Cotton Outlook: Global Stocks Projected Lowest Since 2011/12

Bales finishing up in cotton gin. ©Debra L Ferguson Stock Images

The latest U.S. Department of Agriculture cotton projections for 2019/20 indicate that world cotton ending stocks are forecast at their lowest in 8 years. Global stocks are projected at 77.3 million bales for 2019/20, marginally below 2018/19 but 29.5 million bales below the record set just 5 years ago.

World stocks totaled 106.7 million bales at the end of 2014/15, with China accounting for 62 percent of the total. Government policies in China resulted in surplus stock accumulations in their national reserve, but subsequent policies reduced these supplies and have led to lower global stocks.

Domestic Outlook

U.S. Cotton Production Forecast Unchanged in June USDA’s 2019 U.S. cotton production projection remains at 22.0 million bales in June, 20 percent (3.6 million bales) above the 2018 crop. Planting conditions have been less than ideal this spring, with planting delays affected by drought in the Southeast and excessive rainfall in the Delta. With planting still in progress, the weather effects on area and yield remain tentative.

The U.S. planting estimate of nearly 13.8 million acres will be updated in USDA’s Acreage report released on June 28. The report will include actual plantings as of early June, as well as estimates of any remaining cotton to be planted. As of June 9, only 75 percent of the expected cotton acreage had been planted, compared with last season’s 88 percent and the 2014-18 average of 87 percent.

In addition, 11 percent of the cotton area was squaring by June 9, 3 percentage points below 2018 but equal to the 5-year average. Meanwhile, reporting of U.S. cotton crop conditions have also begun, with early indications confirming the less than favorable start to the 2019 growing season. As of early June, cotton crop conditions are slightly above last season but below the 5-year average.

Based on current projections, U.S. cotton harvested area is forecast at 12.5 million acres in 2019, reflecting a 10-year weighted-average abandonment by region, with the Southwest adjusted to indicate favorable moisture conditions. U.S. abandonment is projected at 9 percent, the lowest in three seasons. The 2019 U.S. cotton yield (842 pounds per harvested acre) is based on a 5-year weighted average by region. USDA’s National Agricultural Statistics Service will begin “in field” surveys in August.

Demand and Stock Estimates Also Unchanged

U.S. cotton demand for 2019/20 is projected at 20.1 million bales—unchanged from the May forecast—compared with the 2018/19 estimate of nearly 17.9 million bales. The higher forecast for 2019/20 is attributable to exports, which are expected to increase more than 2 million bales due to increased foreign import demand associated with projected record global cotton mill use and an anticipated rise in U.S. supplies.

For 2019/20, U.S. cotton exports are forecast at 17.0 million bales, approximately 2.3 million bales above the 2018/19 estimate and would account for nearly 85 percent of total U.S. demand. However, U.S. exports—which are forecast to be the second highest on record behind 2005/06—are likely to face competition from Brazil in 2019/20 as their supplies also expand.

Based on these export projections, the U.S. share of world trade is expected to improve from 35 percent in 2018/19 to 38 percent in 2019/20, similar to the 3-year average.

Meanwhile, U.S. cotton mill use remains estimated at 3.1 million balesfor both 2018/19 and 2019/20.Based on USDA’s June supply and demand estimates, 2019/20 U.S. cotton ending stocks are projected at 6.4 million bales, nearly 1.8 million bales (38 percent) above the beginning level and the highest since 2007/08 when ending stocks were 10.1 million bales.

Similar to stocks, the stocks-to-use ratio is also expected to increase; in 2019/20, the stocks-to-use ratio—which has ranged between 14 percent and 30 percent over the past decade—is projected at 32 percent, the highest in 11 years. As a result, the 2019/20 U.S. average upland farm price is expected to decrease from 70 cents per pound estimated for 2018/19 to 64 cents per pound.

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