Cotton Outlook: World Consumption To Exceed Production in 2017/18

©Debra L Ferguson Stock Images

The initial U.S. Department of Agriculture cotton projections for 2017/18 indicate that world cotton consumption will rise slightly and exceed production for the third consecutive season. Global cotton mill use is projected to expand further in 2017/18 to nearly 115.8 million bales, the highest since 2009/10.

Moderate growth in global gross domestic production (GDP) in 2017 and 2018 is expected to support mill use in most countries. China, India, and Pakistan continue to lead world cotton mill use and are projected to account for a combined 62 percent of the total in 2017/18, similar to 2016/17.

Domestic Outlook

U.S. Cotton Production Projected To Increase in 2017 According to USDA’s initial projection for the 2017 crop, U.S. cotton production is forecast at 19.2 million bales, nearly 12 percent above the final 2016 estimate.

Based on the Prospective Plantings report, 2017 cotton area is estimated at 12.23 million acres, nearly 2.2 million acres above 2016. The increased planted acreage expectation is largely the result of higher relative prices that favor cotton over competing crops.

Area for both upland and extra-long staple (ELS) cotton is forecast to expand in 2017. For the upcoming season, upland acreage is projected higher in each of the Cotton Belt regions. Based on Prospective Plantings, the Southwest upland area is estimated at 7.4 million acres, above 2016’s 6.0 million acres and the second highest since the early 1980s.

The Southwest is forecast to account for 62 percent of the upland area in 2017, slightly above last season’s 61 percent. Cotton acreage in the Southeast is expected to approach 2.5 million acres in 2017, nearly 14 percent above last season but equal to the 5-year average.

However, the Southeast is forecast to account for only about 21 percent of the upland acreage in 2017, the smallest since a similar share occurred in 2008.

In the Delta, 2017 cotton area is forecast to increase for the second consecutive season to 1.8 million acres as acreage returns to near the 10-year average. The Delta is expected to account for 15 percent of the U.S. upland acreage in 2017, similar to the previous season.

In the West, improved irrigation supplies for the 2017 spring-planted crops–in addition to favorable prices–are expected to boost cotton area there. Upland cotton in the West, at 285,000 acres, would be the highest in four seasons and would have a 2.5-percent share–equal to the 5-year average–of the total U.S. acreage in 2017.

ELS cotton remains concentrated in the West, where over 90 percent of the 232,000-acre total is expected to be planted in 2017. California continues as the dominant ELS-producing State, contributing 190,000 acres of the total.

As of early May, moisture conditions across the Cotton Belt are more favorable this season, although parts of the Southeast have experienced some dry conditions. Weather conditions will continue to influence cotton plantings, crop progress, and production.

Cotton Commentary

As of May 7, 21 percent of the U.S. cotton area had been planted, which is below last year and the 2012-16 average of 25 percent. Several States have considerable variations from their 5-year averages, however.

While Arkansas, California, Tennessee, and Missouri have planted at a slower pace this season, the planting pace in Oklahoma and Louisiana is ahead of the 5-year average.

U.S. cotton harvested area for 2017 is projected at nearly 11.4 million acres, 20 percent above the 2016 estimate of 9.5 million acres.

The preliminary 2017 forecast is based on the 2007-16 crop average abandonment, weighted by region; however, due to the favorable moisture conditions in the Southwest this spring, the region’s abandonment is estimated well below average at 10 percent.

Overall, the U.S. abandonment rate is projected at 7 percent, compared with 2016’s rate of about 6 percent. The national yield is projected at 810 pounds per harvested acre and is based on the 2012-16 crop average yields, weighted by region.

The initial U.S. yield estimate is below last season’s final estimate due to the proportionally larger increase in lower-yielding Southwest acreage in 2017.

Cotton Demand To Decrease Slightly in 2017/18

U.S. cotton demand (mill use plus exports) in 2017/18 is forecast 2 percent lower at 17.4 million bales, as reduced exports account for the decline. In 2016/17, the largest U.S. cotton supply since 2010/11 and the high quality crop sought by foreign mills boosted demand for U.S. cotton to its highest level in 6 years.

For 2017/18, U.S. exports account for the majority of U.S. cotton demand–80 percent–but, at 14.0 million bales, U.S. exports are forecast 500,000 bales below the 2016/17 estimate. With increased competition and a global cotton trade projected to rise slightly in 2017/18, the U.S. share of world trade is expected to decline.

In 2017/18, the U.S. share of global trade is projected at 37 percent, down from 39 percent estimated for 2016/17, but still one of the highest since 2010/11. U.S. cotton mill use for 2017/18 is estimated above 2016/17 at 3.4 million bales, supported by demand for U.S. cotton textile product exports.

With U.S. cotton production expected to exceed demand in 2017/18, ending stocks are projected to increase from the current season. Cotton stocks are forecast at 5.0 million bales on July 31, 2018, the highest since 2008/09.

However, the 2017/18 stocks-to-use ratio (29 percent) is forecast between last season’s 18 percent and 2015/16’s 30 percent. Based on these initial supply and demand projections, the 2017/18 U.S. upland farm price is expected to range between 54 cents and 74 cents per pound.

At the midpoint of the range, the farm price would be 5 cents below the 2016/17 estimate of 69 cents per pound.

2016/17 Estimates Revised in May

U.S. cotton production for 2016/17 was revised in May as USDA, National Agricultural Statistics Service released its final cotton production estimates. Modest adjustments were made to area, yield, and production.

The U.S. cotton crop for 2016/17 was finalized at 17.17 million bales, with a national average yield of 867 pounds per harvested acre; both production and yield were at their highest levels since 2012/13.

On the demand side, U.S. exports were increased 500,000 bales in May to 14.5 million bales. Despite relatively high cotton prices, continued strong sales and shipments have boosted the U.S. export forecast considerably over the last several months.

At the end of April, U.S. cotton export commitments had reached 14.4 million bales, with shipments surpassing 10.5 million bales. Based on the latest estimates for 2016/17, U.S. ending stocks are forecast at 3.2 million bales, the lowest stocks and stocks-to-use ratio since 2013/14.

Full report.

The Latest