Cotton Outlook: Global Mill Use To Rise for 7th Consecutive Season

Photo: Nick McMichen

The initial U.S. Department of Agriculture (USDA) cotton projections for 2018/19 indicate that global cotton consumption will climb to a new record, continuing the recovery that began in 2012/13.

World cotton consumption in 2018/19 is expected to reach 125.4 million bales and exceed production for the third time in 4 years. Forecast growth in global gross domestic product (GDP) in 2018 and 2019 supports the increase in cotton consumption.

Together, China, India, and Pakistan—the leading spinners of raw cotton—are projected to account for 62 percent of the total, similar to 2017/18.

Domestic Outlook

U.S. Cotton Production Projected To Decline in 2018

According to USDA’s initial projection for the 2018 crop, U.S. cotton production is forecast at 19.5 million bales, nearly 7 percent below the final 2017 estimate. Based on the Prospective Plantings report, however, 2018 cotton area is estimated at 13.47 million acres, nearly 900,000 acres above 2017.

The larger 2018 planted acreage expectation is mainly due to relative prices that favor cotton and the successful yields experienced in 2017 that reached a national record.

Planted area for both upland and extra-long staple (ELS) cotton is expected to increase in 2018. For the upcoming season, upland acreage is projected higher in two of the Cotton Belt regions and nearly identical in the other two regions.

Based on Prospective Plantings, the Southwest upland area is estimated at 8.1 million acres, above 2017’s 7.6 million acres and the highest since an identical amount was planted in 1981. The Southwest is forecast to account for 61 percent of the total upland area in 2018, similar to last season.

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Cotton acreage in the Southeast is forecast at 2.8 million acres in 2018, nearly 13 percent above 2017 and the highest since 2011 when the region planted 3.4 million acres to cotton; however, the region is forecast to only account for about 22 percent of the upland area in 2018, below the 5-year average.

In the Delta, 2018 cotton acreage is forecast to remain near last season’s 1.9 million acres, compared with the 5-year average of 1.4 million acres. The Delta is projected to account for about 15 percent of the U.S. upland area in 2018, slightly below the previous two seasons.

Similarly, the West region’s upland cotton area is estimated at 317,000 acres, nearly identical to area in 2017 and the largest in 6 years. The West’s 2.4-percent share of upland plantings in 2018 is equal to the 5-year average.

Meanwhile, ELS cotton remains concentrated in the West, where 95 percent of the 262,000-acre total is forecast to be planted in 2018. California is the major ELS-producing State, accounting for 230,000 acres of the total.

As of early May, drought conditions—particularly in the Southwest region—have dominated the early-season outlook for cotton plantings. On the High Plains of Texas, where over 60 percent of the State’s cotton is planted, accumulated precipitation from November 2017–April 2018 was 70 percent below normal.

Weather conditions will continue to influence cotton plantings, crop progress, and yield. As of May 6, 20 percent of the U.S. cotton area had been planted, equal to 2017 and the 2013–17 average. Several States have considerable variations from their 5-year averages, however.

While California and Virginia have planted at a faster pace this season, the planting pace in Louisiana, Arkansas, and South Carolina is behind the 5-year average.

U.S. cotton harvested area for 2018 is projected at 11.1 million acres, similar to the 2017 estimate. The preliminary 2018 forecast is based on the 2008–17 crop average abandonment, weighted by region. As a result, the U.S. abandonment rate is projected at 17 percent, compared with 2017’s rate of 12 percent.

The national yield is projected at 841 pounds per harvested acre and is based on the 2013–17 crop average yields, weighted by region. The initial U.S. yield estimate is 7 percent below 2017’s record of 905 pounds per harvested acre but near the 5-year average.

U.S. Cotton Demand Forecast Similar in 2018/19

U.S. cotton demand (mill use plus exports) in 2018/19 is projected to remain near 18.9 million bales, as mill use and exports are each forecast to reach a similar level to that during the previous year. In 2017/18, the largest U.S. cotton supply in a decade—which consisted of a wide range of qualities—boosted export demand for U.S. cotton to its second highest on record.

Furthermore, this demand is expected to continue into 2018/19 as global cotton mill use is forecast to reach a record; exports account for over 80 percent of U.S. cotton demand. With world trade projected to rise further in 2018/19 and export competition from Brazil and Australia increasing, the U.S. share of global trade is expected to decrease.

In 2018/19, the U.S. share of world trade is forecast at 38 percent, down slightly from nearly 39.5 percent in 2017/18. U.S. cotton mill use for 2018/19 is estimated near 2017/18 at 3.4 million bales, supported by export demand for U.S. cotton textile products.

With U.S. cotton production projected to exceed demand in 2018/19, ending stocks are expected to increase nearly 11 percent from the current season. Cotton stocks are forecast at 5.2 million bales on July 31, 2019, the highest in 10 years, while the stocks-to-use ratio of 27.5 percent is the highest in 3 years.

Based on these initial projections, the 2018/19 U.S. upland farm price is expected to range between 55 cents and 75 cents per pound. At the midpoint of the range, the farm price would be 3 cents below the 2017/18 estimate of 68 cents per pound.

2017/18 Estimates Revised in May

U.S. cotton production for 2017/18 was adjusted downward in May as USDA released its final cotton production estimates (table 10). Modest revisions were made to area, yield, and production.

The U.S. cotton crop for 2017/18 was finalized at 20.92 million bales, with a national yield of 905 pounds per harvested acre; production was the highest since 2006/07 while the yield set a new record.

On the demand side, U.S. exports were increased 500,000 bales in May to 15.5 million bales. Continued strong sales and shipments have boosted the export expectations considerably. Based on the latest estimates for 2017/18, U.S. ending stocks are forecast at 4.7 million bales, the highest stocks since 2008/09 but a stocks-to-use ratio (25 percent) that is between last season’s 15 percent and 2015/16’s 30 percent.

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