Cotton Outlook: Global Production Slightly Lower in 2018

The latest USDA estimates for 2018/19 indicate that world cotton production is projected at 122.0 million bales, 1 percent below the previous season. While relative prices favored cotton plantings this season, the effects of weather on production are expected to be mixed. India, China, and the United States remain the largest cotton-producing countries. In 2018/19, these countries are projected to account for 62 percent of global cotton production, slightly below the previous 3-year average.

Domestic Outlook

U.S. 2018 Cotton Production Forecast Higher in September

According to USDA’s September Crop Production report, the 2018 U.S. cotton crop is forecast at approximately 19.7 million bales, 447,000 bales above the August estimate but 1.2 million bales below the 2017 crop. The larger September forecast is attributable to increased area that more than offset a lower national yield; if realized, 2018 U.S. cotton production would be the second largest crop since 2006.

U.S. cotton planted area for 2018 was increased nearly 4 percent in September based on acreage reported to USDA’s Farm Service Agency (FSA). Planted area was estimated at 14.0 million acres by USDA’s National Agricultural Statistics Service (NASS), while harvested area was projected at 10.55 million acres—up 4 percent from the August forecast. As a result, abandonment in 2018 is expected near 25 percent, compared with 12 percent in 2017. The national yield is forecast 10 pounds below 2017’s record at 895 pounds per harvested acre.

The 2018 U.S. upland production is forecast at 18.9 million bales, 6.5 percent (1.3 million bales) below last season. During the previous 20 years, the September upland cotton forecast was below the final estimate 10 times and above it 10 times. Past differences between the September forecast and the final upland estimate indicate that chances are 2 out of 3 that 2018 production will range between 17.8 million and 20.1 million bales.

Compared with last season, the 2018 upland cotton crop is expected lower in the western half of the Cotton Belt and higher in the eastern half. For the Southwest, upland production is projected at about 7.8 million bales, 26 percent below the 2017 record of 10.5 million bales.

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Although planted area is estimated at 8.6 million acres—the highest in over 6 decades—above-average abandonment is projected to keep harvested area below the previous two seasons. With Southwest abandonment forecast at 39.5 percent—the highest in 5 years—harvested area is estimated at only 5.2 million acres.

The region’s yield is forecast at 714 pounds per harvested acre, below the previous 2 years but 15 pounds above the 5-year average.

In the Southeast, 2018 cotton production is forecast at 5.7 million bales, one of the largest crops on record. The increased production is attributable to the highest expected harvested area in 7 years and expectations for improved yields; notwithstanding any potential effects of Hurricane Florence, the Southeast yield is projected at 956 pounds per harvested acre, the second highest on record.

In the Delta, cotton production is expected to expand to 4.6 million bales in 2018, the largest crop since 2007, as a record yield of 1,136 pounds per harvested acre is forecast.

In the West, the 2018 upland crop is projected at 795,000 bales, compared with 833,000 bales in 2017. Although the upland cotton area decreased this season—after consecutive increases—and a below-average yield of 1,451 pounds per harvested acre is forecast, the region’s crop is expected above the 5-year average. In addition, the extra-long staple (ELS) crop—grown mainly in the West—is projected at 771,000 bales in 2018, up from 700,000 bales in 2017 and the largest since 2012’s crop of 780,000 bales.

Although area is estimated lower in 2018, the yield is forecast at its highest in 5 years at 1,508 pounds per harvested acre.

U.S. cotton crop development in early September is running ahead of last season and the 5-year average. As of September 9, 39 percent of the cotton crop had bolls opening, compared with last season’s 33 percent and the 2013-17 average of 35 percent. However, U.S. cotton crop conditions have continued below recent years. As of September 9, only 38 percent of the 2018 area was rated “good” or “excellent,” compared with 63 percent last year, while 34 percent was rated “poor” or “very poor,” compared with 11 percent in 2017.

U.S. Export and Ending Stock Estimates Higher in September

With the U.S. cotton crop increase this month, 2018/19 demand was increased 200,000 bales to 19.1 million bales, which is similar to 2017/18. While the 2018/19 forecast for U.S. mill use remains at 3.4 million bales, U.S. exports accounted for this month’s increase; for 2018/19, U.S. cotton exports are projected at 15.7 million bales, slightly below last season’s estimate.

Despite increased foreign import demand for raw cotton in 2018/19, export competition—particularly from Brazil—is projected to keep U.S. exports of the fiber near last season’s relatively high level. As a share of global trade, U.S. cotton exports are projected to account for approximately 37.5 percent of global exports in 2018/19, below last season’s 39 percent.

U.S. 2018/19 ending stocks are now forecast at 4.7 million bales, 400,000 bales above last season’s estimate. With the expected stocks-to-use ratio reaching 25 percent by the end of the season, the ratio would be slightly higher than both last season and the 5-year average.

Based on the current supply and demand estimates, the 2018/19 upland cotton farm price is forecast to range between 70 cents and 80 cents per pound. The midpoint of 75 cents per pound is 7 cents above last season’s estimate; the final 2017/18 upland farm price will be released in October.

For 2017/18, U.S. demand and stock estimates incorporate final data for the season. Cotton mill use was reported at nearly 3.23 million bales in 2017/18, marginally below 2016/17 and the lowest in over a century.

Final U.S. cotton exports reached 15.85 million bales, nearly 1 million bales above 2016/17; increased foreign import demand for U.S. cotton helped support the strong global mill use growth realized in 2017/18. Based on the supply and demand estimates and stocks data collected by FSA and NASS, U.S. cotton ending stocks for 2017/18 are estimated at 4.3 million bales, compared with 2.75 million bales in 2016/17.

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