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USDA Cotton & Wool Outlook

15 July 2014

USDA Cotton & Wool Outlook - 15 July 2014USDA Cotton & Wool Outlook - 15 July 2014

USDA Cotton & Wool Outlook

World Cotton Production Remains Concentrated in 2014/15

The latest U.S. Department of Agriculture (USDA) projections for 2014 indicate that the global cotton crop is forecast at 116.4 million bales, about 2 percent below the 2013 estimate of 118.3 million bales. While below a year ago, world production remains forecast above projected consumption, resulting in 2014/15 global ending stocks rising for the fifth consecutive season to a new record.

Cotton crop estimates for the leading suppliers are mixed, with expected declines in China and India more than offsetting an increase in the United States. The top five cottonproducing countries consistently account for about 80 percent of global production, with 2014 projected near 79 percent. Figure 1 illustrates each of the major producers’ estimated shares of production. The U.S. share is expected to rise to 14 percent in 2014, resulting from higher area and improved crop conditions increasing output. However, reduced shares are seen for China and India, where a combined 49 percent of global production is expected in 2014. Meanwhile, shares for Pakistan and Brazil are above 2013 and the recent average.


U.S. Cotton Production Projection Sharply Higher for 2014

The U.S. cotton crop forecast for 2014 was raised sharply in July to 16.5 million bales and is projected nearly 3.6 million bales above 2013. Along with an increase in planted area reported in the June Acreage report (see table 10), the cotton crop forecast was also supported by improved crop conditions. Favorable precipitation, particularly in the Southwest, reduced abandonment expectations. U.S. July abandonment and yield projections are based on 2012-13 averages, weighted by region. Projected abandonment in the Southwest was placed at the long-term average of 23 percent, compared with the 2012-13 average of 44 percent.

Based on the June Acreage report, U.S. cotton producers indicated that they had planted or intended to plant nearly 11.4 million acres to cotton in 2014, 2 percent above the March Prospective Plantings report and 9 percent above 2013. Harvested area is also expected above last season as the drought in the Southwest has eased with recent rainfall. Nationally, U.S. abandonment for 2014 is projected at 15 percent (1.67 million acres); the July projection places the 2014 abandonment rate near the 10-year average and at the lowest since 2010’s 2.5-percent rate (less than 300,000 acres).

Upland cotton area projections increased for three of the four Cotton Belt regions for 2014 as relatively higher cotton prices generally encouraged cotton plantings this spring; only the West region’s cotton area—which is relatively small—is projected lower in 2014. Area in the Southwest is reported at 6.7 million acres (12 percent higher); the previously mentioned precipitation has benefited the region which is expected to harvest its largest share of planted area in 4 years. In the Southeast and Delta, cotton area is forecast at nearly 2.8 million acres (4 percent higher) and 1.5 million acres (18 percent higher), respectively. Upland cotton area in the West is expected to decline 20 percent from 2013—to a low of 235,000 acres—as limited irrigation supplies were expected to be used on tree crops. In addition, extra-long staple acreage—most of which is in the West—is projected to reach only 178,000 acres, 11 percent below 2013 and the lowest since 2009.

U.S. cotton crop development in 2014 is ahead of last season but below the 5-year average. As of July 13th, 70 percent of the crop was squaring, compared with 2013’s 66 percent and the 2009-13 average of 74 percent. Similarly, area setting bolls had reached 24 percent by July 13th, compared with 16 percent a year ago and the 5-year average of 25 percent. Due to the recent rainfall in the Southwest, early season U.S. cotton crop conditions are above the last several seasons (fig. 2). As of July 13th, 53 percent of the U.S. cotton area was rated “good” or “excellent,” compared with 42 percent a year earlier, while 14 percent was rated “poor” or “very poor,” compared with 26 percent in 2013.

The U.S. yield is currently forecast at 816 pounds per harvested acre, 5 pounds below last season and marginally below the previous 5-year average. In August, USDA’s National Agricultural Statistics Service will publish its first survey-based results for cotton production in 2014.

2014/15 Demand Revised; Ending Stocks Increase

U.S. cotton demand for 2014/15 was revised upward in July to 14.0 million bales, nearly matching the latest 2013/14 estimate of 14.1 million bales. The export forecast was increased to 10.2 million bales as a larger available supply was forecast. Despite the increase in July, U.S. cotton exports remain projected below those of 2013/14 as world trade is forecast to decline in 2014/15. The U.S. share of global trade is currently projected near 29 percent, up from 26 percent in 2013/14 and the highest since 2010/11. Meanwhile, U.S. cotton mill use is forecast to rise about 5.5 percent in 2014/15 as expanding domestic mill capacity is expected to push mill use to 3.8 million bales, the highest in 4 seasons.

Based on these supply and demand estimates, 2014/15 ending stocks are forecast at 5.2 million bales, 2.5 million bales above the beginning level and the highest since 2008/09 when stocks were 6.3 million bales. The stocks-to-use ratio is also expected to rise considerably in 2014/15, reaching 37 percent, similar to 2008/09.

International Outlook

World Cotton Production to Decrease in 2014/15

World 2014/15 cotton production is projected at 116.4 million bales, 500,000 bales higher this month due to the increase projected for the U.S. crop; global production remains about 2 million bales below 2013/14. For 2014/15, production declines for major cotton growers (such as China and India) are expected to more than offset increases in others (such as the United States and Brazil). For the United States, cotton production is expected to expand 28 percent (3.6 million bales), while Brazil is forecast to increase less than 3 percent (0.2 million bales).

For China and India—the world’s largest cotton producers—production is projected to decrease 2.5 million bales (8 percent) for each country in 2014/15. In China, production is forecast at 29.5 million bales this season, the lowest since 2005/06. Reduced area, resulting from changes in China’s cotton purchasing policies, more than offsets a higher national yield that is based on rising area in the high-yielding Xinjiang region. In India, cotton production is projected at 28 million bales for 2014/15, the lowest in 4 seasons. Lower yields are largely responsible for the decline, as concerns continue about this season’s late developing monsoon. Also, Australia’s 2014/15 crop is expected to decrease 1.4 million bales (34 percent) from last season to 2.7 million bales as low reservoir levels reduce area and yield.

Global cotton harvested area is forecast at 33.4 million hectares for 2014/15, up 2 percent from the preceding year; the increase is attributable to the United States, as total foreign area is reduced for the third consecutive season. Meanwhile, the global yield is projected at 759 kg/hectare, 3 percent below 2013/14.

Global Cotton Consumption Continues Rebound

World 2014/15 cotton consumption is forecast at 111.3 million bales, an increase of 2.6 percent (2.9 million bales) from a year ago. Mill use in China is currently forecast at 36.5 million bales for 2014/15, nearly 6 percent (2 million bales) above 2013/14. However, high domestic cotton prices in China, and the uncertainty about future policies, favored the use of polyester in 2013/14 and are expected to limit cotton’s potential in 2014/15. In July, China’s cotton mill use estimate was reduced 1 million bales for 2013/14 and 500,000 bales for 2014/15.

India’s consumption is projected to rise 2 percent (500,000 bales) in 2014/15 to nearly 24.3 million bales, a record, as strong demand for India’s cotton product exports continues. Mill use in Pakistan is expected to rebound in 2014/15, rising about 3 percent (300,000 bales) to 11.0 million bales. Turkey’s cotton mill use is also projected to continue its rebound in 2014/15, rising for the third consecutive season to 6.4 million bales.

Cotton mill use for the five leading cotton-consuming countries is forecast to expand 4 percent in 2014/15 and account for about 74 percent of total cotton mill use, up slightly from 2013/14. For individual countries, the 2014/15 shares of consumption are expected to remain similar to the previous season (fig. 3). China’s share is forecast to rebound to 32.8 percent, up from a recent low of 32 percent last season. Shares for India, Pakistan, Turkey, and the United States are expected near year-ago levels.

World Cotton Trade Contracts in 2014/15

Global cotton trade is forecast at 35.6 million bales in 2014/15—12 percent below 2013/14 and the lowest since 2010/11—due mainly to reduced shipments to China, where imports are expected to decline by 5.5 million bales. Exports are forecast to decrease for most of the major countries; one exception is Brazil, where exports are rebounding after 2013/14’s relatively low level. In addition to the United States, cotton exports by India, Australia, and Uzbekistan are projected to contract in 2014/15 due to reduced global imports. India’s exports are forecast at 5.5 million bales, a 39-percent reduction from 2013/14’s 9.0 million bales and the lowest since 2010/11. Exports from Australia are projected at 3.3 million bales, 27 percent below 2013/14 and the lowest in 4 years. Uzbekistan’s exports are forecast to decline from 2.7 million bales in 2013/14 to about 2.5 million bales.

Global Stocks to Reach New Record

World ending stocks are forecast at a record 105.7 million bales by the end of 2014/15, 5 percent above 2013/14, as world cotton production exceeds consumption for the fifth consecutive season. As during the past several seasons, China will hold the bulk of these stocks. In July, stocks in China were increased 1.5 million bales due to reductions in mill use in both 2013/14 and 2014/15. China’s ending stocks are now projected at nearly 62.3 million bales, up 15.5 percent from a year ago and accounting for 59 percent of global ending stocks in 2014/15.

In addition to rising U.S. stocks, Brazil’s stocks in 2014/15 are forecast to expand 11 percent to nearly 8.3 million bales as a larger crop and reduced demand push stocks to a record. On the other hand, stocks in India and Australia are projected to decrease in 2014/15 as supplies are reduced due to lower production. India’s ending stocks are forecast at 10.3 million bales, 6 percent below 2013/14 and the lowest since 2009/10. Stocks in Australia are also expected to decline to the lowest in 5 seasons and are currently estimated at 1.7 million bales.

Published by USDA Economic Research Service

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