Cotton Outlook: World Ending Stocks Projected at 7 Year Low

Photo by Larry Stalcup

The latest U.S. Department of Agriculture (USDA) cotton projections for 2018/19 indicate that global cotton stocks are forecast to decrease following last season’s relatively small increase. World ending stocks are projected at 83.0 million bales for 2018/19, nearly 6 percent (5.2 million bales) below 2017/18 and the lowest since 2011/12.

Domestic Outlook

U.S. Cotton Production Forecast Unchanged in June

USDA’s 2018 U.S. cotton crop projection remains at 19.5 million bales this month, 7 percent below the final 2017 crop. Planting conditions have been less than favorable this spring, ranging from drought conditions in the Southwest to excessive rainfall in the Southeast. However, the effect on area and yield remains uncertain as planting is still in progress.

The planting estimate of nearly 13.5 million acres will be updated in USDA’s Acreage report released on June 29. The report will include actual plantings as of early June, as well as estimates of any remaining cotton to be planted. As of June 10, 90 percent of the expected acreage had been planted, equal to last season but slightly above the 2013-17 average of 88 percent.

In addition, 15 percent of the cotton area was squaring by June 10, compared with 14 percent last year and 10 percent for the 5-year average. Reporting of U.S. cotton crop conditions have also begun, with early indications substantiating the less than favorable start to the 2018 crop. As of early June, cotton crop conditions are below the last two seasons and the 5-year average.

Based on current projections, U.S. cotton harvested area is forecast at 11.1 million acres in 2018, reflecting a 10-year weighted-average abandonment by region; U.S. abandonment is projected at 17 percent and is above the previous four seasons. The 2018 U.S. cotton yield (841 pounds per harvested acre) is based on a 5-year weighted-average by region. USDA’s National Agricultural Statistics Service will begin “in field” production surveys in August.

Demand Prospects for 2018/19 Unchanged; 2017/18 Revised

U.S. cotton demand for 2018/19 is projected at 18.9 million bales, unchanged from the May forecast, compared with the upwardly revised 2017/18 estimate of nearly 19.4 million bales. U.S. exports—which contribute over 80 percent of total demand—account for the year-to-year decline in 2018/19, with the United States likely facing additional competition from Brazil and Australia.

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For 2018/19, U.S. cotton exports are forecast at 15.5 million bales, 500,000 bales below the latest 2017/18 estimate, which was increased in June as a result of continued strong seasonal shipments. Nevertheless, U.S. cotton exports in 2018/19 are expected to remain at one of the highest levels on record as global mill demand prospects are forecast to improve further.

Based on these export projections, the U.S. share of global trade is expected to remain robust. After reaching 40 percent in 2016/17 and 2017/18, the U.S. share in 2018/19 is forecast to decrease slightly to 38 percent. Meanwhile, U.S. cotton mill use remains estimated near 3.4 million bales for both 2017/18 and 2018/19.

Cotton Ending Stocks Adjusted in June

Based on USDA’s supply and demand estimates, U.S. cotton ending stocks for 2018/19 are projected at 4.7 million bales, 500,000 bales below last month but still 500,000 bales above 2017/18. If realized, U.S. stocks in 2018/19 would be the highest in a decade; however, with demand for U.S. cotton strong, the stocks-to-use ratio—which has ranged between 14 percent and 38 percent over the past decade—is only slightly higher in 2018/19 at 25 percent.

Meanwhile, the forecast for the 2018/19 U.S. average farm price is projected to range between 60 cents and 80 cents per pound, with the midpoint of this range slightly above the 68 cents per pound estimated for both 2017/18 and 2016/17.

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