Cotton Outlook: Record Global Mill Use in 2018/19

Cotton bales in gin warehouse. ©Debra L Ferguson Stock Images

The latest U.S. Department of Agriculture (USDA) cotton projections for 2018/19 (August-July) indicate that world cotton mill use is forecast to reach a new record, in large part reflecting additional expected growth in the world economy.

Global cotton consumption is projected at 127.0 million bales in 2018/19, 3.9 percent above 2017/18’s 122.2-million-bale estimate. Mill use is forecast to rise in each of the leading raw cotton spinners in 2018/19, with China accounting for more than one-third of the world total.

Cotton mill use growth varies by country and year of comparison. Using 2015/16 as the base year, 2018/19 world cotton consumption is projected 12 percent higher. Likewise, relative to 3 years ago, cotton mill use in China in 2018/19 is expected 18 percent higher; in India, 2 percent higher; and in Pakistan, 4 percent higher.

In addition, cotton mill use in Bangladesh and Vietnam continues to expand and the growth since 2015/16 has been remarkable. For Bangladesh, 2018/19 mill use is projected 27 percent higher than in 2015/16, while the growth for Vietnam is even more dramatic, with 2018/19 mill use expected to be nearly 67 percent above the 2015/16 level.

Domestic Outlook

U.S. 2018 Cotton Crop Projection Lowered in July

U.S. cotton production in 2018 is projected at 18.5 million bales, 5 percent (1 million bales) below the June projection and approximately 11.5 percent lower than the 2017 crop. The July production decrease was largely attributable to higher anticipated abandonment in the Southwest—despite expectations of additional cotton acreage—due to the limited rainfall received there through June.

Based on USDA’s Acreage report released June 29, U.S. producers had planted or intended to plant 13.5 million acres to cotton in 2018, slightly above the March indications and 7 percent above 2017.

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Upland cotton area projections for 2018 increased for two regions of the Cotton Belt and decreased for two regions, compared with 2017. Area in the Southwest is reported at 8.2 million acres, 9 percent higher than 2017 and the highest since 1980; in addition, the Southwest upland plantings are forecast to account for a record 62 percent of the total U.S. area, increasing the region’s significance for U.S. cotton production.

In the Southeast, 2018 cotton acreage is estimated at 2.8 million acres, 300,000 acres above 2017 and the highest since 2011. The Southeast is expected to account for 21 percent of the U.S. area in 2018, one of the lowest shares of the decade for the region.

For the Delta, 2018 cotton area is forecast at 1.9 million acres, slightly below last season, but still one of the highest over the last 6 years; the Delta is expected to contribute 14 percent of the U.S. upland area in 2018. Similarly, upland cotton area in the West is estimated at 280,000 acres (2 percent of the total), below 2017 but above the 5-year average.

In addition, extra-long staple (ELS) cotton area for 2018 is forecast at 243,000 acres, 4 percent below 2017 but still one of the highest levels during the last 10 years.

Total cotton harvested acreage is estimated in July at 10.5 million acres, 5 percent below 2017. U.S. abandonment—forecast at 22 percent in 2018—is expected to be the highest in 5 years.

The abandonment forecast is based on 10-year averages by region, with the Southwest estimate adjusted upward to 35 percent to reflect the crop conditions and limited moisture to date; four previous seasons with a similar situation resulted in Southwest abandonment ranging between 30 percent and 45 percent.

The U.S. yield—projected at 845 pounds per harvested acre—is based on 5-year average yields by region; the U.S. yield reached a record 905 pounds per harvested acre in 2017. In August, USDA’s National Agricultural Statistics Service (NASS) will publish its first survey-based results for 2018 cotton production.

U.S. cotton crop development as of July 8 indicated that 59 percent of the 2018 cotton crop was squaring, equal to last season but above the 2013-17 average of 55 percent. In addition, cotton area setting bolls had reached 21 percent which was above last season’s 18 percent and the 5-year average of 15 percent.

However, the U.S. crop conditions through early July have remained well below the previous two seasons. As of July 8, only 41 percent of the U.S. cotton area was rated “good” or “excellent,” compared with 61 percent a year earlier, while 27 percent was rated “poor” or “very poor,” compared with 12 percent in 2017.

U.S. Demand and Stocks Revised for 2018/19 and 2017/18

The U.S. cotton demand projection for 2018/19 was reduced 500,000 bales in July to 18.4 million bales. U.S. exports accounted for the decrease, resulting from reduced available supplies—a lower U.S. crop forecast and lower beginning stocks—coupled with expectations of increased foreign competition.

U.S. cotton exports are forecast at 15.0 million bales for 2018/19, 1.2 million bales below the 2017/18 estimate that was increased 200,000 bales in July based on late-season strength in shipments. With world cotton trade slightly higher in 2018/19, the U.S. share of global trade is forecast to decline from the 40 percent achieved during each of the past two seasons to 36 percent in 2018/19.

U.S. cotton mill use accounts for the additional 3.4 million bales of demand in 2018/19. Meanwhile, total U.S. cotton demand for 2017/18 was increased to 19.55 million bales—16.2 million bales of exports and 3.35 million bales of mill use—the highest since a record 23.5 million bales of cotton demand were achieved in 2005/06.

Based on the latest supply and demand estimates, 2018/19 ending stocks are forecast at 4.0 million bales, equal to 2017/18 and the highest since 2008/09’s 6.3 million bales; in addition, the 2018/19 stocks-to-use ratio (22 percent) is expected to rise for the second consecutive season to its highest level since 2015/16.

Meanwhile, the strength of global cotton demand is helping support higher upland cotton farm prices in 2018/19; the farm price is forecast to range between 68 cents and 82 cents per pound in 2018/19, with the 75-cent midpoint 7 cents above the average of the previous two seasons.

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