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USDA Cotton & Wool Outlook


15 December 2014

USDA Cotton & Wool Outlook December 2014USDA Cotton & Wool Outlook December 2014


USDA Cotton & Wool Outlook

Global Cotton Trade To Decline in 2014/15

The latest U.S. Department of Agriculture (USDA) projections for 2014/15 indicate that global cotton trade is forecast to decrease for the second consecutive season. World trade is projected at 34.3 million bales in 2014/15, 16 percent (or nearly 6.5 million bales) below 2013/14 and 27 percent below 2012/13’s record of 46.7 million bales. Raw cotton import demand by China is a key component of global cotton exports. Exporting countries are finding few opportunities to offset the sharp decrease in demand by China this season. As a result, global cotton shipment expectations for most major exporters have declined (fig. 1). While total cotton exports by the United States, Uzbekistan, and the rest of the world category are forecast to decline slightly in 2014/15, India’s shipments are expected to decrease considerably as it met a significant portion of China’s import demand last season. Australia’s exportable supply is significantly below last season, but Brazil’s is higher, due to relatively large beginning stocks.

Domestic

U.S. Cotton Crop Reduced in December

The USDA December forecast of the 2014 U.S. cotton crop was reduced 3 percent this month to 15.9 million bales; however, the estimate remains 3 million bales above the 2013 crop. While planted area rose 600,000 acres to 11 million acres this season, harvested area increased 2.3 million acres as the drought eased in the Southwest region this summer. U.S. harvested area is estimated at nearly 9.9 million acres, the highest in 4 years. The 2014 national yield is projected at 773 pounds per harvested acre, below both last season and the record of 892 pounds per acre achieved in 2012. Upland cotton production is estimated at 15.3 million bales, compared with the 12.3 million bales produced in 2013. The extra-long staple (ELS) crop is forecast at 578,000 bales, the lowest in 4 years. For current production estimates by State and region, see table 10. Upland cotton production is forecast to increase in three of the four Cotton Belt regions this season as a result of higher area (fig. 2).

The Southwest will regain its position as the leading producing region for the 2014 season. The upland crop in the Southwest is forecast at 6.2 million bales, 43 percent above 2013’s 4.4 million bales; the increase is due largely to a low abandonment rate of about 17 percent, compared with the previous 3-year average of 50 percent. As of December, the Southwest upland yield is estimated at 556 pounds per harvested acre, the lowest in over a decade. For the Southeast, cotton production in 2014 is estimated at 5.1 million bales, 17 percent above last season.

The larger crop results from the second-highest yield on record—927 pounds per harvested acre; the record of 1,033 pounds was set in 2012. In the Delta, production is expected to approach 3.3 million bales this season as both area and yield are above a year ago. Although area of 1.4 million acres is below the 5-year average, the Delta yield is forecast at a record 1,104 pounds per harvested acre. In the West, upland production is expected to reach only 723,000 bales, the lowest on record for the region. Area shifted out of upland cotton for the third consecutive season as water limitations—mainly in California—pushed acreage to a low of 241,000 acres.

U.S. Demand Forecast Unchanged; Stocks and Prices Revised

U.S. cotton demand for the 2014/15 season is forecast at 13.8 million bales, unchanged from last month but 2 percent below 2013/14. U.S. cotton mill use— based on data from the Farm Service Agency—remains projected at 3.8 million bales, up from last season’s 3.55-million-bale estimate. U.S. exports, on the other hand, are forecast at 10 million bales in 2014/15, 500,000 bales below 2013/14. Reduced foreign import demand, mainly by China, is expected to lower world trade and keep U.S. exports at their lowest since 2000/01. Despite a lower volume of shipments by the United States in 2014/15, the U.S. share of global trade is projected to rise from 26 percent to 29 percent. Due to the production change this month, U.S. ending stocks are now forecast at 4.6 million bales, more than 2 million bales above the beginning level. Both the stocks and the stocks-to-use ratio—estimated at 33 percent—would be the highest since 2008/09. Based on the latest supply and demand outlook for 2014/15, the average upland cotton farm price is now forecast to range between 59 and 64 cents per pound, compared with the final 2013/14 price of 77.9 cents per pound.

International Outlook

Global Cotton Production To Decline in 2014/15

World cotton production in 2014/15 is forecast at 119 million bales, slightly below the previous season as a yield reduction more than offsets increased area (fig. 3). Considerable production declines in 2014/15 for China and Brazil counterbalanced the increase for the United States. Global cotton area harvested in 2014/15 is forecast at 34.3 million hectares, up from last season but similar to 2012/13. The world cotton yield is forecast at 755 kg/hectare, the lowest since 2009/10. Production for the top two producers—India and China—is projected to account for a combined 51 percent of the world total, with forecasts of 31 and 30 million bales, respectively. For India, the production forecast matches the 2013/14 record and includes an all-time high area of 12.75 million hectares. In contrast, production in China is forecast to decline from nearly 32.8 million bales in 2013/14, as area is reduced to 4.4 million hectares, the lowest since 2000/01. Pakistan’s crop is forecast at 9.8 million bales in 2014/15, 3 percent above last season and largely attributable to rising yields. On the other hand, the cotton crop in Brazil that is planted in December and January is forecast to decrease about 13 percent to 7 million bales as the decline in world prices reduces area expectations.

World Mill Use Continues Rebound

Global cotton mill use in 2014/15 is forecast at 112.6 million bales, 3 percent above the previous season (fig. 3). Among the major cotton mill users, all countries— except Brazil—are projected to expand between 1 percent and 7 percent in 2014/15. Cotton mill use in China, estimated at 37 million bales in 2014/15, is projected to grow 7 percent after several seasons of decline; mill use reached a record 51 million bales in 2007/08. Recent policy announcements will support cotton consumption by bringing domestic prices in line with world prices; in particular, lower prices will raise the incentive to spin cotton within China rather than import cotton yarn as in recent years.

In 2013/14, China imported an estimated 8.6 million (raw-cotton equivalent) bales in the form of yarn; in 2014/15, the yarn imports may decline approximately 15 percent. Cotton mill consumption in India and Pakistan—both benefactors of China’s recent growth in yarn imports—is only expected to grow slightly in 2014/15 as a result of China’s rebound. India’s mill use is forecast at 24 million bales (about 3 percent higher) while Pakistan’s use is estimated at 10.5 million bales (1 percent higher). In addition to China and the United States, cotton mill use in Vietnam is forecast to expand more than 6 percent, reaching a record 3.4 million bales in 2014/15. Mill use in Bangladesh and Brazil are forecast to change about 5 percent in 2014/15, offsetting one another.

Global Cotton Stocks To Reach New Record

World cotton stocks have risen significantly in recent years as production exceeded consumption. Rising global stocks have been largely attributable to China, where policies supported prices and took a large supply of cotton out of the marketplace with China’s reserve purchases. For 2014/15, policies in China have changed, and ending stocks there are forecast to remain near the 2013/14 level. Global cotton stocks are expected to rise 6 percent in 2014/15 to 108.1 million bales, a record. China’s stocks are forecast at 62.7 million bales or 58 percent of total world stocks. India is the second-largest stockholder and is expected to hold 14.6 million bales at the end of 2014/15, or nearly 14 percent of the total. With world cotton prices declining this season, production and consumption are projected to be at their closest balance since 2010/11. The Cotlook A-index is expected to fall significantly from the 2013/14 average of 91 cents per pound.

Published by USDA Economic Research Service

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