan account for 60 percent of the expected increase in world 2013/14 cotton mill use.

China—the world’s top cotton consumer—is forecast to use 36.0 million bales in 2013/14, unchanged from the previous year. China’s national reserve procurement policy has raised prices to domestic mills, reducing spinners’ profit margins and forcing the industry to source more cotton yarn from other Asian countries such as India, Pakistan, and Vietnam. In addition, the IMF’s July 2013 World Economic Outlook has revised China’s 2013 and 2014 economic growth downward to 7.8 percent and 7.7 percent, respectively, from the April 2013 forecast, a development that does not augur well for domestic demand for cotton in China. Figure 4 shows the recent consumption shares for the leading cotton-consuming countries.

World 2013/14 ending stocks are forecast at a record 94.3 million bales, up 10 percent from a year ago, as world cotton production outpaces consumption for the fourth consecutive year. China’s 2013/14 ending stocks are forecast at nearly 60.0 million bales, up 18 percent from a year ago and accounting for 63 percent of global ending stocks. Australia and Brazil’s 2013/14 ending stocks are forecast at 2.7 million bales and 6.0 million bales, up 19 percent and 8 percent, respectively, from the previous year. Ending stocks in India and Pakistan are forecast at 8.4 million bales and 3.0 million bales in 2013/14, an increase of 8 percent and 6 percent, respectively, from the preceding year. In the July WASDE, India’s 2013/14 ending stocks were increased by nearly 1.2 million bales from the previous month’s estimate. Ending stocks in the United States are forecast at 2.9 million bales in 2013/14, down 26 percent from the previous year. Despite the larger stocks overall, world stocks relative to consumption outside of the China reserve will continue to be tight, supporting market prices. USDA’s July projections assume continuation of the currently-announced China policies regulating the acquisition and release of cotton from the national reserve.

Global Cotton Trade To Contract in 2013/14

World 2013/14 cotton exports are forecast to decline 18 percent from a year ago to 38.3 million bales. Exports in 2013/14 are expected to decline in several major exporting countries, including Australia, Brazil, India, Uzbekistan, and the United States. Brazil and Australia are expected to export 4.2 million bales and 2.6 million bales in 2013/14, down 30 percent and 40 percent, respectively, from the preceding year, as lower beginning stocks will reduce available supplies. Australia’s 2012/13 export estimate was raised 300,000 bales from the previous month’s estimate, following an increase in the country’s 2012/13 crop estimate. India’s 2013/14 exports are forecast at 5.8 million bales, down 19 percent from the previous year. The United States—the world’s leading cotton exporter—is forecast to export 11.0 million bales in 2013/14, a decline of 17 percent from the previous year.

China’s 2013/14 imports are forecast at 11.0 million bales, down 45 percent from a year ago, leaving its share of world imports at 29 percent, compared with a 43- percent share in the previous year. If realized, this will be the third consecutive annual decline in China’s share of global imports. India’s 2013/14 cotton imports are forecast to decline 20 percent from a year earlier to 1.2 million bales. Pakistan and Turkey are forecast to import 2.7 million bales and nearly 4.0 million bales in 2013/14, up 23 percent and 4 percent, respectively, from the preceding year.

Published by USDA Economic Research Service

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