Cotton Outlook: U.S. Product Trade Rising in 2018

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The latest U.S. Department of Agriculture estimates indicate that total U.S. cotton textile and apparel trade grew during the first half of 2018, compared with the corresponding period of 2017. While U.S. cotton product imports totaled the equivalent of nearly 8.8 million 480-pound bales of raw cotton during January-June 2018—compared with approximately 8.6 million bales for the first 6 months of 2017—cotton product exports decreased slightly to about 1.8 million bale-equivalents.

Based on these volumes, the cotton textile and apparel trade deficit was 3 percent higher at 7.0 million bale-equivalents during the first half of 2018.

The concentration of U.S. cotton product imports continues to be focused on several major suppliers, with the top five countries contributing more than two-thirds of total imports during the first half of 2018. Compared with the corresponding period of 2017, the first 6 months of 2018 saw the share rise for four of the top five suppliers.

China remains the leading supplier of U.S. cotton product imports, accounting for nearly 31 percent of the total during January-June of 2018; for India—the second largest supplier—the share reached 11.5 percent. In addition, the U.S. cotton product import shares increased for Pakistan, Vietnam, and Bangladesh in 2018, with each providing 8 percent of the mid-year total.

Domestic Outlook

U.S. 2018 Cotton Production Forecast Higher in August

According to USDA’s first survey-based forecast of the 2018 cotton crop, U.S. production is estimated at 19.2 million bales, compared with July’s projection of 18.5 million bales and last season’s final estimate of 20.9 million bales. Compared with 2017, lower estimates for U.S. cotton harvested area and yield account for this season’s production decline.

Based on the August forecast, total cotton planted area in 2018 is estimated at 13.5 million acres, the same as indicated in the June Acreage report but 7 percent (905,000 acres) above 2017; this season’s area is the largest since 2011 when 14.7 million acres were planted. Harvested area is projected at 10.1 million acres this season, indicating an abandonment rate of 25 percent, more than double 2017’s 12 percent and the highest in 5 years. The U.S. cotton yield is forecast at 911 pounds per harvested acre this season, slightly above 2017 and, if realized, would reach a new record.

Upland cotton production in 2018 is forecast at nearly 18.5 million bales, 1.7 million bales below 2017. During the past 20 years, the August upland production forecast was above the final estimate 12 times and below it 8 times. Past differences between the August forecast and the final production estimates indicate that chances are two out of three for the 2018 upland crop to range between 17.1 and 19.8 million bales.

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Compared with 2017, U.S. upland production is projected higher in two of the four Cotton Belt regions in 2018, with the Southwest significantly lower and the West slightly lower. Based on the August estimates, 2018 Southwest upland production is expected to reach about 7.6 million bales (41 percent of the U.S. crop), down from last season’s 10.5-million-bale record and the smallest in 3 years.

As a result of the drought conditions in the Southwest, a much lower harvested area is expected in 2018; abandonment is forecast at 40 percent for the region, well above last season’s 19 percent and the highest in 5 years. Meanwhile, the Southwest yield is projected at 737 pounds per harvested acre, above the 5-year average.

In the Southeast, 2018 production is projected at nearly 5.6 million bales or 30 percent of the U.S. upland crop. While area in the region is at its largest in 7 years, yield and production are at their highest in 6 years. The Delta crop is forecast at 4.5 million bales this season—the largest since 2011—and accounts for 24 percent of U.S. cotton production. Area is similar to 2017 at 1.9 million acres, while the Delta yield is forecast at a record 1,142 pounds per harvested acre.

For the West, upland production is projected at 805,000 bales in 2018, 3 percent below last season but still the second largest crop in 5 years. A reduction in area is nearly offset by a rebound in yield (1,469 pounds per harvested acre) that is slightly below average.

In addition, extra-long staple (ELS) cotton production—grown primarily in the West—is forecast to increase in 2018 to 779,000 bales, the largest since a similar amount was produced in 2012. Although area is forecast lower in 2018, the ELS yield is forecast at 1,555 pounds per harvested acre, the second highest on record.

Meanwhile, U.S. cotton crop development is near that of last year and the 5-year average. As of August 12, 77 percent of the cotton crop was setting bolls, equal to 2017 and marginally behind the 2013-17 average. In contrast, 2018 U.S. cotton crop conditions remain well below last season and the 5-year average.

As of August 12, 40 percent of the crop area was rated “good” or “excellent,” compared with 61 percent last year, while 34 percent was rated “poor” or “very poor,” compared with 12 percent a year earlier. This season’s relatively low crop conditions are largely attributable to the extremely dry conditions experienced in the Southwest.

U.S. Cotton Demand and Stocks Revised in August

U.S. cotton demand for 2018/19 and 2017/18 were adjusted this month based on recently released data. For 2018/19, demand is projected at 18.9 million bales, nearly 3 percent above the July forecast but slightly below the revised 2017/18 demand of nearly 19.1 million bales. Increased supplies—from both larger beginning stocks and a higher August production forecast—are expected to provide additional opportunities for U.S. cotton exports in 2018/19 as world trade is projected to rise again.

For 2018/19, U.S. cotton exports are projected at 15.5 million bales, 500,000 bales above last month’s forecast but nearly 350,000 bales below the adjusted 2017/18 export estimate. Final marketing year data for 2017/18 was reported in USDA’s U.S. Export Sales report on August 9. With lower U.S. exports and higher global trade forecast in 2018/19, the U.S. share of world trade is forecast to decrease from 39 percent in 2017/18 to 37 percent, but remain above the 5-year average.

Meanwhile, U.S. cotton mill use was reduced 100,000 bales for 2017/18 to 3.25 million bales, as cumulative data through June indicate that total mill use will remain near the 2016/17 level. For 2018/19, U.S. cotton mill use remains forecast at 3.4 million bales, as growth in the global economy supports textile expansion in a number of countries.

With U.S. cotton production expected to exceed demand in 2018/19, ending stocks are projected to rise modestly to 4.6 million bales, compared with 2017/18’s estimate of 4.4 million bales. Consequently, this season’s stocks-to-use ratio is forecast to grow slightly to 24 percent; this ratio compares with the 5-year average of 22 percent and would be the highest in 3 years, if realized.

As of August, however, the 2018/19 upland farm price is forecast to range between 70 and 80 cents per pound. At the midpoint of 75 cents per pound, the farm price is 7 cents above the estimate for 2017/18.

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