Cotton Outlook: Global Production, Mill Use Projections More Closely Balanced

Cotton modules lined up in a gin yard. ©Debra L Ferguson

The initial U.S. Department of Agriculture (USDA) cotton projections for 2020/21 (August-July) include a closer balance between global cotton production and use than in 2019/20. Even so, ending stocks in 2020/21 are forecast to increase to their highest in 6 years. World cotton mill use is forecast to begin its rebound from the COVID-19 disruptions that have affected the global cotton supply chain from spinning to retail.

For 2020/21, cotton mill use is projected at 116.5 million bales, 11 percent above the 2019/20 estimate that has seen significant reductions for many countries. In 2020/21, cotton use in most of these countries is expected to rebound, with China, India, and Pakistan leading the increase.

Domestic Outlook

U.S. Cotton Crop Forecast To Decrease in 2020

According to USDA’s initial projection for the 2020 crop, U.S. cotton production is forecast at 19.5 million bales, 2 percent (400,000 bales) below the final 2019 estimate. Based on the March Prospective Plantings report, 2020 cotton area is estimated at 13.7 million acres. While nearly identical to area in 2019, relative harvest price expectations going into planting season would have suggested (at least on a historical basis) that 2020 cotton acreage would decrease moderately.

However, other factors—such as weather, production costs, and potential program benefits—also help determine the acreage planted to cotton each year. USDA will update the initial plantings estimate at the end of June.

Planted area for both upland and extra-long staple (ELS) cotton is forecast to remain similar in 2020. For the upcoming season, upland acreage is projected to be lower in three of the Cotton Belt regions, while rising in the Southwest. Based on Prospective Plantings, the Southwest upland area is estimated at nearly 8.2 million acres, the second largest since 1980, behind only 2018.

The Southwest is forecast to account for 61 percent of the total 2020 upland area, near the 5-year average. Cotton acreage in the Southeast is projected at 2.8 million acres, 150,000 acres below 2019 but still above the past decade’s average. In 2020, the Southeast is expected to contribute 21 percent of the total upland area, slightly below the 5-year average.

For the Delta, cotton acreage is projected 160,000 acres lower in 2020, but remains one of the largest of the past 10 years at 2.2 million acres. In 2020, the Delta’s share of total upland area is expected to approach 17 percent, slightly below 2019 but above the 5-year average. Upland cotton area in the West is also expected to decline in 2020, reaching only 240,000 acres, the smallest in 4 years.

Nevertheless, the region will account for approximately 2 percent of the total U.S. upland cotton area in 2020. ELS cotton, meanwhile, remains concentrated in the West, where 94 percent of the 228,000-acre total is expected to be planted in 2020. California is the leading ELS-producing State, accounting for 195,000 acres of the total.

As of early May, moisture conditions across the Cotton Belt remain relatively favorable—except for South Texas, where drought conditions persist. On the High Plains of Texas, where 60 percent of the State’s cotton is planted, accumulated precipitation from November 2019 to April 2020 was above the long-term average. Weather conditions will continue to influence cotton plantings, crop progress, and yield.

As of May 10, 32 percent of the U.S. cotton area had been planted—above both last season and the 2015-19 average—largely due to Texas’ favorable planting progress that reached its highest over the past 10 years. However, several States were considerably below their 5-year averages as of May 10, including Missouri, Arkansas, Tennessee, and Mississippi.

U.S. cotton harvested area for 2020 is projected at 11.35 million acres, 2 percent (260,000 acres) below the final 2019 estimate. The preliminary 2020 forecast is based on the 2010-19 average abandonment, weighted by region. As a result, the U.S. abandonment rate is projected at 17 percent, slightly above the 15.5 percent recorded for 2019. The national yield is forecast at 825 pounds per harvested acre and is based on the 2015-19 crop average yields, weighted by region.

The initial U.S. yield for 2020 is slightly (2 pounds) above the final 2019 yield estimate.

U.S. Cotton Demand Projected To Rebound in 2020/21

U.S. cotton demand (mill use plus exports) is forecast to rise moderately in 2020/21 to 18.9 million bales, 7 percent above 2019/20 and the highest in 3 years. As previously discussed, the unprecedented COVID-19 impacts on the 2019/20 global cotton industry is expected to ease as the industry begins to rebound.

More on Cotton

With the United States remaining the leading raw cotton exporter to the world, an increase in 2020/21 global imports and mill use supports higher U.S. cotton exports. In addition, increased export prospects related to the U.S.-China trade deal are supportive as is the largest U.S. cotton supply since 2007/08.

The initial U.S. export projection for 2020/21 is 16.0 million bales, 1 million bales above the previous year. In 2020/21, the U.S. share of global trade is projected near 37.5 percent, similar to 2019/20. U.S. cotton exports are forecast to account for 85 percent of U.S. cotton demand in 2020/21, also near 2019/20. Meanwhile, U.S. cotton mill use is projected to rise to 2.9 million bales in 2020/21.

With U.S. cotton production forecast to exceed demand in 2020/21, ending stocks are projected to increase further. Cotton stocks are forecast 8 percent higher at 7.7 million bales on July 31, 2021, the fourth consecutive increase and the largest stock level since 2007/08. The stocks-to-use ratio (41 percent) is also the highest in 13 years, but is only slightly above 2019/20 as demand rebounds. Based on these initial projections, the 2020/21 U.S. upland farm price is forecast at 57 cents per pound, or 2 cents below the 2019/20 estimate of 59 cents per pound.

U.S. Estimates for 2019/20 Revised in May

U.S. cotton production for 2019/20 was adjusted upward in May as USDA released its final cotton production estimates, with minor revisions to area, yield, and production. The U.S. cotton crop was finalized at 19.91 million bales, with a national yield of 823 pounds per harvested acre; production was more than 8 percent above 2018/19, while the national yield was 7 percent below 2018/19, as more area in the lower-yielding Southwest region was harvested than the year before.

On the demand side, U.S. cotton exports remain estimated at 15.0 million bales, after April’s substantial reduction related to the global pandemic. However, U.S. mill use was further reduced 200,000 bales this month to 2.7 million bales for 2019/20 as the U.S. textile industry has also been affected. Based on the latest estimates for 2019/20, U.S. ending stocks are forecast at 7.1 million bales, 46 percent above a year earlier and a stocks-to-use ratio of 40 percent, 13 percentage points above 2018/19.

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