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USDA Cotton & Wool Outlook


17 June 2013

USDA Cotton & Wool Outlook - June 2013USDA Cotton & Wool Outlook - June 2013


USDA Cotton & Wool Outlook

The latest U.S. Department of Agriculture (USDA) projections for 2013/14 indicate that global cotton stocks are forecast to rise for the fourth consecutive season, reaching an alltime high. World ending stocks are now projected at 92.5 million bales for 2013/14, 9 percent (or nearly 7.6 million bales) above 2012/13 (fig. 1).

Global cotton stocks have risen dramatically over the past several seasons as world production has outpaced consumption. Relatively high cotton prices in recent years encouraged production but discouraged cotton mill use at the same time. The growth in global stocks since 2011/12 has occurred mainly in China, where national reserve purchases have effectively taken a large supply of cotton out of the marketplace and supported prices. At the end of 2012/13, stocks in China are estimated at 50 million bales, or about 59 percent of global stocks. For 2013/14, the latest projection indicates that stocks in China will likely expand, rising to nearly 59 million bales by season’s end, or 64 percent of the total.

Figure 1
U.S. and World Cotton Ending Stocks

Source: USDA, World Agricultural Supply and Demand Estimates reports.

Domestic

U.S. 2013 Cotton Production Projection Lowered

USDA’s projection for the 2013 cotton crop was lowered to 13.5 million bales this month (from 14.0 million in May) as abandonment expectations were increased to reflect the continued drought in the Southwest. The latest crop projection is well below the 2012 crop of 17.3 million bales and would be the lowest in four seasons.

The planting estimate—currently at 10.0 million acres—will be updated in the Acreage report released by USDA on June 28th. This report will include actual plantings as of early June, as well as estimates for any remaining cotton to be planted. As of June 9th, 88 percent of the expected cotton area had been planted, below both last season (95 percent) and the 5-year average (92 percent). Similarly, crop development is also running behind, with 6 percent of the cotton area squaring, compared with 18 percent a year ago and a 5-year average of 11 percent.

Based on current projections, U.S. harvested area is forecast at 8.1 million acres, implying an abandonment rate of 19 percent. Last season’s final abandonment reached 24 percent. Historically, most of the U.S. cotton area abandonment occurs in the Southwest region (Texas, Oklahoma, and Kansas). With the Southwest drought spanning a third consecutive season, abandoned acres there are expected to once again account for the bulk of the total. Abandonment in the Southwest is currently forecast at 32 percent for 2013; while the latest forecast is above the 10- year average of 25 percent, it is about half the rate experienced in 2011 (fig. 2).

The U.S. cotton yield remains forecast at 800 pounds per harvested acre for 2013, compared with 887 pounds per harvested acre for 2012. USDA’s National Agricultural Statistics Service will begin “in field” production surveys in August.

Figure 2
Southwest Regional Upland Cotton Abandonment Rates

Source: USDA, Crop Production reports.

Demand Reduced Further in 2013/14; Stocks Lowered

U.S. cotton demand for 2013/14 is reduced 500,000 bales this month, a change that offsets the lower crop forecast. U.S. demand is projected at 14.5 million bales or 15 percent below the 2012/13 estimate. In addition to lower U.S. supplies in 2013/14, a lower world trade—particularly imports by China—is expected to contribute to the lower U.S. export forecast. In 2013/14, the U.S. share of world trade is projected at about 29 percent, similar to 2012/13. U.S. cotton exports are forecast at 11.0 million bales in 2013/14, contributing about 76 percent of total demand. Mill use accounts for the remaining 24 percent, or 3.5 million bales.

Based on these supply and demand estimates, U.S. ending stocks for 2013/14 are projected at a relatively low 2.6 million bales, 1.0 million bales below the beginning level and similar to 2010/11. The implied stocks-to-use ratio is estimated at 18 percent, the second lowest in a decade. The forecast for the 2013/14 U.S. average farm price is expected to range between 73 and 93 cents per pound, with the midpoint of this range 11 cents above the 2012/13 estimate of 72 cents per pound.

Cotton Estimate Revisions for 2012/13

U.S. cotton demand estimates were revised upward this month based on recent data. Mill use data from USDA’s Farm Service Agency indicate that U.S. mills have used about 2.9 million bales of cotton through May, resulting in the revised estimate of 3.45 million bales for the 2012/13 season.

Similarly, U.S. cotton export data over the past month from USDA’s Foreign Agricultural Service suggest higher seasonal shipments. In June, the export estimate was increased to 13.6 million bales. By the end of May, U.S. cotton export commitments (shipments plus outstanding sales) had reached 13.6 million bales, while exports had reached 11.5 million bales, or 85 percent of the estimate (fig. 3). As a result, shipments through the end of July will need to average only 233,000 bales per week, which is below the May average of 303,000 bales per week.

Figure 3
Cumulative U.S. cotton export commitments and shipments, 2012/13

Sources: USDA, World Agricultural Supply and Demand Estimates and Export Sales reports.

International Outlook

World Cotton Production To Decline in 2013/14

World 2013/14 cotton production is forecast to decline 3 percent from a year ago to 117.2 million bales, as relatively higher expected crops in several major cotton countries are more than offset by declines in China and the United States. Brazil and Australia are forecast to produce 4.5 million bales and 7.0 million bales, respectively, up 5 percent and 21 percent from the preceding year. India and Pakistan are forecast to produce 27.0 and 9.5 million bales, respectively, in 2013/14, an increase of 2 percent each from a year ago. China’s 2013/14 production is forecast to decline 3 percent from a year earlier to 34.0 million bales. The United States is expected to produce 13.5 million bales in 2013/14, down 22 percent from the previous year.

Global 2013/14 area harvested is forecast at 33.9 million hectares, down 1 percent from a year ago and the second consecutive annual decline in world harvested area. Weaker world market prices for the fiber since 2010 explain much of this decline. World cotton yield is forecast at 753 kg/hectare in 2013/14.

Global Cotton Consumption and Ending Stocks To Rise in 2013/14

World 2013/14 cotton mill use is forecast at 110.2 million bales, up 2 percent from a year earlier. India and Pakistan are forecast to consume 23.3 million bales and 12.0 million bales, respectively, in 2013/14, an increase of 2 percent and 4 percent from the previous year. Bangladesh and Vietnam are forecast to consume 3.8 million bales and 2.5 million bales, respectively, in 2013/14, an increase of 2 percent and 11 percent from the preceding year. Projected increases in South and Southeast Asia mill use will be supported by yarn demand from China, where price supports through an official reserve-building policy has constrained the profitability of domestic spinning.

Global ending stocks are forecast at a record 92.5 million bales in 2013/14, up 9 percent from a year earlier. The forecast surge in ending stocks comes as world production outpaces world consumption for the third consecutive year and as global cotton trade is forecast to decline in 2013/14. China is expected to account for 64 percent (58.9 million bales) of projected global stocks due to the ongoing policy of government cotton purchases for state reserves.

Australia’s 2013/14 ending stocks are forecast at 2.7 million bales, up 19 percent from the previous year and representing 3 percent of global ending stocks. Brazil’s 2013/14 ending stocks are forecast at 5.9 million bales, an 8-percent increase from the previous year. India’s and Uzbekistan’s 2013/14 ending stocks are forecast to decline 6 percent and 15 percent, respectively, from a year ago, to 7.2 million bales and 1.2 million bales. Ending stocks in the United States are forecast at 2.6 million bales in 2013/14, down 28 percent from a year ago and at one of the lowest levels in recent years.

World Cotton Trade To Decline in 2013/14

Global 2013/14 cotton imports are forecast at 38.4 million bales, down 18 percent from the previous year, as moderate import increases in Mexico, Pakistan, Turkey, and Vietnam are more than offset by a large decline in China (fig. 4). Mexico is forecast to import 1.2 million bales in 2013/14, up 20 percent from a year ago. Pakistan and Vietnam are forecast to import 3.0 million bales and 2.5 million bales, respectively, in 2013/14, an increase of 11 percent and 9 percent from the preceding year. Turkey’s 2013/14 imports are projected at 4.0 million bales, up 8 percent from a year ago. China—the world’s leading cotton importer—is forecast to import 11.0 million bales in 2013/14, down 45 percent (9.0 million bales) from the previous year; sharply lower imports by China are driven mainly by anticipated constraints on the world’s exportable supplies. The expected decline in China’s 2013/14 cotton imports will reduce its share of world imports to 29 percent, compared with a global share of 43 percent in the previous year.

Exports are projected to decline in 2013/14 across major exporting countries. Australia and Brazil are forecast to export 4.2 million bales and 2.6 million bales, respectively, in 2013/14, down 26 percent and 42 percent from the preceding year; these reductions are due mainly to expected lower stocks on hand at the beginning of the season. Greece and India are forecast to export 925,000 bales and 5.7 million bales, respectively, in 2013/14, down 25 percent and 21 percent from the previous year. The United States—the world’s top cotton exporter—is expected to export 11.0 million bales in 2013/14, down 19 percent from the previous year.

Figure 4
China and world cotton imports

Source: USDA, World Agricultural Supply and Demand Estimates reports.

June 2013

Published by USDA Economic Research Service

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