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USDA Cotton & Wool Outlook

15 September 2014

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

USDA Cotton & Wool Outlook

India Projected To Be Leading Cotton Producer in 2014/15

The latest U.S. Department of Agriculture (USDA) estimates for 2014/15 project world cotton production at 118 million bales—slightly below last year and the lowest in four seasons. The three largest cotton-producing countries continue to include China, India, and the United States; in 2014/15, these countries will account for approximately 65 percent of global production, similar to last season. One significant difference, however, is the latest projection that India could surpass China as the top producing country this season (fig. 1).

In 2014/15, India is forecast to produce 30 million bales (25 percent of the global crop), slightly higher than the 29.5-million-bale estimate for China. Yields in India have risen to a new plateau with the adoption of Bt cotton over a decade ago; however, the record harvested area projected in 2014 is a key factor for India’s production to surpass China, where area has declined due to shifts out of cotton in eastern provinces. In 2013/14, India produced a record crop of 31 million bales, an increase of about 40 percent (8.5 million bales) since 2006/07—the year India surpassed the United States in cotton production.

Domestic Outlook 

2014 U.S. Cotton Crop Estimate Reduced in September

According to USDA’s September Crop Production report, the 2014 U.S. cotton crop is forecast at 16.5 million bales, 964,000 bales below last month’s forecast but 3.6 million bales above 2013 production. September’s projection indicated a 5.5- percent reduction in the cotton crop, resulting from a decline in both area and yield.

U.S. upland production is forecast at approximately 16 million bales, 30 percent above the 2013 crop but below the 10-year average of 17 million bales. During the previous 20 years, the September upland cotton forecast was below the final estimate 12 times and above it 8 times. Past differences between the September forecast and the final upland estimate indicate that chances are two out of three that 2014 production will range between 15.4 and 17.6 million bales.

Compared with last season, 2014 upland cotton production is higher in each region of the Cotton Belt—except for the West (fig. 2). Based on the September forecast, the upland crop in the Southwest is projected to rebound dramatically from last season. At 7 million bales, the Southwest crop is 60 percent above 2013 and the largest production there since 2010; higher planted area and lower abandonment in the region this season more than offsets a lower yield. Southwest abandonment is forecast at 17 percent—well below the previous three seasons—while the yield is projected at 621 pounds per harvested acre, which is near the 3-year average.

In the Southeast, cotton production is estimated at 5 million bales in 2014, 600,000 bales above last season. While 2014 area is slightly above last season, the region’s yield is forecast 14 percent higher at 911 pounds per harvested acre—the second highest on record. In the Delta, the 2014 cotton crop is expected to reach 3.2 million bales as area rises from last season’s low. In addition, the Delta yield is forecast at 1,082 pounds per harvested acre—a third consecutive record, if realized.

In the West, the upland crop is forecast at 762,000 bales, a 13-percent decrease as lower area more than offsets a record yield projection of 1,570 pounds per harvested acre. Meanwhile, the extra-long staple (ELS) crop remains concentrated in the West, where over 95 percent of the ELS production is grown. Lower area and yield this season are forecast to result in an ELS crop of 578,000 bales, 56,000 bales below the 2013 crop.

Total 2014 U.S. cotton area was reduced 3 percent in September. Based on acreage reported to USDA’s Farm Service Agency (FSA), planted area was estimated at 11 million acres. Harvested area was forecast at nearly 9.9 million acres by USDA’s National Agricultural Statistics Service. As a result, abandonment is projected at 10 percent, compared with nearly 28 percent in 2013. The national yield is projected at 803 pounds per harvested acre, 18 pounds below 2013 and the lowest in three seasons. For current production estimates by State, see table 10.

U.S. cotton crop development continues ahead of last season and the 5-year average. As of September 7th, 39 percent of the area had bolls opening, compared with 23 percent in 2013 and the 2009-13 average of 37 percent. In addition, U.S. cotton crop conditions remain above the last several seasons (fig. 3). As of September 7th, 49 percent of the 2014 crop area was rated “good” or “excellent,” compared with 45 percent last year, while 17 percent was rated “poor” or “very poor,” compared with 21 percent a year ago.

Demand and Stock Estimates Revised

For 2014/15, the U.S. cotton export forecast was lowered this month due to reduced foreign import demand and a smaller U.S. crop. U.S. cotton exports are now projected at 10 million bales, 700,000 bales below the August forecast and the lowest export estimate since 2000/01. As a share of global cotton trade, U.S. cotton
exports are expected to account for 28 percent of world trade, above the last three seasons. U.S. mill use is estimated at 3.8 million bales, unchanged from last month but 7 percent above the revised 2013/14 estimate.

With September’s adjustments, the 2014/15 ending stock estimate is now forecast at 5.2 million bales, more than double last season’s revised 2.45 million bales. The stocks-to-use ratio is expected to reach 38 percent this season, the highest since 2008/09. Based on the current supply and demand estimates, the 2014/15 upland cotton farm price is forecast to range between 58 cents and 70 cents per pound. The midpoint of 64 cents per pound is considerably below last season’s estimate of 77.5 cents per pound. The final 2013/14 farm price will be released in October.

For 2013/14, lower ending stocks are reflected in the September balance sheet based on stocks data collected by the FSA. Even after adjustments were made to account for cotton in transit at the end of the marketing year, U.S. ending stocks appear lower than the estimated supply minus use would indicate. As a result, 2013/14 ending stocks were reduced to reflect this discrepancy, with further revisions possible in subsequent reports.The 2.45-million-bale estimate is the lowest since 1990/91, when ending stocks were 2.3 million bales.

International Outlook

Global Cotton Production Lowest in 4 Years

Global cotton production in 2014/15 is projected at 118.0 million bales, up slightly from last month’s projection; the 2014/15 estimate is also above last season’s crop which was increased similarly in September. World production is forecast to decline for the third consecutive season and is 8.6 million bales below 2011/12’s record.

Harvested area in 2014/15 is estimated 4 percent higher—at 34.1 million hectares (84.3 million acres)—largely attributable to the United States and India. For India, cotton area is expected to reach a record due to the late monsoon that limited alternative crops with an earlier planting window. Area is projected at 12.5 million hectares this season based on planting indications to date. Despite record area in 2014/15, a below-average yield—due to the delayed monsoon—is expected to reduce production to 30 million bales, 1 million bales below 2013/14’s  record.

In China, cotton production is projected at 29.5 million bales, down 8 percent from last season and the lowest since 2005/06 when only 28.4 million bales were produced. China’s cotton area has declined for the third consecutive season and is projected at 4.35 million hectares in 2014/15, the lowest since 2000/01.

For Pakistan, the cotton crop remains projected at 9.5 million bales—equal to 2013/14—with area and yield unchanged. In Brazil, the 2014/15 cotton crop is forecast to reach 7.3 million bales, 6 percent below last season based on reduced area expectations.

World Consumption to Rise for Third Consecutive Season

World cotton consumption in 2014/15 is forecast at 112.1 million bales this month, nearly 4 percent above last season’s 108 million bales. While rising over the past several seasons, the potential for global cotton mill use has been limited by the loss of fiber share in many apparel products; mill use reached a record 124 million bales
in 2006/07.

The top four cotton-spinning countries—China, India, Pakistan, and Turkey—are forecast to account for a combined 70 percent of the world’s cotton mill use in 2014/15, above last season but below the 2010-12 season average (fig. 4). For China, the global share is forecast to rebound in 2014/15 and account for nearly one-third of the total; however, the share remains below the 2010-12 average of 37 percent. India and Turkey have seen their respective shares expand in recent years. India is projected to account for 22 percent of global cotton mill use in 2014/15, while Turkey’s share remains near 6 percent; meanwhile, Pakistan’s share is forecast to decrease slightly in 2014/15 but remain near the 2010-12 average of approximately 9.5 percent.

Over the past several years in China, domestic prices have been above world prices for raw cotton and China supplanted some mill use with yarn imports. In 2013/14, China’s cotton yarn imports reached an equivalent of 8.6 million bales of raw cotton, 1 million bale-equivalents above 2012/13 and over 5 million bale equivalents above 2010/11 (fig. 5). Cotton mill use has grown rapidly in Pakistan, India, and Vietnam as a result; these three countries accounted for 79 percent of China’s yarn imports during the previous three seasons.

For 2014/15, however, China’s incentive to import yarn will likely be reduced in favor of spinning more domestic cotton fiber. China’s mill use is projected at 36.5 million bales in 2014/15, nearly 6 percent above last season. Despite lower expectations for yarn imports by China, overall growth in the global economy is projected to boost mill use in a number of countries. Cotton mill use in India is expected to reach a record of nearly 24.8 million bales in 2014/15—22 percent of global consumption. Mill use in Pakistan is forecast to rise slightly to 10.5 million bales, while mill use in Turkey is projected at 6.45 million bales, the highest in eight years. Cotton mill use in Vietnam is forecast at 3.25 million bales in 2014/15, double the level of just four years ago and a record.

Global Cotton Trade Reduced in 2014/15

World cotton trade is projected at 35.2 million bales in 2014/15, 14 percent below last season and 25 percent below the record of 46.7 million bales set in 2012/13. The smaller trade estimate is largely attributable to a projected 43-percent reduction in raw cotton imports by China this season as the Government is expected to limit imports in order to increase use of surplus domestic supplies. However, a number of other major importers are expected to purchase more cotton in 2014/15; these countries include Bangladesh, Vietnam, and Indonesia.

With reduced global import demand in 2014/15, competition among the major exporting countries will likely increase. All of the leading exporters—except for Brazil—are expected to have reduced shipments in 2014/15. In addition to a decline in the United States, lower shipments are also projected for India (with exports of 5.7 million bales), Australia (3.0 million bales), and Uzbekistan (2.3 million bales). In contrast, Brazil’s 2014/15 cotton exports are projected to rebound from last season’s relatively low shipments due to larger supplies carried forward from the 2013/14 crop harvest.

Record World Ending Stocks in 2014/15

Based on the latest cotton supply and demand projections, global ending stocks are forecast at a record 106.3 million bales in 2014/15, 6 million bales (6 percent) above the beginning level. The stocks-to-use ratio is expected to reach 95 percent this season, compared with just 40 percent five years ago, the result of China’s stock building. In 2014/15, China is forecast to account for a record 62.9 million bales of the total, or the equivalent of 56 percent of global cotton mill use. Based on these rising stocks and the anticipated effects of China’s policies, world cotton prices are forecast to decline considerably this season. In 2014/15, the Cotlook AIndex is likely to average around 75 cents per pound, compared with 91 cents per pound in 2013/14.

Published by USDA Economic Research Service

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