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USDA Cotton & Wool Outlook


13 May 2014

USDA Cotton & Wool Outlook - 13 May 2014USDA Cotton & Wool Outlook - 13 May 2014


USDA Cotton & Wool Outlook

Global Cotton Production to Decrease in 2014/15 but Remain Above Consumption

The first U.S. Department of Agriculture (USDA) cotton forecast for 2014/15 projects that global cotton production will decline for the third consecutive season. Although projected at its lowest in 5 years, production remains above expectations for consumption (fig.1). World production is projected to decline slightly from 2013/14 (to 115.5 million bales) as area is expected to shift from China and Australia to lower-yielding countries. Based on USDA’s initial projections, China, India, the United States, and Pakistan will account for a combined 71 percent of world production in 2014/15, similar to 2013/14.

Global cotton consumption for 2014/15 is projected at 111.8 million bales, a 2-percent increase from the current season, as mill use continues to expand from 2011/12’s 8-year low. Modest growth in world gross domestic product (GDP) is expected to support the consumption growth in 2014/15. China, India, and Pakistan are expected to lead global cotton mill use and account for a combined 65 percent of world consumption in 2014/15, slightly above the current season’s estimate.

Domestic

U.S. Cotton Crop Projected to Rise in 2014

According to USDA’s first projection for the 2014 crop, U.S. cotton production is forecast at 14.5 million bales, 12 percent above the final 2013 crop estimate. Based on the Prospective Plantings report, 2014 cotton area is expected to reach 11.1 million acres, 7 percent above 2013. The higher planted acreage is largely due to relative crop prices favoring cotton over competing crops.

While drought conditions continue across much of the Southwest’s cotton-growing area, wet conditions across parts of the Delta and Southeast have led to planting delays this spring. As of May 4th, only 16 percent of the U.S. cotton area had been planted, compared with a 5-year average of 25 percent. Texas has planted 16 percent of its crop, compared with an average of 22 percent. For the Southeastern States, plantings have ranged from 0-23 percent complete, compared with the 5- year average of 18-27 percent; most States are also below last season’s progress. For the Delta States, plantings are above 2013 but remain below the 5-year average.

Weather conditions will continue to influence cotton plantings and, more importantly, production. The initial 2014 abandonment is based on the 2012-13 crop average abandonment, weighted by region; the Southwest abandonment is projected near 40 percent. Overall, the U.S. abandonment rate is projected at 24 percent, slightly below last season’s final estimate. Harvested area is projected at 8.45 million acres, 12 percent above 2013/14. The national yield projection of 824 pounds per harvested acre is based on the 2012-13 crop average yields, weighted by region. The initial estimate is near the final 2013 estimate of 821 pounds.

While area for upland cotton is forecast to rise in 2014, extra-long staple (ELS) acreage is expected to decline. For the upcoming season, upland cotton acreage is forecast to expand in the Southwest and Delta while decreasing slightly in the Southeast and West. Based on Prospective Plantings, the Southwest upland area is forecast at nearly 6.7 million acres, up from the previous season but below both 2011 and 2012 (fig. 2); the Southwest is forecast to account for nearly 61 percent of the upland area in 2014, the highest since at least 1920. Although the Delta is expected to plant 17 percent more in 2014, area (at 1.4 million acres) remains one of the lowest on record; the region is expected to account for 13 percent of the U.S. upland acreage in 2014. In contrast, area in the Southeast (at 2.6 million acres) is similar to 2013 and the previous 10-year average. The Southeast is forecast to contribute 24 percent of the upcoming season’s cotton area. In the West, where irrigation concerns have reduced upland area, only 245,000 acres are projected to be grown in 2014 (or 2 percent of the total). ELS cotton is largely grown in the West, where more than 90 percent of the 158,000-acre total is planted.

Total Cotton Disappearance to Decline in 2014/15

U.S. cotton disappearance (mill use plus exports) in 2014/15 is expected to decrease 4 percent to 13.4 million bales, compared with 14.0 million bales estimated for 2013/14. Reduced foreign import demand—particularly from China—is largely responsible and expected to keep U.S. cotton exports at its lowest since 2000/01 when shipments were only 6.7 million bales. 

Exports continue to account for the bulk of U.S. cotton disappearance and, at 9.7 million bales, 2014/15 exports are forecast to account for 72 percent of the total. With world cotton trade also expected to decline, the U.S. share of global trade is projected to rise slightly to 27 percent in 2014/15. U.S. cotton mill use for 2014/15 is projected to reach 3.7 million bales, nearly 3 percent above the latest 2013/14 estimate of 3.6 million bales. With modest growth projected in world mill use, demand for U.S. cotton textile products is also expected to improve in 2014/15, as consumer demand for cotton apparel moves with the global economy.

With U.S. cotton production projected to exceed demand in 2014/15, ending stocks are forecast to rise from 2013/14. Stocks are projected at 3.9 million bales on July 31, 2015—1.1 million bales above the latest estimate for 2013/14 but equal to the 2012/13 level. The stocks-to-use ratio is estimated at 29 percent in 2014/15, the highest since 38 percent was achieved in 2008/09. Based on these initial supply and demand projections, the 2014/15 U.S. upland farm price is expected to range between 63 and 83 cents per pound. At the midpoint of the range, the farm price would be 4.5 cents below the 2013/14 estimate but near the price recorded for the 2012/13 season.

2013/14 Supply and Demand Adjusted in May

U.S. cotton production for 2013/14 was revised up marginally this month as the National Agricultural Statistics Service released its final cotton production estimate of 12.9 million bales (see table 10 for final estimates). The U.S. cotton export estimate was also revised in May as the recent export sales pace suggests that exports may reach only 10.4 million bales. These supply and demand adjustments result in a higher ending stock estimate, now forecast at 2.8 million bales for 2013/14. The implied stocks-to-use ratio is 20 percent, the lowest in 3 seasons. 

International Outlook

 World Cotton Production to Decline in 2014/15

USDA’s initial projection for the 2014/15 global cotton crop is 115.5 million bales, 1.4 percent below the latest 2013/14 estimate, as offsetting changes are expected to limit the year-to-year reduction to about 1.7 million bales. Significant production changes are expected for a number of countries in 2014/15, as several factors— including China’s cotton policies, price expectations, and weather conditions— influence global area and production. World 2014/15 cotton area is forecast nearly unchanged at 32.9 million hectares, but below the 5-year average. The global yield in 2014/15 is forecast below the last several seasons at 764 kg/hectare.

The two largest producing countries—China and India—are expected to account for a combined 50 percent of the global crop in 2014/15; in 2013/14, these countries contributed about 53 percent of world cotton production. China is forecast to produce 29.5 million bales in 2014/15, nearly 8 percent (2.5 million bales) below the previous season and the smallest crop since 2005/06. Area is expected to decline 11 percent overall, and the concentration of cotton area in the northwest region of Xinjiang is expected to accelerate as the Government’s new income support program focuses mainly on Xinjiang cotton. The national yield is forecast at 1,477 kg/hectare, a record.

India’s 2014/15 cotton production is forecast at 28.5 million bales, a 3-percent (1- million-bale) decline from the preceding year despite slightly higher area. Last season, production benefited from above-average yields. Cotton production in India is heavily dependent on monsoon rainfall and concerns about the development of an El Niño that could limit rainfall may discourage further growth in planted area. India’s yield is projected at 526 kg/hectare, near the 3-year average.

Australia is also expected to reduce cotton production in 2014/15, as reservoir levels have decreased considerably from a year ago. Australia is projected to produce only 3.1 million bales in 2014/15, a 24-percent reduction. In contrast, Brazil’s crop is projected at 8.3 million bales, 800,000 bales above 2013/14 as increased cotton plantings are expected there. Pakistan and Uzbekistan are forecast to produce crops similar in size to the 2013/14 season. Pakistan’s production is expected at 9.5 million bales, while Uzbekistan’s crop is forecast at 4.2 million bales. Meanwhile, the largest increase is projected for the United States in 2014/15. The initial projection includes reduced prospects due to the Southwest region’s ongoing drought. U.S. production is placed at 14.5 million bales, 1.6 million bales above 2013/14.

Global Consumption to Rise in 2014/15

World 2014/15 cotton mill use is forecast at 111.8 million bales, up 2 percent from 2013/14, reflecting an expanding global economy. The two largest consuming countries are China and India, with a combined cotton mill use of over 60 million bales, or 54 percent of the world total. China is forecast to increase its consumption by 4 percent to 37 million bales in 2014/15, the highest in 3 years. China’s domestic cotton prices have been above world prices during the last several years, which dampened mill use and encouraged the substitution of yarn imports. However, recent policy announcements are likely to make cotton fiber more competitive within China and provide the incentive for increased cotton mill use.

India’s 2014/15 cotton consumption is projected at a record 23.5 million bales, 2 percent above a year earlier, representing 21 percent of global cotton consumption. India’s mill use rose 18 percent between 2011/12 and 2013/14, supported by yarn shipments to China. In 2014/15, however, reduced yarn shipments to China will likely limit India’s consumption growth to near the world average.

Cotton consumption in Pakistan has also grown steadily in recent years, benefitting from yarn exports to China. For 2014/15, cotton mill use is forecast to rise about 3 percent to 11.8 million bales, the highest since the mid-2000s, accounting for 11 percent of world cotton consumption. Growth is also expected in 2014/15 in a number of other Asian countries, including Bangladesh, Indonesia, and Thailand. In addition, cotton consumption in Turkey is forecast to rise nearly 2 percent (100,000 bales) to 6.4 million bales in 2014/15.

World Cotton Trade Forecast Lower in 2014/15; Stocks at Record

World cotton trade in 2014/15 is forecast to reach only 36.3 million bales, 10 percent below the previous season and the lowest since 2010/11. While imports by China have supported cotton trade over the last several seasons, expectations for lower China import demand are reducing trade in 2014/15. The initial forecast represents the second consecutive decrease in global trade as most major exporters anticipate reduced shipments in 2014/15 (fig. 3). Exports by the United States, the world’s leading exporter, are forecast to decline 7 percent to 9.7 million bales, the lowest since 2000/01. Exports from India and Australia are forecast to decline considerably from a year earlier as exportable supplies there appear limited. India is projected to export 5.7 million bales in 2014/15, down 35 percent from 2013/14. 

In Australia, exports are projected at 3.2 million bales, down 30 percent from a year earlier and the lowest since 2010/11. Brazil’s exports are forecast to rebound to 3.5 million bales with increased supplies. Uzbekistan’s exports are projected to remain flat in 2014/15 at 2.7 million bales.

Global imports in 2014/15 are driven once again by China, where cotton imports are forecast to fall by one-third to 8.5 million bales, as the Government is likely to restrict imports in favor of consumption of domestic cotton. Imports by China are expected to decline for the third consecutive season after reaching a record 24.5 million bales in 2011/12. Smaller import declines are also expected for Turkey, Vietnam, Malaysia, and others in 2014/15. Offsetting these declines, however, are increases in Pakistan, India, and Bangladesh.

With global cotton production forecast to exceed consumption for the fifth consecutive season in 2014/15, world ending stocks are estimated to rise to a new record, reaching 101.7 million bales by July 31, 2015 (fig. 4). China will continue to hold the bulk of these stocks, as ending stocks there are projected to reach 60.5 million bales by the end of 2014/15; however, China’s share of total world stocks is expected to decline slightly. World stocks outside of China are expected to rise by about 3 million bales. China would hold nearly 60 percent of global cotton stocks, slightly below the estimate for 2013/14. Stocks in India, the next largest stock holder, are also expected to rise to 10.7 million bales, or nearly 11 percent of the global total. The global stocks-to-use ratio is projected at 91 percent, up from 90 percent in 2013/14 and more than double the 2010/11 level.

Published by USDA Economic Research Service

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