Cotton Outlook: World Stocks Rise; China Lower in 2019/20

Cotton module on conveyor belt at Mill Creek Gin. ©Debra L Ferguson

The latest U.S. Department of Agriculture (USDA) cotton estimates for 2019/20 project global ending stocks to increase 3.0 million bales from the previous season to 83.7 million bales. World cotton stocks are forecast nearly 4 percent higher at season’s end, despite reduced stocks in China.

Cotton stocks in China continue to trend lower from the 2014/15 peak of more than 66 million bales, or 62 percent of total global stocks that season. Sales from the national reserve, along with limited imports, during the past several years have reduced China’s stocks by half. By the end of 2019/20, China’s cotton stocks are projected at about 33.3 million bales, or nearly 40 percent of the world total.

Meanwhile, stocks outside of China are forecast at a record 50.4 million bales in 2019/20, largely due to increases for India and the United States. India’s cotton stocks are expected to account for 16 percent of the global total this season, while the United States is forecast to account for 8 percent.

Domestic Outlook

U.S. Cotton Production Estimate Slightly Lower in October

According to USDA’s October Crop Production report, 2019 U.S. cotton production is estimated at 21.7 million bales, slightly below last month’s forecast but 18 percent (3.3 million bales) above the 2018 crop. With the expected harvested area unchanged in October, the national yield was lowered, reducing the U.S. production estimate by 157,000 bales.

The U.S. upland cotton crop is forecast at 21.0 million bales this season, compared with the 2018 crop of 17.6 million bales. During the previous 20 years, the October estimate has been above final production 10 times and below it 9 times; no production forecast was published in 2013. Past differences between the October estimate and final production indicate that chances are two out of three that the 2019 U.S. upland cotton crop will range between 19.9 and 22.1 million bales.

Upland cotton production is forecast to increase in each region of the Cotton Belt this season (fig. 2). In the Southeast, 2019 cotton production is projected at 5.6 million bales, up 1.4 million from last season’s crop, which was affected by Hurricane Florence and Hurricane Michael. Cotton area in 2019 is forecast at its highest since 2011, with harvested area estimated at 2.9 million acres—500,000 acres above the previous 5-year average. The Southeast yield is projected at 920 pounds per harvested acre in 2019—the highest in 5 years and the third highest on record.

The 2019 Delta cotton crop is also estimated at 5.6 million bales—the largest since 2006—as area continues its expansion from the 2015 low. In 2019, cotton harvested acreage is forecast at 2.4 million acres, compared with the 5-year average of 1.5 million. Meanwhile, the region’s yield is projected at 1,140 pounds per harvested acre, slightly below last season’s record.

In the Southwest, the 2019 upland crop is forecast at nearly 9.0 million bales, above last season but below 2017’s record of 10.5 million bales. While planted area was reduced in 2019 to about 7.9 million acres, harvested area is projected to reach 6.7 million acres—the highest since 1981—resulting in an implied abandonment rate of only 14.5 percent, compared with last season’s 42 percent and a 5-year average of 20.5 percent. Meanwhile, the 2019 Southwest upland yield is forecast at 639 pounds per harvested acre, the lowest in 4 years.

In the West, the upland cotton crop is projected at 806,000 bales in 2019, compared with 738,000 bales in 2018. Although the region’s area is slightly below a year ago, the yield is forecast to reach 1,500 pounds per harvested acre, the highest in 3 years as crop conditions have been favorable this season; a record yield of 1,538 pounds per harvested acre was reached in 2016. The extra-long staple (ELS) cotton crop—grown mainly in the West—is projected at 724,000 bales in 2019, 10 percent below last season’s crop. Both ELS area and yield are expected to be lower in 2019.

Total 2019 U.S. cotton harvested area is estimated at 12.5 million acres, compared with last season’s 10.2 million. The national yield is projected at 833 pounds per harvested acre, compared with 2018’s 864 pounds.

As of October 6, 25 percent of the U.S. cotton crop had been harvested, similar to last season but slightly above the 2014-18 average of 20 percent. Cotton crop conditions are also similar to last season. As of October 6, 39 percent of the 2019 area was rated “good” or “excellent,” compared with 2018’s 42 percent. In addition, 19 percent of the area was rated “poor” or “very poor,” compared with 25 percent in 2018. For current production estimates by State, see table 10 published separately with this report.

U.S. Demand Estimates Unchanged; Stocks Lowered

The U.S. cotton demand estimate for 2019/20 remains projected at 19.5 million bales, 10 percent above last season, but equal to 2017/18. U.S. exports—which account for the majority of demand—are forecast at 16.5 million bales, while mill use is estimated at 3.0 million bales. A slightly higher global mill use, along with increased foreign import demand for raw cotton, is expected to support the export forecast.

More on Cotton

U.S. cotton exports are projected to be the second highest on record in 2019/20, behind only 2005/06’s exports of 17.7 million bales. The U.S. share of global trade is forecast at 38.5 percent in 2019/20, above last season but below the preceding 2 years, as uncertainties remain surrounding U.S.-China trade (fig. 3).

With the U.S. demand projection unchanged in October and the slightly lower production estimate, the U.S. ending stocks estimate declined 200,000 bales this month to 7.0 million bales. Even with the adjustment, 2019/20 stocks are forecast to rise nearly 2.2 million bales to their highest level since 2007/08 when stocks approached 10.1 million bales.

In addition, this season’s implied stocks-to-use ratio (36 percent) is expected to rise 9 percentage points above 2018/19. Based on the latest supply and demand estimates and recent prices, the average upland cotton farm price is projected at 58 cents per pound in 2019/20—compared with last season’s estimate of 70.5 cents per pound—and would be the lowest in 11 years.

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