Cotton Outlook: World Stocks To Rise Slightly in 2017/18

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The latest U.S. Department of Agriculture (USDA) cotton projections for 2017/18 indicate that global ending stocks are forecast at 88.3 million bales, about 2 percent (1.5 million bales) above the previous season but the second lowest since 2011/12. World cotton stocks are projected to rise in 2017/18 after back-to-back decreases from 2014/15’s recent high of 110.8 million bales.

China accounted for the bulk of global stocks in 2014/15—nearly 67 million bales of the total—following a policy-driven buildup that began a few years earlier. Since 2014/15, China’s stocks have declined as policies to reduce the excess cotton supplies also discouraged production and limited imports.

In 2017/18, China’s cotton stocks are forecast at 41.0 million bales, 15 percent below last season and the lowest in 6 years; if realized, China’s ending stocks would be nearly 26 million bales below the record set in 2014/15. Meanwhile, stocks in the United States and for the rest of the world are projected to increase in 2017/18, largely due to increased production.

As a result, China’s share of global cotton supplies are projected to decline for a second consecutive year from 61 percent in 2015/16 to 46 percent at the end of 2017/18.

Domestic Outlook

U.S. Cotton Acreage To Expand in 2018

U.S. cotton area is projected to increase for the third consecutive season in 2018. Based on the National Agricultural Statistics Service’s (NASS) Prospective Plantings report that surveyed farmers in early March, producers intended to plant nearly 13.5 million acres to cotton in 2018.

The initial projection is 7 percent (857,000 acres) above 2017’s plantings and the highest since 2011’s 14.7 million acres. Upland acreage is forecast at 13.2 million acres in 2018, while extra-long staple (ELS) area is estimated at 262,000 acres; for area projections by State and region, see table 10. These estimates will be updated at the end of June in NASS’s Acreage report.

Cotton planting is underway in two States, according to the NASS Crop Progress report; as of April 9, 7 percent of the expected U.S. acreage had been planted, which was slightly above last year and the 2013–17 average.

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U.S. cotton area is expected to rise this spring as a result of relative prices that favor cotton over competing crops. High yields recorded in 2017, the growth in global cotton demand, and dry conditions in the Southwest also likely played a role in the higher 2018 acreage indications. Two of the four Cotton Belt regions are forecast to plant notably more cotton in 2018, while two are forecast to plant a similar amount as the year before.

The Southwest is expected to plant 8.1 million acres to upland cotton in 2018, more than 500,000 acres (7 percent) above 2017. Reduced corn, soybean, and peanut area is projected to boost upland cotton in the region to its highest since 1980, when nearly 8.6 million acres were planted. The Southwest is forecast to account for 61 percent of total U.S. upland cotton acreage in 2018, similar to the previous two seasons. As a result, production prospects in the region will continue to play a key role in the 2018 U.S. cotton crop.

In the Southeast, 2018 cotton plantings are projected to rise more than 300,000 acres (13 percent) from a year ago to 2.8 million acres; lower peanut area and the smallest soybean area for the region in 5 years are expected to push cotton acreage there to its highest since 2011. Cotton area in the Southeast is forecast to account for about 22 percent of the U.S. upland total.

In contrast, the Delta cotton acreage for 2018 is projected very similar to that of 2017, at 1.9 million acres; in fact, indications are for corn and soybean acreages for the region to be similar to 2017 as well. The Delta is expected to account for 15 percent of the total cotton area in 2018, slightly below the year before.

Likewise, the West is expected to plant area to upland cotton and corn in 2018 that is similar to 2017. In 2018, upland cotton acreage is estimated at 317,000 acres, or 2 percent of the U.S. upland cotton total.

Meanwhile, ELS area in the West is forecast to reach 250,000 acres, 5 percent above 2017; the region will account for 95 percent of total ELS cotton area in 2018.

U.S. 2017/18 Cotton Supply Unchanged; Exports Increased

The 2017/18 U.S. cotton supply remains estimated at 23.8 million bales, 2.8 million bales above the previous season and the largest since 2007/08. Beginning stocks are estimated at nearly 2.8 million bales while U.S. production is estimated at 21.0 million bales. USDA will release updated 2017/18 production estimates on May 10.

While the supply forecast remained steady, the U.S. cotton export estimate was raised slightly in April based on the continued strength of sales and shipments. U.S. cotton exports are forecast at 15.0 million in 2017/18, marginally above last season’s shipments and the second highest on record, behind only the 17.7 million bales exported by the United States in 2005/06.

Based on USDA’s U.S. Export Sales data, U.S. cotton shipments had reached 8.6 million bales at the end of March, or 58 percent of the latest projection; last season, exports had reached 9.0 million bales, or 60 percent of final exports. Although export commitments (shipments plus outstanding sales) at the end of March had surpassed this season’s projection, a portion of annual sales are traditionally rolled into the next season, and the cancellation of some sales also remains a possibility.

Nevertheless, shipments will need to remain strong through the end of the marketing year; based on the current estimate, the 2017/18 U.S. share of global trade is expected to reach 38 percent, compared with 40 percent in 2016/17.

U.S. Ending Stocks and Farm Price Revised Slightly

With the increase in U.S. exports, 2017/18 U.S. ending stocks are forecast lower this month at 5.3 million bales, although they remain more than 2.5 million bales above a year earlier. The current stocks-to-use ratio is estimated at a modest 29 percent, albeit nearly double last season’s ratio. Despite a higher stocks-to-use ratio in 2017/18, the U.S. farm price is expected to remain relatively high based on the strength of global cotton demand.

The average price received by upland cotton producers for 2017/18 is projected to range between 67 and 69 cents per pound, with the midpoint of 68 cents equal to the average received in 2016/17.

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