USDA Cotton & Wool Outlook
13 July 2012
USDA Cotton & Wool Outlook - July 2012
World Cotton Production Remains Concentrated Among Five Countries
The latest U.S. Department of Agriculture (USDA) projections for 2012 indicate that
global cotton production is forecast at 113.8 million bales, 7 percent below the 2011
record estimate of 122.7 million bales. Despite a 1.5-million-bale reduction from last
month—due mainly to decreases in India and Pakistan—the global production forecast
remains above projected consumption for 2012/13, resulting in rising world stocks for
the third consecutive season.
The top five cotton-producing countries continue to account for approximately 80
percent of total world production, with 2012 projected at 78 percent. Figure 1 illustrates
the production shares for each of the major producers. For 2012, the projected shares for
China and India account for a combined 48 percent, down from recent years. Lower
cotton prices resulting from rising stocks reduced 2012 area and production prospects for
many producers. Although 2012 U.S. plantings are lower, harvested area and production
are expected to rise from 2011’s drought-related losses.

Domestic
U.S. Cotton Crop Projection Unchanged Despite Lower 2012 Area
The U.S. cotton production forecast for 2012 remains at 17.0 million bales this
month and is projected 1.4 million bales above the 2011 crop. Despite a reduction
in planted area based on the June Acreage report (see table 10), the crop was left
unchanged as abandonment and yield were adjusted based on current conditions.
While drought conditions are still prevalent across parts of the Cotton Belt this year,
they are much improved from those in 2011. Abandonment and yield projections
are based on 2009-11 averages, weighted by region; however, harvested area is
further adjusted to include estimated abandonment of 30 percent in the Southwest.
Based on the June Acreage report, U.S. producers indicated that they had planted or
intended to plant more than 12.6 million acres to cotton in 2012, 4 percent below
the March Prospective Plantings report and 14 percent below 2011. Although
planted area is below last season, harvested area is projected 10 percent higher at
10.4 million acres. Improved moisture and crop conditions in the Southwest—
compared with last season—are expected to reduce abandonment dramatically from
2011 when the region lost over 60 percent of the intended area. Nationally, U.S.
abandonment for 2012 is projected at 18 percent (2.2 million acres), above the longterm average of 13 percent. The projected 2012 abandonment compares with a
record of 36 percent (5.3 million acres) set last season (fig. 2); the previous
abandonment record of 27 percent occurred in 1933.
Upland cotton area projections are lower for each region of the Cotton Belt for
2012, ranging from 11 percent to 22 percent lower, as higher alternative crop prices
provided the incentive to reduce cotton area. Area in the Southwest was reported at
about 7.2 million acres (11 percent lower); this region is expected to have an above
average abandonment once again in 2012. In the Southeast and Delta regions, area is estimated at about 2.7 million acres (22 percent lower) and 2.1 million acres (13
percent lower), respectively. Upland area in the West is estimated to decline 20
percent from 2011 to 400,000 acres. In addition, extra-long staple area—most of
which is in the West—is expected to reach 235,000 acres, 23 percent below 2011.
U.S. cotton crop development in 2012 continues ahead of both last season and the
5-year average. As of July 8th, 70 percent of the crop was squaring, compared with
56 percent a year earlier and the 5-year average of 64 percent. Likewise, area
setting bolls had reached 23 percent as of early July, compared with 18 percent in
2011 and the 2007-11 average of 19 percent. Meanwhile, early season U.S. cotton
crop conditions are above the corresponding period from last year and similar to the
5-year average (fig. 3). As of July 8th, 44 percent of the U.S. area was rated “good”
or “excellent,” compared with 28 percent last season, while only 18 percent was
rated “poor” or “very poor,” compared with 42 percent in 2011.
The U.S. yield is currently projected at 785 pounds per harvested acre, slightly
below last season’s final estimate. In August, USDA’s National Agricultural
Statistics Service will publish its first survey-based results for 2012
cotton production.

Cotton Demand and Stocks Revised
As the start of the 2012/13 season approaches, demand projections for the
upcoming season were revised slightly this month; 2012/13 total U.S. cotton
demand is forecast at 15.5 million bales, 600,000 bales above the latest 2011/12
estimate. U.S. exports for 2012/13 were increased 300,000 bales this month as
higher projected foreign import demand is expected to support exports of 12.1
million bales. U.S. mill demand for 2012/13 was reduced slightly to 3.4 million
bales, reflecting recently reported mill activity that reduced the 2011/12 estimate
this month.
Despite global cotton trade being projected smaller in 2012/13, the U.S. share of
world trade is forecast to rebound from 2011/12. Larger U.S. exportable supplies
are expected in 2012/13 as is less competition from some of the major cotton
producers that reduced area. Based on the current projections, the U.S. share of
world trade is forecast at 32 percent, between last season’s 27 percent and
2010/11’s 39 percent.
Based on the latest supply and demand estimates, 2012/13 stocks are forecast to rise
for the second consecutive season from 3.3 million bales when the season begins on
August 1st, to 4.8 million bales at season’s end. Just as actual stocks are likely to
increase in 2012/13, the stocks-to-use ratio is also expected to rise from 22 percent
in 2011/12 to 31 percent in 2012/13, the highest in four seasons. The 2012/13
upland farm price is expected to range between 60 and 80 cents per pound,
compared with the 2011/12 estimate of 91 cents and 2010/11’s 81.5 cents.

International Outlook
Global Cotton Production To Decline in 2012/13
World 2012/13 cotton production is forecast at 113.8 million bales, a 7-percent
decline from the previous year. The expected output decline is driven mainly by a
combination of relatively weak global cotton prices and rising production costs,
encouraging major growers to shift area to more profitable alternatives.
China and India are forecast to produce 30.5 million bales and 24.0 million bales,
respectively, each a 9-percent decline from a year earlier. China’s harvested area is
also expected to decline 9 percent from the previous year to 5.0 million hectares in
2012/13. India’s harvested area is forecast at 10.8 million hectares in 2012/13,
down 11.5 percent from a year earlier. India’s production is revised down 4 percent
from last month to 24.0 million bales, as low prices and a delay in the monsoon
season have shaved production prospects. Australia and Brazil are forecast to
produce nearly 4.3 million bales and 7.0 million bales in 2012/13, a decline of 13
percent and 20 percent, respectively, from the previous year. Australia’s harvested
area is expected to decline 18 percent to 475,000 hectares, while Brazil’s area is
forecast to contract 23 percent from a year earlier to nearly 1.1 million hectares.
Pakistan and Uzbekistan are expected to produce 9.7 million bales and 4.1 million
bales in 2012/13, down 9 percent and 2 percent, respectively, from the preceding
year. Area harvested in Pakistan and Uzbekistan is forecast to decline 3 percent
from a year earlier to 3.1 million hectares and 1.3 million hectares, respectively.
The United States and the African Franc Zone (AFZ) are forecast to produce 17.0
million bales and 3.1 million bales in 2012/13, up 9 percent and 2 percent,
respectively, from the previous year.
Globally, 2012/13 harvested area is forecast at 33.3 million hectares, down 7
percent from a year earlier, and yield is projected at 745 kg/ha, similar to 2011/12.
World Cotton Consumption To Rebound, Stocks at Record in 2012/13
Global 2012/13 cotton mill use is forecast to increase 2 percent from a year earlier
to 109.0 million bales. China is expected to consume 39.5 million bales in 2012/13,
down 1.5 bales (-3.7 percent) from the preceding year. If realized, the projected
mill use will reduce China’s global share of cotton consumption to 36 percent, the
lowest in 8 years. The projected decline in China’s cotton mill use is expected to be
more than offset by increases in other countries such as India, Pakistan,
and Vietnam.
India and Pakistan are forecast to consume 21.5 million bales and nearly 11.3
million bales, 5-percent and 10-percent increases, respectively. Vietnam’s 2012/13
cotton consumption is expected to rise 9 percent from the previous year to nearly
1.8 million bales. Brazil and Turkey are forecast to consume nearly 4.3 million
bales and 5.6 million bales in 2012/13, an increase of 6 percent and 7 percent,
respectively, from the previous year. The United States is forecast to consume 3.4
million bales in 2012/13, a 3-percent increase from a year earlier.
Global cotton 2012/13 ending stocks are projected at a record 72.4 million bales, up
9 percent from the preceding year, as global production outpaces consumption.
World stocks are forecast at their highest level relative to cotton consumption since
at least 1960. World stocks are forecast at 66 percent of annual consumption in
2012/13, compared with only 40 percent in 2009/10 and a 10-year average of
51 percent.
China’s policy of continued accumulation of cotton in the national reserve accounts
for most of the projected increase in world stocks and would raise China’s share of
total world stocks to 44 percent. At the same time, the divergence between China’s
domestic price support level and world prices is constraining China’s consumption,
such that stocks there could reach 80 percent of total offtake. USDA continues to
assume that China will release a portion of the cotton acquired by the national
reserve during 2012/13, thereby partially offsetting China’s need for imports. If the
Government of China does not release reserves, then China’s stocks are likely to
rise even higher than the current projection.
With China absorbing most of the world’s cotton surplus, stocks in other countries
mostly show balanced supply and use. Stocks in the United States are forecast at
4.8 million bales, a 45-percent increase from the previous year, but the forecast
stocks-to-use ratio of 31 percent is only marginally above the 10-year average.
Stocks in foreign countries outside of China would account for about 39 percent of
their use, in line with the previous two seasons. Southern Hemisphere stocks are
anticipated to fall about 1.2 million bales, mainly reflecting lower expected
production in Brazil and Australia. Projected stocks in India and Pakistan, at 30
percent and 28 percent of total use, respectively, are adequate but not excessive to
support projected offtake.
Global Cotton Trade Forecast To Decline in 2012/13
World 2012/13 cotton imports are projected to decline 14 percent from the previous
year to 37.4 million bales. Several countries are expected to increase imports in
2012/13 but not cumulatively enough to offset a major import contraction by China.
Bangladesh and Indonesia are forecast to import 3.6 million bales and 2.1 million
bales, up 14 percent and 6 percent, respectively, from a year earlier. Pakistan and
Turkey are forecast to import 2.2 million bales and 3.0 million bales, an increase of
83 percent and 30 percent, respectively, from the preceding year.
On the export side, increases in several cotton exporting countries are expected to
be more than offset by export declines in Brazil and India (fig. 4). Brazil’s 2012/13
cotton exports are forecast at 4.0 million bales, down 17 percent from the preceding
year’s record. India is expected to export 3.7 million bales in 2012/13, down 63
percent from the previous year, due to lower supplies and higher domestic
consumption. Australia and the AFZ are forecast to export 4.5 million bales and 2.8
million bales, an increase of 7 percent and 24 percent, respectively, from a year
earlier. If realized, Australia’s share of world trade will rise to 12 percent, while
AFZ’s share will be 7.4 percent. Uzbekistan and the United States are expected to
export 2.8 million bales and 12.1 million bales in 2012/13, up 10 percent and 4
percent, respectively, from the preceding year.

Published by USDA Economic Research Service
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