Cotton Outlook: Global Trade at 4-Year High

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The latest U.S. Department of Agriculture (USDA) projections for 2017/18 indicate that world cotton trade is forecast to expand 3 percent from last season and reach a 4-year high. Global trade is projected at 38.5 million bales in 2017/18, 1.2 million bales above last season. However, 2017/18 world cotton trade remains 17 percent below 2012/13’s record of 46.5 million bales.

The rising trade outlook is largely attributable to the above-average growth expected in world cotton mill use in 2017/18. Most of the world’s primary spinners of cotton rely on imports, and the leading importers this season are considered nonproducing countries. As a result, this import demand is satisfied by producing/exporting countries.

In 2017/18, export prospects for the United States are once again expected to remain strong, while those from Brazil and Australia are forecast to increase as they harvest larger high-quality crops; these three countries are projected to attain a combined 60 percent of global trade. In contrast, cotton exports from India and Uzbekistan are forecast to decline again in 2017/18.

Domestic Outlook

U.S. Cotton Crop Nearly Unchanged in December

The USDA December forecast of 2017 U.S. cotton production remains at 21.4 million bales, nearly 4.3 million bales (25 percent) above the 2016 crop, and the largest U.S. production since 2006, when 21.6 million bales were produced.

Planted and harvested area this season are estimated at 12.6 million and 11.4 million acres, respectively, resulting in an abandonment rate of 10 percent. The 2017 national yield is forecast at a record 902 pounds per harvested acre, 4 percent (35 pounds) above last season. Improved conditions in the Southwest helped push the national yield higher in 2017.

Upland cotton production is estimated at 20.7 million bales, the largest crop since 2006 and the fourth highest on record. The extra-long staple (ELS) crop is forecast at a relatively high level at 727,000 bales this season, compared with 569,000 bales in 2016. For current production estimates by State and region, see table 10.

Upland cotton production is estimated to increase for each of the Cotton Belt regions this season. The Southwest upland crop is forecast to approach 10.8 million bales in 2017, a record for the region. The largest harvested area in over 35 years in the Southwest, coupled with the second highest yield on record, pushed the region’s crop 23 percent above 2016.

In the Southeast, 2017 cotton production is projected at 4.7 million bales, 900,000 bales above last season. Area and yield at the 5-year average are expected to produce a regional crop that is at a 3-year high; Southeast area is estimated at 2.5 million acres, while the yield is forecast at 899 pounds per harvested acre.

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In the Delta, cotton production is forecast at 4.3 million bales, 1 million above 2016 and the largest in 6 years. Area reached 1.9 million acres for the first time in 5 years and the region’s yield is estimated at 1,089 pounds per harvested acre, the third highest on record.

In the West, upland production is forecast at 905,000 bales in 2017, compared with 708,000 bales last season and a 5-year average of 809,000 bales. Higher area this season more than offset a below-average yield expectation.

U.S. Cotton Export Estimate Revised; Ending Stocks Lower

Projected demand for U.S. cotton was increased in December with the export forecast rising to 14.8 million bales, 300,000 bales above the previous month and close to last season’s exports of 14.9 million bales. Reduced production estimates for a number of countries, along with strong U.S. export commitments to date, pushed the forecast higher.

Based on the current global trade estimate, the 2017/18 U.S. share of world cotton trade is forecast to reach 38.5 percent, a relatively strong share but below last season’s 40 percent. U.S. cotton mill use remains projected at 3.35 million bales, 100,000 bales above 2016/17, as competition with synthetics has improved for cotton relative to last season.

With supplies similar to those projected in November, the export increase this month reduced the U.S. ending stock estimate by a similar amount. For 2017/18, ending stocks are currently projected at 5.8 million bales, 300,000 bales below last month’s forecast but still over twice the beginning level. Both the stocks and the stocks-to-use ratio—estimated at 32 percent—would be the highest since 2008/09.

Based on the latest global supply and demand outlook for 2017/18, the U.S. upland cotton farm price is projected to range between 63 and 69 cents per pound, with the midpoint of 66 cents per pound 2 cents below the final 2016/17 estimate.

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