Cotton Outlook: Historical U.S. Export Estimates Revised Up

Cotton modules in front of cotton gin. ©Debra L Ferguson

U.S. cotton exports for the 2017/18 and 2018/19 marketing years were adjusted upward in September based on a reduced unaccounted estimate for each year that more closely reconciles reported cotton stocks with related supply and demand data. The unaccounted estimate has grown in recent years, indicating a cotton balance sheet discrepancy.

The estimates for production, mill use, and stocks have maintained their consistency over this time, but a growing percentage difference has occurred between the cotton export sources—the U.S. Census Bureau and USDA’s U.S. Export Sales reports.

The variation between Census and USDA export data averaged 2 percent during 2007/08-2016/17. Beginning in 2017/18, the difference reached 5.5 percent and climbed to nearly 8 percent in 2018/19. As a result, these export estimates were further reviewed—given the reported stocks and implied unaccounted estimates—resulting in revised exports equal to the average reported by the two sources.

Domestic Outlook

U.S. 2019 Cotton Crop Forecast Reduced in September

According to USDA’s September Crop Production report, 2019 U.S. cotton production is forecast at nearly 21.9 million bales, 654,000 bales below the August estimate but still 3.5 million bales above the 2018 crop. The smaller September forecast is attributable to a reduced area estimate and a lower projected national yield. If realized, the 2019 U.S. cotton crop would remain the largest since 2005’s record of 23.9 million bales.

U.S. cotton planted area for 2019 was lowered slightly (1 percent) in September based on acreage reported to USDA’s Farm Service Agency (FSA). Planted area was estimated at nearly 13.8 million acres by USDA’s National Agricultural Statistics Service (NASS), while harvested acreage was projected at 12.5 million acres, also down 1 percent from the August forecast.

As a result, abandonment in 2019 is projected at 9 percent, compared with approximately 27.5 percent in 2018. The national yield is projected at 839 pounds per harvested acre this season, slightly below the 5-year average of 848 pounds. For current production estimates by State, see table 10 published separately with this report.

The 2019 U.S. upland cotton crop is forecast at 21.1 million bales, 20 percent (3.6 million bales) above last season. During the previous 20 years, the September upland cotton forecast was below the final estimate 9 times and above it 11 times. Past differences between the September forecast and the final upland estimate indicate that chances are 2 out of 3 that 2019 production will range between 19.8 million and 22.5 million bales.

Compared with last season, 2019 upland cotton production is forecast higher in each region of the Cotton Belt. For the Southwest, upland production is projected at 9.1 million bales, 1.2 million above last season but below the 2017 record of 10.5 million bales.

Although 2019 planted area (7.9 million acres) is estimated below the previous year, below-average abandonment—projected at 14.5 percent in 2019—is expected to increase harvested acreage (6.7 million acres) to its highest level since 1981. The region’s yield is forecast at 649 pounds per harvested acre, below the last several seasons.

In the Southeast, 2019 cotton production is forecast at 5.7 million bales, one of the largest crops on record. The higher production is based on increased area—the highest since 2011—and expectations for the third highest yield on record. The region’s yield is forecast at 927 pounds per harvested acre, well above the 5-year average of 861 pounds.

In the Delta, 2019 cotton production is expected to expand for the fourth consecutive season—reaching 5.6 million bales. With a yield of 1,140 pounds per harvested acre projected slightly below the 2018 record, the region is forecast to have its largest cotton crop since 2006.

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In the West, the 2019 upland crop is expected to reach 785,000 bales, compared with 738,000 bales in 2018. Although the upland cotton area decreased slightly this season, an above-average yield of 1,460 pounds per harvested acre helped increase the level of production for 2019.

In addition, the extra-long staple (ELS) crop—grown mainly in the West—is projected at 717,000 bales in 2019, down from 801,000 bales in 2018 but still the second largest crop since 2012. Area has shifted out of ELS production recently as stocks have risen and prices declined.

U.S. cotton crop development in early September is running ahead of last season and the 5-year average. As of September 8, 43 percent of the cotton crop had bolls opening, compared with last season’s 38 percent and the 2014-18 average of 37 percent. In addition, U.S. cotton crop conditions have continued above last season and are near the 5-year average.

As of September 8, 43 percent of the 2019 area was rated “good” or “excellent,” compared with 38 percent a year ago, while 18 percent was rated “poor” or “very poor,” compared with 34 percent in 2018.

U.S. Cotton Demand Reduced in 2019/20; Stocks Unchanged

The estimate for U.S. cotton demand in 2019/20 decreased 4 percent in September to 19.5 million bales, 10 percent above 2018/19 but equal to 2017/18. Mill use for 2019/20 is forecast at 3.0 million bales, similar to last season. U.S. exports, however, are projected at 16.5 million bales for 2019/20; despite a 700,000-bale reduction this month, U.S. cotton exports are forecast at their second highest on record, behind only 2005/06.

Despite larger supply expectations in 2019/20, reduced prospects for global mill demand—coupled with competitive supplies from other exporters—are likely to limit U.S. cotton export expansion this season. As a share of global trade, U.S. cotton exports are projected to rise slightly from 36 percent in 2018/19 to 38 percent this season.

With offsetting adjustments in supply and demand, the September U.S. 2019/20 ending stocks estimate remains forecast at 7.2 million bales, nearly 50 percent above last season and the highest since 2007/08. The stocks-to-use ratio is expected to climb to 37 percent by the end of 2019/20, the largest in over a decade.

Based on these supply and demand estimates, the 2019/20 upland cotton farm price is forecast at 58 cents per pound, 12.5 cents per pound below the 2018/19 estimate. The final 2018/19 upland farm price estimate will be released in October.

Revisions to 2017/18 and 2018/19 U.S. Supply and Demand

As discussed at the beginning of this report, U.S. cotton exports for 2017/18 and 2018/19 were increased in September as reductions were made to the unaccounted estimate in the respective supply and demand balance sheets. For 2017/18, U.S. cotton exports were increased 432,000 bales and are now estimated at nearly 16.3 million bales, while exports for 2018/19 were raised 546,000 bales and are now estimated at about 14.8 million bales.

These export levels were obtained by averaging the shipment data reported by the Census Bureau and USDA’s U.S. Export Sales reports after review of the discrepancy between reported stocks and unaccounted estimates in the cotton balance sheets. Also, based on preliminary 2018/19 data, U.S. mill use was reduced slightly to 2.975 million bales this month.

In addition, cotton stocks data collected and reported by FSA and NASS led to the computation of U.S. cotton ending stocks for 2018/19, which are estimated at 4.85 million bales, compared with 4.2 million bales estimated for 2017/18. For details on the calculation of U.S. cotton ending stocks, see the Highlight section in this report.

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