Global Markets: Cotton – Lower U.S. Exports Still Dependent on Strong Late-Season

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This month’s forecast for U.S. 2017/18 exports is lowered by 300,000 bales to 14.5 million 480-lb bales. To meet the revised forecast, however, exports will still have to average over 350,000 bales per week, a rate just over last year’s then-second-highest level on record.

Shipments have lagged during the first half of the marketing year. Accumulated exports as of the last week in January totaled 4.57 million running bales or just 32.5 percent of the new forecast. This is the second-lowest level in the last decade and well below the 38 percent decadal average.

The only lower year, 2014/15, saw Feb-July U.S. exports supported by two events: a very small crop in Australia due to drought, and large MSP operations in India reducing its exports. Both of these limited competition with—and helped accelerate—U.S. exports during Feb-July. No such favorable factors are evident so far this season to support second-half exports.

Additionally, several factors are likely to pressure U.S. exports in the coming months. In Australia, the cotton crop is expected to be the largest in 6 years, and harvest appears to have begun appreciably earlier than usual, which may enable early export shipments. As a result, U.S. exports may face fiercer competition from Australia than is typical for the early Northern Hemisphere spring months.

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A second negative sign can be seen in Mexico. In normal years, export shipments to Mexico have a fairly even pace over the course of the marketing year; however, the doubling of Mexican crop this year is expected to curtail imports in the second half of the season relative to the first half of the season. As such, shipments to that major market may slow noticeably.

Finally, since the beginning of CY 2018, implementation of new U.S. trucking regulations has reportedly caused delays in transporting cotton from U.S. warehouses, a situation which may not be entirely resolved and backlogs cleared before the end of the season.

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