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USDA Cotton & Wool Outlook

11 April 2014

USDA Cotton & Wool Outlook - 11 April 2014USDA Cotton & Wool Outlook - 11 April 2014

USDA Cotton & Wool Outlook

The latest U.S. Department of Agriculture (USDA) cotton projections for 2013/14 indicate that global ending stocks are forecast to reach a record 96.9 million bales, 8 percent (7.3 million bales) above 2012/13. Stocks have risen dramatically over the last several seasons as cotton prices encouraged higher global production that exceeded mill demand for the fiber. The latest 2013/14 forecast of world cotton stocks indicates that they will have increased by nearly 50 million bales since 2009/10, an unprecedented occurrence.

Policies in China are the major driver of the global stock build-up. For 2013/14, ending stocks in China are projected at a record 58.8 million bales, the third consecutive season of rising stocks (fig. 1). With stocks in the United States declining and those in the rest of the world about unchanged, China is forecast to hold a record 61 percent of global stocks by the end of 2013/14. However, the uncertainty surrounding the retention and disposal of these stocks has supported world cotton prices as global free supplies have declined in recent marketing years.


U.S. Cotton Area Expected to Rise in 2014

U.S. cotton acreage in 2014 is projected to increase after last season’s reduction. Based on the National Agricultural Statistics Service’s (NASS) Prospective Plantings report that surveyed farmers as of March 1st, producers intended to plant 11.1 million acres to cotton in 2014. This initial projection is nearly 700,000 acres (7 percent) above 2013’s actual planted area. Upland area is estimated at 10.9 million acres in 2014, while extra-long staple (ELS) plantings are expected at only 158,000 acres. These indications will be updated at the end of June in NASS’s Acreage report. As of April 6th, cotton plantings were underway in a few States with 6 percent of the anticipated area planted, equal to the 5-year average.

U.S. cotton acreage is expected to rise this spring as estimates for 2013/14 demand exceed production for the first time since 2009/10 and reduce ending stocks. Relative cotton prices for 2014/15 have favored cotton over competing crops as planting decisions are finalized. According to the 2014 Prospective Plantings report, two of the four Cotton Belt regions—the Delta and Southwest—are projected to plant more cotton, while each of the four regions are expected to plant fewer acres of corn than in 2013; meanwhile, soybeans are expected to rise in the Southeast, Delta, and Southwest in 2014. Overall, the 2014 upland cotton area is estimated to account for about 23 percent of the three-crop Cotton Belt total, above last season but below both 2012 and 2011. The Southwest is projected to plant nearly 6.7 million acres of upland cotton in 2014, about 650,000 acres (11 percent) above 2013 and nearly 4 percent above the previous 5-year average (fig. 2).

The Southwest is expected to account for nearly 61 percent of the U.S. upland cotton area in 2014, the highest in over 75 years. If drought conditions continue, Southwest 2014 upland area could expand from that projected in March as cotton is a more drought-tolerant crop than other alternatives.

The Delta is expected to rebound from 2013’s record low and plant 1.4 million acres to upland cotton in 2014, 17 percent above last season. However, the region will account for only 13 percent of the U.S. upland acreage, its second lowest share in over 75 years.

In the Southeast region, 2014 cotton plantings are estimated to decline slightly from a year ago to 2.6 million acres. The region is projected to contribute 24 percent of the U.S. cotton acreage estimate, similar to its 5-year average. Meanwhile, limited irrigation supplies in the West are likely to reduce upland area by 16 percent from last season to 245,000 acres, which is slightly below that of 2009. The West will only account for 2 percent of the U.S. upland area in 2014. In addition, ELS area in the West is forecast at only 145,000 acres, 24 percent below 2013; however, the region will account for 92 percent of U.S. ELS area in 2014.

U.S. 2013/14 Cotton Crop Lowered; Demand Unchanged

The 2013/14 U.S. cotton production estimate was reduced this month to 12.87 million bales as indicated in the March 2014 Cotton Ginnings report; upland production was placed at 12.23 million bales while the ELS crop was estimated at 633,000 bales. USDA will release final production estimates for 2013/14 on May 9th. With beginning stocks unchanged in April, this season’s cotton supply is now estimated at about 16.8 million bales, nearly 4 million bales below 2012/13 and the lowest in 30 years.

U.S. cotton demand estimates were unchanged in April. U.S. cotton exports remain forecast at 10.7 million bales, 2.3 million bales (18 percent) below the previous season. Despite this decline, the U.S. share of global trade is similar to a year ago— estimated at 27 percent in 2013/14 versus about 28 percent in 2012/13. U.S. cotton mill use is unchanged this month and is projected at 3.6 million bales, 3 percent above last season. Based on data from the Farm Service Agency, U.S. mill use had surpassed 2 million bales during the first 7 months of the marketing year.

U.S. Ending Stocks Reduced in April; Average Farm Price Revised

With the reduction in U.S. production, the ending stocks estimate declined similarly. Ending stocks are now forecast at 2.5 million bales, the lowest since 1990/91. The ending stock estimate for 2013/14 is 36 percent (1.4 million bales) below a year earlier. The current stocks-to-use ratio is now estimated at 17.5 percent for 2013/14, compared with 23.6 percent last season. With U.S. ending stocks declining, the U.S. farm price is forecast to increase from 2012/13’s 72.5 cents per pound. The average price received by upland producers for 2013/14 is projected to range between 76 and 79 cents per pound; the midpoint of 77.5 cents per pound is 5 cents above last season.


Global Cotton Production Lower in 2013/14

World 2013/14 cotton production is projected at 116.6 million bales, 5 percent below last season. China and India continue to account for half of the global crop, contributing an estimated 61 million bales (52 percent) of cotton production in 2013/14. World harvested area and production are forecast to be the lowest in 4 years. Global harvested area is currently estimated at nearly 33 million hectares, 4 percent below 2012/13. Global yield is estimated at 771 kg/hectare, below last season but equal to the 2011/12 season.

This month’s USDA reduction (320,000 bales) to the U.S. crop was partially offset by increases in Brazil and Burkina Faso. Brazil’s cotton production estimate was raised 100,000 bales in April and is now forecast at 7.5 million bales, 25 percent above last season, as both area and yield are forecast higher in 2013/14 due to favorable growing conditions. On a much smaller scale, Burkina’s crop is estimated at 1.2 million bales, 100,000 bales higher this month and 4 percent above a year ago; cotton production has expanded there over the last several seasons as well as in the neighboring cotton-producing countries of West Africa.

World Cotton Consumption Slowly Expands

Global 2013/14 cotton consumption is estimated at 109.5 million bales, 3 percent (3 million bales) above the preceding year. Although rising for a second consecutive season, world consumption remains below production (fig. 3). China continues as the leading cotton spinner, but mill use there is expected to decrease for the fourth consecutive season as policies have forced textile mills to import more cotton yarn; India, Pakistan, and Vietnam are the major yarn suppliers to China. Mill use in China is forecast at 35.5 million bales this season, down from 50 million bales in 2009/10.

India’s 2013/14 cotton consumption estimate is currently forecast at 23.0 million bales, a 250,000-bale reduction from March, as higher exports and lower imports reduce supplies available to mills; however, consumption is still 5 percent above last season. Pakistan is forecast to use 11.5 million bales of cotton in 2013/14, a 500,000-bale increase over last month and last season. Pakistan’s mill use is projected to rise for the third consecutive season in 2013/14. Vietnam, like India and Pakistan, is benefiting from China’s import demand for cotton yarn. In 2013/14, Vietnam is expected to use 2.8 million bales of cotton, two-thirds more than it used in 2011/12.


World Cotton Trade Contracts in 2013/14; Stocks Move Higher

World cotton trade is forecast at 39.6 million bales for 2013/14, 15 percent below the previous season. Over the last 2 years, imports by China have driven the trade as China imported more than 20 million bales in both the 2011 and 2012 marketing years. However, China is forecast to import only 12 million bales this season, a level similar to 2010/11; at the current forecast, China will account for 30 percent of global imports, compared with 44 percent in 2012/13. The decline in China’s imports is partially offset by increased imports by Turkey, Vietnam, Bangladesh, and Pakistan.

With the decline in global import demand, most major exporting countries are expected to have lower shipments in 2013/14. India is one exception, however, as cotton exports are projected to reach 8.0 million bales in 2013/14. Based on recent shipment data, India’s export forecast was raised 500,000 bales in April. Similarly, Australia’s forecast was increased 700,000 bales this month to 4.5 million bales; however, exports there remain below the 6.2 million bales shipped in 2012/13.

With global cotton production exceeding consumption for the fourth year in a row, world 2013/14 ending stocks are estimated to increase 8 percent to a record 96.9 million bales. USDA’s April 2013/14 revisions included a 1.0-million-bale increase in China’s ending stocks, the result of a higher import forecast there. As highlighted earlier, China is projected to account for 61 percent of global stocks at the end of 2013/14. Stocks in India—the next largest stock holder—are forecast at 10.2 million bales, or 11 percent of the world total. With record world stocks, the global stocks-to-use ratio is projected at nearly 89 percent, up from 84 percent in 2012/13 but double the level recorded in 2010/11.

Published by USDA Economic Research Service

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