Cotton Outlook: Global Production Decrease Led by U.S., Brazil

    The latest U.S. Department of Agriculture (USDA) estimates indicate that global cotton production in 2020/21 is projected at 117.5 million bales, about 4.5 percent below 2019/20, and largely the result of lower crop expectations for the United States and Brazil. Smaller reductions are seen for India and China—the largest producers—as well as for the rest of the world combined.

    Domestic Outlook

    U.S. 2020 Cotton Crop Forecast Higher in August

    According to USDA’s first survey-based forecast of the 2020 cotton crop, U.S. cotton production is estimated at 18.1 million bales, compared with July’s projection of 17.5 million bales and last season’s final estimate of 19.9 million bales. Compared with 2019, harvested area is expected to be substantially (20 percent) smaller, but a record yield is forecast to limit the production decline this season.

    Based on the August forecast, total cotton planted acreage in 2020 is estimated at 12.2 million acres, equal to the area reported in the June Acreage report and the smallest in 4 years. U.S. harvested area is projected at only 9.25 million acres this season, indicating an abandonment rate of 24 percent, above last season’s rate of 15.5 percent.

    The U.S. cotton yield is forecast at 938 pounds per harvested acre this season, 115 pounds above 2019 and 33 pounds above the previous record in 2017.

    Upland cotton production in 2020 is forecast at 17.5 million bales, 9 percent (1.7 million bales) below 2019 and, if realized, the smallest crop since 2016. During the past 20 years, the August upland production forecast was above the final estimate 12 times and below it 8 times.

    Past differences between the August forecast and the final production estimates indicate that chances are two out of three for the 2020 upland crop to range between 16.2 million and 18.9 million bales.

    Compared with 2019, U.S. upland production is projected to decrease in three of the four Cotton Belt regions this season, with the Southwest rising slightly. Based on the August estimates, 2020 Southwest upland production is forecast at 7.5 million bales (43 percent of the U.S. crop), compared with nearly 7.3 million in 2019 and a 5-year average of 8.1 million bales.

    With less than ideal growing conditions this season in the Southwest, 2020 abandonment is projected to be considerably above 2019 and the 5-year average; Southwest abandonment is forecast at 38 percent this season versus 25.5 percent in 2019 and a 5-year average of 21 percent.

    The Southwest yield is projected at 785 pounds per harvested acre in 2020—compared with 594 pounds last season—the result of a large percentage of the lower-yielding dryland area being abandoned that pushes this season’s regional yield to the third highest on record.

    In the Southeast, 2020 production is estimated at nearly 4.8 million bales (27 percent of the U.S. crop), 17 percent below 2019, as area dips below the 5-year average. Meanwhile, the Southeast yield is projected slightly higher in 2020 at 950 pounds per harvested acre, the second highest on record.

    In the Delta, the 2020 cotton crop is estimated lower at 4.6 million bales (26 percent of the U.S. crop) after 4 consecutive increases that reached nearly 5.6 million bales in 2019, the highest since 2006. Lower area this season is partially offset by an anticipated record yield of 1,201 pounds per harvested acre that is expected to keep the Delta crop above the 5-year average.

    In the West, upland production is projected at 610,000 bales in 2020, slightly below last season. Lower area is expected to be nearly offset by an above-average yield (1,450 pounds per harvested acre) in 2020. The West accounts for less than 4 percent of the total U.S. upland crop.

    In addition, extra-long staple (ELS) cotton production, which is primarily grown in the West, is forecast at 555,000 bales and one of the smaller crops of the decade; both ELS area and yield are projected to decrease in 2020, with each at its lowest in several seasons.

    U.S. cotton crop development is running behind both last season and the 5-year average. As of August 9, 9 percent of the cotton crop had bolls opening, compared with 17 percent in 2019 and 11 percent for the 2015-19 average. Of note, Texas had bolls opening on 13 percent of its area (compared with 26 percent in 2019), while Arizona had bolls opening on 35 percent of its area (compared with 20 percent last year).

    Meanwhile, 2020 U.S. cotton crop conditions remain below last season and the 5-year average. As of August 9, 42 percent of the cotton area was rated “good” or “excellent,” compared with 56 percent last year, while 23 percent was rated “poor” or “very poor,” compared with 10 percent a year ago. Dry conditions, particularly in parts of the Southwest, have kept this season’s overall crop conditions below average.

    U.S. Cotton Demand and Stocks Adjusted in August

    U.S. cotton demand and stocks for 2020/21 and 2019/20 were revised this month based on recently released data. For 2020/21, demand is forecast at 17.7 million bales, slightly below the July projection but slightly above the revised 2019/20 demand of 17.6 million bales.

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    Despite higher supplies—from both larger beginning stocks and the higher August production forecast— U.S. cotton export opportunities in 2020/21 may be tempered as surplus foreign supplies will compete for the modestly higher global import demand. The U.S. share of world trade is projected at 36 percent in 2020/21, compared with 38 percent in 2019/20.

    In 2020/21, U.S. cotton exports are forecast at 15.0 million bales, unchanged from last month’s projection but 400,000 bales below the upward adjusted 2019/20 export estimate; complete marketing year data for 2019/20 will be available next month, as the final estimate will be based on reported shipments in USDA’s U.S. Export Sales and reports by the Bureau of the Census.

    U.S. cotton mill use in 2020/21 is forecast at 2.7 million bales, a rebound from the revised 2.2-million-bale estimate for 2019/20 that was significantly affected by the COVID-19 impacts.

    With U.S. cotton production expected to exceed demand in 2020/21 for the fourth consecutive season, ending stocks are forecast to increase further to 7.6 million bales—compared with 2019/20’s estimate of 7.2 million bales—and reach their highest since 2007/08’s estimate of 10.1 million bales.

    As a result, this season’s stocks-to-use ratio is expected to rise slightly to 43 percent, also the highest since 2007/08. Consequently, the 2020/21 upland farm price is forecast lower at 59 cents per pound, compared with 2019/20’s estimate of 59.5 cents.

    U.S. Cotton Product Trade Declining in 2020

    Total U.S. cotton textile and apparel trade declined considerably during the first half of 2020, compared with the corresponding 2019 period, as the effects of COVID-19 impacted the retail and manufacturing industries.

    U.S. cotton product imports totaled the equivalent of only 6.5 million 480-pound bales of raw cotton during January-June 2020—compared with 9.0 million bales for the first 6 months of 2019—while cotton product exports declined from 1.7 million bale-equivalents to 1.0 million bale-equivalents.

    As a result, the cotton textile and apparel trade deficit was nearly 24 percent lower during the first half of 2020, at 5.5 million bale-equivalents.

    The source for U.S. cotton product imports remains concentrated among a handful of suppliers, however, with the top 5 countries accounting for nearly 68 percent of total imports during the first half of 2020, similar to the past 2 years. Compared with the same period in 2019, the share rose for 4 of the top 5 suppliers during the first 6 months of 2020.

    Only imports from China saw a decrease, as manufacturers supplying the U.S. market appear to continue adjusting sourcing opportunities as a result of the uncertainty surrounding U.S.-China trade relations. Nevertheless, China remains the leading supplier of U.S. cotton product imports, accounting for 25 percent of the total during January-June of 2020.

    India supplied 13 percent of U.S. cotton product imports, while Pakistan and Vietnam each contributed 10 percent; Bangladesh accounted for an additional 9 percent of the total.

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