Cotton Outlook: Global Stock Increase Led by India

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

The latest U.S. Department of Agriculture (USDA) estimates indicate that global cotton ending stocks in 2020/21 are projected at 103.8 million bales, nearly 4.5 percent above 2019/20. Stocks are forecast at their second highest on record behind only 2014/15, as world cotton production exceeds mill use for the second consecutive year in 2020/21. This season’s stock increase is largely attributable to rising supplies in India—where stocks are projected to climb 20 percent. As a result, 2020/21 world cotton prices are expected to remain near last season’s relatively low level.

Domestic Outlook

U.S. 2020 Cotton Crop Forecast Lowered in September

According to USDA’s September Crop Production report, 2020 U.S. cotton production is forecast at nearly 17.1 million bales, 1 million below the August estimate and 2.8 million bales below the 2019 crop. The smaller September forecast is attributable to a lower area estimate and a reduced national yield projection. If realized, the 2020 U.S. cotton crop would be the smallest since 2015, when only 12.9 million bales were produced.

U.S. cotton planted area for 2020 was reduced slightly in September based on acreage reported to USDA’s Farm Service Agency (FSA). Planted acreage was estimated at 12.1 million acres by USDA’s National Agricultural Statistics Service (NASS), while harvested area was projected at 9.0 million acres, about 2.5 percent below the August forecast.

As a result, 2020 abandonment is projected at approximately 25.5 percent, compared with 15.5 percent in 2019. The national yield is projected at a record 910 pounds per harvested acre this season, slightly above the 2017 level. For current production estimates by State, see table 10 published separately with this report.

The 2020 upland cotton crop is forecast at 16.5 million bales, 14 percent (2.7 million bales) below last season. During the past 20 years, the September upland production forecast was above the final estimate 11 times and below it 9 times. Past differences between the September forecast and the final production estimates indicate that chances are two out of three for the 2020 upland crop to range between 15.4 million and 17.6 million bales.

Compared with last season, 2020 upland production is projected to decline in each region of the Cotton Belt. For the Southwest, upland production is forecast at 7.1 million bales, slightly (2 percent) below last season and 1 million bales below the 5-year average. Lower planted area and higher abandonment expectations this season are projected to reduce the Southwest crop to its lowest since 2015. With limited rainfall throughout much of the growing season, 2020.

Southwest abandonment is projected to be considerably higher (40 percent), compared with last season’s 25.5 percent and the 5-year average of 21 percent. With a larger percentage of the lower-yielding dryland area being abandoned this season, the 2020 Southwest yield is projected higher at 759 pounds per harvested acre, compared with last season’s 594 pounds.

In the Southeast, 2020 cotton production is forecast at nearly 4.5 million bales, 22 percent below 2019. The lower production is based on reduced area—the lowest in 4 years—and a 2020 yield that is below last season but above the 5-year average. Southeast harvested area is estimated at 2.3 million acres this season, while the region’s yield is projected at 921 pounds per harvested acre.

In the Delta, 2020 cotton production is expected to be the lowest in 3 years at 4.3 million bales, as area there is 25 percent below 2019. However, an anticipated record yield of 1,176 pounds per harvested acre is expected to keep the Delta crop above the 5-year average.

In the West, the 2020 upland crop is expected to reach 560,000 bales, compared with 631,000 bales in 2019. Although the upland cotton area decreased this season, a rebound in yield to 1,358 pounds per harvested acre is expected, bringing yield closer to the 5-year average. In addition, the extra-long staple (ELS) crop—grown mainly in the West—is projected at 559,000 bales in 2020, down from 685,500 bales in 2019 and the lowest crop since 2015. ELS area is expected to decrease for the third consecutive season in 2020.

U.S. cotton crop development in September is running behind last season but ahead of the 5-year average. As of September 13, 47 percent of the cotton crop had bolls opening, compared with 51 percent in 2019 and 45 percent for the 2015-19 average. Of note, South Carolina had bolls opening on only 20 percent of its area (compared with 67 percent in 2019), and Georgia had bolls opening on 52 percent of its area (compared with 67 percent last year). In contrast, Arizona had bolls opening on 96 percent of its area (compared with 84 percent in 2019).

Meanwhile, 2020 U.S. cotton crop conditions have continued below last season and the 5-year average. As of September 13, 45 percent of the cotton area was rated “good” or “excellent,” compared with 41 percent last year, while 27 percent was rated “poor” or “very poor,” compared with 17 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 Reduced in September

The estimate for U.S. cotton demand for 2020/21 was reduced 3 percent (600,000 bales) in September to 17.1 million bales—the lowest in 5 years—with both mill use and exports lowered this month. U.S. mill use for 2020/21 is forecast at 2.5 million bales, 16 percent above 2019/20, which was significantly affected by COVID-19. U.S. cotton exports, meanwhile, are projected at 14.6 million bales in 2020/21, 900,000 bales below last season and the lowest since 2015/16.

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Competitively priced foreign supplies are expected to limit U.S. cotton shipments in 2020/21. As a share of global trade, U.S. cotton exports are projected at 35 percent this season, compared with 38 percent in 2019/20 and 36 percent in 2018/19.

With the cotton production decline more than offsetting the demand decrease, the September U.S. ending stocks estimate for 2020/21 is lower than a month earlier, forecast at 7.2 million bales. This is slightly below the final 2019/20 estimate of 7.25 million bales, which was the highest in 12 years.

The stocks-to-use ratio is expected to rise slightly, however, to 42 percent by the end of 2020/21, also the largest since 2007/08. Based on these supply and demand estimates, the 2020/21 upland cotton farm price is forecast at 59 cents per pound, marginally below the 2019/20 estimate. The final 2019/20 upland farm price estimate will be released at the end of October.

Revisions to 2019/20 U.S. Cotton Demand and Stocks

Estimates for U.S. cotton demand and stocks were revised in September with the release of complete marketing year data for 2019/20. Data from USDA’s FSA and NASS indicated that U.S. cotton mill use in 2019/20 totaled 2.15 million bales, 825,000 bales below 2018/19. U.S. cotton exports, on the other hand, reached 15.5 million bales, 690,000 bales above 2018/19.

The export estimate was obtained by averaging cotton shipments data reported by the U.S. Census Bureau and USDA’s U.S. Export Sales reports when converted to 480-pound statistical bales; this procedure is consistent with the calculation used for the previous 2 seasons when considerable discrepancies also occurred. For more details about those export estimate adjustments, see the September 2019 Cotton and Wool Outlook report on the ERS website.

In addition, cotton stocks data collected and reported by FSA and NASS led to the computation of U.S. cotton ending stocks for 2019/20, which are estimated at 7.25 million bales, compared with 4.85 million bales estimated for 2018/19. For details on the calculation of U.S. cotton ending stocks, see the Highlight section in this report.

Cotton Product Imports Recovering from COVID-19 Impact

Total U.S. cotton textile and apparel trade declined considerably during the first half of 2020, compared with the corresponding 2019 period, but is expected to improve during the second half of the year. U.S. cotton product imports—which are mostly clothing products—generally follow a seasonal pattern, with increased imports seen in the months prior to peak consumer buying periods—summer, back-to-school, and Christmas.

As calendar year 2020 began, U.S. cotton product imports recorded similar monthly levels as during the previous 3 years. However, as the COVID-19 pandemic unfolded, dramatic reductions in the textile and apparel industry produced ripple effects throughout the supply chain from manufacturing to retail sales, which affected product imports significantly during the spring and summer of 2020. U.S. cotton product imports began deviating from their seasonal pattern in March 2020.

As the impacts of COVID-19 progressed, dramatic import declines ensued in April and May, as manufacturing reductions, supply chain disruptions, and retail closures led to declines in consumer purchases of items such as clothing.

Conversely, cotton product import data since May have been relatively positive, as the recovery of the textile and apparel industry progresses. May 2020 cotton product imports were only about 40 percent of the 2017-19 average for that month. However, by July—the latest available data—imports had climbed to 85 percent of its 2017-19 average. Although the economic recovery is expected to vary by industry, recent cotton product imports—a proxy for the textile and apparel industry—show a substantial improvement and are supportive of the ongoing recovery.

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