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USDA Cotton & Wool Outlook


13 March 2012

USDA Cotton & Wool Outlook - March 2012USDA Cotton & Wool Outlook - March 2012

US net textile and apparel fiber imports decreased in calendar year 2011 as a result of the sluggish US economy.
USDA Cotton & Wool Outlook

US Net Textile and Apparel Imports Decline in 2011

Total fiber product imports reached 17.2 billion raw-fiberequivalent pounds in 2011, 7 percent below 2010 and the second lowest since 2004. Meanwhile, fiber product exports rose for the second consecutive year to 3.7 billion pounds after a recent low of 3.1 billion in 2009. As a result, 2011 net fiber product imports only reached 13.5 billion pounds, 9 percent below 2010 and one of the lowest since the mid-2000s (fig. 1).

Figure 1: US net imports of textile and apparel fiber products

Cotton products continue to account for the largest share of net textile trade, although the 2011 gap shrank as substitution from cotton to manmade fibers occurred. In 2011, cotton products contributed 50 percent of the total—compared with 54 percent in 2010— while manmade fiber products accounted for 44 percent (40 percent in 2010). In 2011, net cotton imports reached only 6.7 billion pounds, the lowest since 2003.

Domestic

US Cotton Supply and Demand Revised Slightly in March

The US cotton crop for 2011/12 remains estimated at 15.7 million bales (upland at 14.8 million bales and extra-long staple (ELS) at 650,000 bales), compared with last season’s 18.1-million-bale crop. USDA will release final US production estimates for the 2011 season on May 10th. Based on the current production estimate and beginning stocks of 2.6 million bales, this season’s total cotton supply reached 18.3 million bales, 13 percent below last season.

Total US cotton demand was reduced slightly in March to an estimated 14.4 million bales, 21 percent below 2010/11 and, if realized, the lowest since 1988/89. The estimate for US cotton mill use during 2011/12 was reduced to 3.4 million bales, 500,000 below a last season. Exports remain projected at 11 million bales, nearly 3.4 million below 2010/11.

Through the first half of the marketing year, US textile mills only consumed 1.6 million bales of cotton, compared with about 2 million a year earlier. The macroeconomic uncertainties and the recent high cotton prices led to this season’s expected reduction in cotton mill use. US cotton mill use is projected to improve slightly in the second half of 2011/12 as the US economy continues to improve and cotton prices are more competitive with polyester fibers.

US cotton exports are forecast to decrease about 25 percent this season. The drought-reduced US crop lowered exportable supplies and competition from more abundant foreign supplies is expected to reduce shipments to their lowest level in a decade (fig. 2). As a result, the share of global trade is projected to fall to 28.4 percent in 2011/12, 9 percentage points below the 5-year average and the lowest share since 2000/01. US cotton exports through the first 7 months of the season have reached 5.7 million bales, compared with 8.0 million a year earlier. In addition, there were 5.7 million bales of cotton that had been sold but not yet shipped as of March 1st. Consequently, total commitments for 2011/12 now stand at approximately 11.4 million bales, compared with 15.6 million during the corresponding period in 2010/11.

Figure 2: US cotton exports and share of global trade

Stocks Rise; Season-Average Price Range Narrowed

With 2011/12 US cotton production exceeding demand, ending stocks are projected to increase for the first time since 2007/08. For 2011/12, US stocks are currently forecast at 3.9 million bales, 50 percent above last season’s near-record low and the highest in 3 seasons. With ending stocks rising and demand declining this season, the 2011/12 stocks-to-use ratio is also projected to climb higher; the current stocks-to-use ratio equals 27 percent, above the last 2 seasons but well below the previous three seasons.

Despite higher stocks, the 2011/12 average price received by US upland producers is expected to rise from last season’s record level of 81.5 cents per pound. While lower world prices have prevailed this season, US producers benefited from contracting early at high prices in the spring and summer of 2011. As a result, the upland price projection for 2011/12 ranges between 88 and 93 cents per pound.

US Retail Cotton Consumption Falls in 2011

US calendar year 2011 domestic cotton consumption (mill use plus net textile imports) decreased after last year’s gain, reaching 8.4 billion (raw-fiber-equivalent) pounds (fig. 3). The 2011 level represented a 15-percent reduction from 2010, which had risen 11 percent. The 2011 decline was largely the result of lower cotton product imports, although mill use and product exports also contributed to the decline. US cotton product imports approached 8.6 billion pounds in 2011, the smallest in 9 years; cotton product exports rose slightly surpassing 1.8 billion pounds in 2011. As a result, the per capita estimate of retail consumption declined 5 pounds from 2010 to a 20-year low of 27 pounds per person in 2011.

Figure 3: US domestic consumption of cotton

International Outlook

Global 2011/12 Crop To Reach a Record High

Global 2011/12 cotton production is estimated to rise 6 percent from a year ago, to a record 123.6 million bales, as major producers, especially in the Southern Hemisphere, prepare for a bumper crops. This expected rebound in production is attributed mainly to relatively higher cotton prices at the time of planting, and relatively favorable weather conditions during the crop season.

China, the world’s largest cotton producer, is estimated to produce 33.5 million bales in 2011/12, up 10 percent from the previous year when output plunged to a 5- year low. If realized, the 2011/12 crop will raise China’s share of global production to 27 percent, slightly higher than the previous year’s. China’s 2011/12 area harvested is estimated at 5.5 million hectares, a 7-percent increase from a year ago.

Australia and Brazil are estimated to produce 4.8 million bales and 9.3 million bales in 2011/12, an increase of 14 percent and 3 percent, respectively, from a year earlier; both countries will produce record crops. The Southern Hemisphere countries are well positioned to respond to market intelligence about Northern Hemisphere supplies due to an almost 6-month differential in the cultivation and trading calendar between hemispheres. Australia’s 2011/12 area is estimated at 580,000 hectares, down 2 percent from the previous year, but yields are estimated sharply higher due to improved irrigation. Brazil’s estimated 2011/12 harvested area stands at 1.4 million hectares, unchanged from a year earlier.

India and Pakistan are expected to grow 27 million bales and 10.6 million bales in 2011/12, up 2 percent and 21 percent, respectively, from the previous year. For India, this will be an all-time high as producers expand area by 10 percent. Pakistan’s area harvested is estimated to rise 14 percent from flood-reduced levels from a year ago to 3.2 million hectares. The United States and Uzbekistan are estimated to produce 15.7 million bales and 4.2 million bales in 2011/12, a 13-percent decrease for the United States and a 2- percent increase for Uzbekistan.

Global 2011/12 harvested cotton area is estimated at 35.7 million hectares, up 7 percent from the preceding year, and yield is estimated at 754 kg/ha.

World Cotton Trade To Continue Rebound in 2011/12

World cotton exports are estimated at 38.8 million bales in 2011/12, an increase of 8 percent from a year ago, continuing a rebound which started 2 years ago. While shipments by some major exporters such as the United States and Uzbekistan are estimated to decline, increases from others are expected to result into a net increase in exports in 2011/12. Australia and Brazil are expected to export a record 4.0 million bales and 3.9 million bales in 2011/12, an increase of nearly 60 percent in Australia and nearly double in the previous year’s volume in Brazil. A bumper crop in Brazil and a strong demand from China has boosted exports from the leading exporter in South America. India, the world’s second-largest cotton exporter is expected to export 7.8 million bales in 2011/12, up 52 percent from a year ago. The United States, the world’s top exporter, is expected to export at 11.0 million bales in 2011/12, down 24 percent from the previous year, and the lowest in a decade. Uzbekistan’s 2011/12 exports are expected to decline 2 percent from a year earlier, to 2.6 million bales.

On March 5th the Government of India imposed a ban on further exports due to new information reflecting increased estimates of exports during October 2011 through February 2012. The status of the ban is currently uncertain. USDA estimates India’s 2011/12 exports at 7.8 million bales, a 52-percent increase from last season, based on an assumption that the ban will continue.

China is expected to import 18.5 million bales in 2011/12, up 54 percent from the previous year, as China’s mills intensify imports to replace domestic supplies which have been purchased by the national reserve. If realized, China imports alone will account for 48 percent of global cotton trade, more than offsetting declining imports by other major importers. Bangladesh and Indonesia are expected to import nearly 3.3 million bales and 2.0 million bales in 2011/12, down 12 percent and 7 percent, respectively, from the preceding year. While this will be Bangladesh’s lowest imports in 5 years, it will be Indonesia’s lowest import volume in 14 years. Pakistan and Turkey are expected to import 1.0 million bales and 2.5 million bales in 2011/12, down 32 percent and 25 percent, respectively, from the previous year. South Korea’s 2011/12 imports are estimated at nearly 1.2 million bales, an 11- percent increase from a year earlier.

Global 2011/12 Ending Stocks To Rise as Mill Use Dwindles

Global 2011/12 cotton mill use is estimated to decline 5 percent from a year ago to 108.7 million bales, as demand by several major users has weakened in response to the uncertain global economic outlook and cotton’s loss of fiber share to polyester. Brazil is expected to consume 4.0 million bales in 2011/12, down 5 percent from the previous year. China, the world’s leading spinner, is expected to consume 43.5 million bales, down 5 percent from the preceding year. If realized, this will be China’s lowest mill use in 7 years, leaving the Nation’s share of global cotton consumption at 40 percent, slightly higher than the previous year. India, the world’s second largest spinner is expected to consume 19.5 million bales, down 7 percent from the previous year’s record. Pakistan’s 2011/12 mill use is estimated at 10.3 million bales, a 3-percent rebound from the preceding year. Turkey and the United States are expected to use 5.3 million bales and 3.4 million bales in 2011/12, down 5 percent and 13 percent, respectively, from a year earlier.

World 2011/12 ending stocks are estimated at 62.3 million bales, up 32 percent from a year ago, due to a combination of rising global production and declining mill use (fig. 4). In 2011/12, global production will outpace mill use by 14.9 million bales, the highest on record, resulting in a rebound in world stocks. Stock-toconsumption is estimated at 57 percent, up 16 percentage points from the previous year. As a result, global cotton prices have been weakening, as indicated by Cotlook’s A-index average to date of about of $1.06 in 2011/12, compared with $1.65 in the previous year.

Figure 4: Gap between 2011/12 cotton production and mill use widens


March 2012

Published by USDA Economic Research Service

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