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USDA Cotton & Wool Outlook


15 October 2014

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


USDA Cotton & Wool Outlook

Global Cotton Stock Growth to Slow in 2014/15

The latest U.S. Department of Agriculture (USDA) cotton projections for 2014/15 indicate that world ending stocks are expected to rise for the fifth consecutive season to just over 107 million bales. However, while stocks are projected at a record, the 2014/15 growth rate is forecast to slow significantly due to a continued rebound in demand.

While global stocks are forecast to increase in 2014/15, stocks in China are projected to decrease for the first time since 2010/11; at that time, the Government of China began its support of domestic cotton prices above world prices, which led to the dramatic stock increase seen in recent years 1). In 2010/11, China’s stocks were at a 15-year low of 10.6 million bales; by the end of 2013/14, their stocks had increased to more than 60 million bales and accounted for over 60 percent of global stocks. In 2014/15, China’s cotton stocks are forecast near the year-ago level, while stocks accumulate in countries outside of China. U.S. stocks are expected to double in 2014/15, with stocks in the rest of the world rising 11 percent.

2014 U.S. Cotton Crop Slightly Lower in October

According to USDA’s October Crop Production report, the 2014 U.S. cotton crop is estimated at nearly 16.3 million bales, down slightly from last month’s forecast but 3.3 million bales (26 percent) above the 2013 production. With harvested area unchanged in October and the national average yield lower, the U.S. production estimate decreased 283,000 bales this month.

The U.S. upland cotton crop is estimated at 15.7 million bales, above both last season and the 5-year average. During the previous 20 years, the October forecast has been below final cotton production 11 times and above it 8 times; the October forecast equaled final production in one year. Past differences between the October forecast and the final production estimate indicate that chances are two out of three that the 2014 U.S. upland crop will range between 14.9 and 16.5 million bales.

Upland production is forecast to rise for three of the Cotton Belt regions this season. In the Southwest, the 2014 upland crop is estimated at 6.6 million bales, well above last season’s drought-reduced crop and the highest since 2010. Planted area abandoned is projected at 17 percent this season, 20 percentage points below the 5-year average. The Southwest yield is forecast at only 589 pounds per harvested acre, similar to the 2011 season. In the Southeast, the 2014 cotton crop is estimated at 5.1 million bales, as the regional yield of 917 pounds per harvested acre climbs to the second highest on record behind 2012’s 1,033 pounds per harvested acre.

The Southeast is expected to produce over 5 million bales for the third time in four seasons. In the Delta, the cotton crop is projected at 3.25 million bales in 2014, above a year ago but below the 5-year average. However, the average yield is forecast to reach a record for the third consecutive season at 1,099 pounds per harvested acre.

In the West, the upland cotton crop is forecast at 752,000 bales, down from last season and similar to the crop produced in 2009. Similar to the Delta, the West’s average yield is projected at a record 1,549 pounds per harvested acre in 2014. Meanwhile, California continues to account for most of the extra-long staple (ELS) crop, producing nearly 90 percent of the 2014 crop. ELS production is forecast at 578,000 bales, 9 percent below 2013 and the lowest in 4 years, as area declined to its lowest since 2009.

Total 2014 U.S. cotton harvested area is estimated at approximately 9.9 million acres, 31 percent above last season, which suffered drought conditions. The national yield is forecast at 790 pounds per harvested acre, 31 pounds below the previous two seasons but equal to the 2011 yield.

2014/15 Demand Estimates Unchanged in October

The U.S. cotton demand estimate for 2014/15 remains unchanged this month despite reduced foreign import expectations, particularly by China. Demand for U.S. cotton is currently forecast at 13.8 million bales this season, with U.S. exports accounting for 10 million bales (over 70 percent) of the total and mill use contributing the remainder. Despite the lowest U.S. export estimate since 2000/01, the U.S. share of global trade is forecast to increase in 2014/15 to 29 percent, the highest in four seasons.

As a result of the reduced production estimate and the unchanged demand projection, U.S. ending stocks were revised lower in October to 4.9 million bales, double the beginning stock estimate. The stocks-to-use ratio is forecast at 35.5 percent in 2014/15, compared with last season’s 17 percent. Both the stock level and the ratio are at their highest since 2008/09.

2014/15 Farm Price Forecast Reduced; 2013/14 Price Finalized

Based on the most recent prices and the latest supply and demand estimates, the average upland cotton farm price in now projected to range between 55 cents and 65 cents per pound in 2014/15. The midpoint of 60 cents would represent a significant decline from last season’s final estimate of 77.9 cents per pound (released by USDA in October) and the 2012/13 price of 72.5 cents per pound. The lower price expectation will likely play a key role in acreage decisions for 2015.

International Outlook 

Global Cotton Crop Similar to 2013/14

World cotton production in 2014/15 is forecast at 119.4 million bales, similar to a year ago as higher area is offset by a lower global yield. Although slightly below 2013/14, the October production estimate represents an upward revision from the previous month’s forecast, mainly reflecting increases for India, China, and Pakistan. Global cotton harvested area is forecast at nearly 34.3 million hectares (84.6 million acres) in 2014/15, similar to 2012/13. World 2014/15 yield is projected at 759 kilograms per hectare (677 pounds per harvested acre), the lowest in five seasons. Production in India and China were raised 1 million bales each this month to 31 million and 30.5 million bales, respectively, as area and yield were projected higher. For India, 2014/15 production is expected to equal the previous year as record harvested area is moderated by a reduction in yield. India’s area is forecast at 12.75 million hectares (31.5 million acres), 9 percent above 2013/14, while the yield is reduced 8 percent from last season’s record to 529 kilograms per hectare (472 pounds per acre).

Production in China is forecast 7 percent below 2013/14 as lower area more than offsets a record national yield. China’s harvested area of 4.4 million hectares (10.9 million acres) is the country’s smallest since 2000/01. However, with a larger share of the crop grown in the Xinjiang region—where provincial yields surpass those of the eastern provinces—the country’s yield is projected at a record 1,509 kilograms per hectare (1,346 pounds per acre). Increases in China’s 2013/14 and 2014/15 production relative to last month mainly reflect revised reports of 2013-crop cotton which entered the national reserve, indicating that production was higher than previously estimated.

For Pakistan, 2014/15 production is currently forecast at 9.8 million bales, up 300,000 bales from last month’s forecast and the 2013/14 estimate. Pakistan’s crop is expected to be the highest since 2011/12 and the third highest on record as a modest increase in both area and yield is forecast.

World Mill Use to Rise in 2014/15; Trade to Decrease

World cotton mill use is forecast to expand nearly 5 percent in 2014/15 to 113.7 million bales as lower fiber prices help push consumption to its highest since 2010/11. China—the world’s largest mill user—is projected to account for twothirds of the increase in 2014/15 as policy changes there are expected to make cotton yarn imports less attractive than spinning domestically-produced cotton. China’s cotton mill use is expected to grow 10 percent in 2014/15 to 38 million bales; while above the last two seasons, China’s cotton consumption remains well below the levels achieved in the mid- to late-2000s.

Most of the other major foreign spinners are also projected to have higher cotton consumption in 2014/15 versus 2013/14. India’s cotton mill use is expected to expand 4 percent (1 million bales) in 2014/15 to 24.5 million bales, a record. In addition, a number of countries are forecast to achieve 200,000-bale gains in mill use in 2014/15 including Pakistan (up 2 percent), Turkey (up 3 percent), Bangladesh (up 5 percent), and Vietnam (up 6 percent).

While consumption improves in 2014/15, cotton trade is forecast to decrease considerably, due in large part to China’s anticipated reduction in raw cotton imports. Global cotton imports are projected at 34.4 million bales for 2014/15, compared with 40.7 million bales in 2013/14 and a record 46.2 million bales in 2012/13. China’s aforementioned policies are expected to reduce their raw cotton imports to 7 million bales in 2014/15, half the level of the previous season and less than 30 percent of their peak imports of 2011/12. In addition, Turkey is forecast to import less in 2014/15 as a result of a larger crop. Moderating the global import decline to some extent are increases for Bangladesh, Vietnam, and Indonesia.

Meanwhile, exports are seen lower for the major shippers with the exception of Brazil, where shipments are expected to rise as a result of the larger crop harvested in late 2013/14. India’s exports (5 million bales) are forecast to decline nearly 50 percent as a result of China’s reduced import demand. In addition, Australia’s exports are projected to decrease by one-third as lower production there reduces exportable supplies.

Global Ending Stocks Remain at Record Level in 2014/15

Based on the latest cotton supply and demand projections, world ending stocks are forecast at a record 107.1 million bales in 2014/15, 5.8 million bales (nearly 6 percent) above the previous year. The stocks-to-use ratio is forecast to reach 94 percent this season, up slightly from last season and well above the 40-percent ratio seen in 2009/10. In 2014/15, China is expected to account for 58 percent of global cotton stocks, a slight decrease from the previous season. With world stocks at a record and the anticipation of China’s policy effects, cotton prices are forecast to decline. In 2014/15, the Cotlook A-Index is projected to average approximately 70 cents per pound, compared with 2013/14’s 91 cents per pound.

 

Published by USDA Economic Research Service

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