Cotton Outlook: Global Growth of Mill Use Varies by Country

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The latest U.S. Department of Agriculture cotton projections for 2017/18 (August-July) indicate that global cotton mill use is forecast to rise for the second consecutive season. World cotton consumption is projected at 117.0 million bales in 2017/18, 3 percent higher than 2016/17 and the highest mill use since 2009/10 when consumption reached 119.5 million bales.

Domestic Outlook

U.S. 2017 Cotton Crop Projection Reduced in July

The 2017 U.S. cotton crop is projected at 19.0 million bales, 1 percent (200,000 bales) below the June projection but nearly 11 percent above the 2016 crop. The July production decrease was largely attributable to the lower planted area reported in USDA’s Acreage report released June 30. Based on the Acreage report, U.S. producers had planted or intended to plant nearly 12.1 million acres to cotton in 2017, slightly below the March indications but 20 percent above 2016.

Upland cotton area projections in 2017 increased for each of the Cotton Belt regions relative to 2016, as higher expected returns for cotton—compared with those for alternatives—supported expanded plantings this spring. Area in the Southwest is reported at 7.1 million acres, 19 percent higher than in 2016 and the second highest since 1981. In 2017, the Southwest upland acreage is expected to account for over 60 percent of the total U.S. area, similar to a year earlier.

In the Southeast, 2017 cotton acreage is estimated at nearly 2.6 million acres, about 400,000 acres above each of the previous two seasons. The Southeast is expected to account for 22 percent of the U.S. area in 2017. For the Delta, 2017 cotton area is estimated at 1.8 million acres, the highest in 5 years but equal to the 10-year average.

For the second consecutive season, the Delta is forecast to account for 15 percent of the U.S. upland cotton area. Similarly, upland cotton area in the West is expanding for the second year in a row.

Read this week’s in-the-field AgFax reports:  AgFax Southwest Cotton | AgFax Southeast Cotton | AgFax Midsouth Cotton

In 2017, upland acreage is estimated at 302,000 acres, or 2.6 percent of the U.S. total. In addition, extra-long staple (ELS) cotton acreage for 2017 is projected at 252,000 acres, 30 percent (57,000 acres) more than 2016 and the highest since 2011.

Total cotton harvested acreage is estimated at nearly 11.2 million acres in July. U.S. abandonment—forecast at 7 percent—is based on the 10-year average abandonment by region, with the Southwest estimated at 10 percent to reflect favorable moisture conditions.

The U.S. yield—projected at 816 pounds per harvested acre—is based on 5-year average yields by region; the U.S. yield reached 867 pounds per harvested acre in 2016 and 766 pounds in 2015. In August, USDA’s National Agricultural Statistics Service (NASS) will publish its first survey-based results for 2017 cotton production.

U.S. cotton crop development as of July 9 indicated that 61 percent of the 2017 cotton crop was squaring, above last season and the 2012-16 average. In addition, area setting bolls had reached 19 percent, also slightly above a year ago and the 5-year average.

Cotton Commentary

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Favorable spring moisture benefitted the cotton crop early this season and current U.S. crop conditions were similar to the previous 2 seasons. As of July 9, 61 percent of the U.S. cotton area was rated “good” or “excellent,” compared with 54 percent a year earlier, while 12 percent was rated “poor” or “very poor,” compared with 11 percent in 2016.

U.S. Cotton Demand Unchanged; Stocks Revised for 2017/18

U.S. cotton demand projections for 2017/18 were unchanged in July. U.S. exports—forecast at 13.5 million bales—are 1 million bales below the 2016/17 estimate; increased export competition is expected in 2017/18 as larger foreign production is projected.

With world trade slightly higher in 2017/18, the U.S. share of global trade is expected to decrease from 40 percent in 2016/17 to about 37 percent, still one of the highest over the last 5 years. U.S. cotton mill use accounts for an additional 3.4 million bales of demand, bringing total demand to 16.9 million bales and the second highest since 2010/11.

Based on the latest supply and demand estimates, 2017/18 ending stocks are forecast at 5.3 million bales, up from 2016/17’s 3.2 million bales and the highest since 2008/09, when stocks were 6.3 million bales. In addition, the 2017/18 stocks-to-use ratio (31.4 percent) is also expected to reach its highest in 9 years.

As a result, the 2017/18 upland cotton farm price is likely to decline from 2016/17; the farm price is forecast to range between 54 and 68 cents per pound in 2017/18, with the 61-cent midpoint 7 cents below the 2016/17 estimate.

Full report.

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