Global Markets: Cotton – U.S. Shipments Lag as Disruption of Seasonal Patterns Continues

    Cotton samples on gin floor. ©Debra L Ferguson Stock Images

    The most recent Export Sales Report shows that total commitments for 2021/22 (accumulated exports plus outstanding sales, OS) relative to forecast exports of 15.0 million bales for the 2021/22 marketing year (MY) are in line with historical levels.

    However, accumulated exports through week 22 as a percentage of forecast exports are the second-lowest since Export Sales Reporting started in 1974. At the same time, current outstanding sales as a percentage of projected exports are the second-highest in 10 years. Simply put, large outstanding sales are offsetting low physical shipments thus far.

    Outstanding sales to China, Turkey, and Pakistan are up sharply from last year. A large portion of sales to China are believed to be destined for its State Reserve, with delivery expected in the second half of the marketing year.

    Pakistan, which experienced a very poor crop in 2020, saw very high levels of buying in 2020/21 resulting in both large carryover sales and 2021/22 sales; outstanding sales at the beginning of 2021/22 were nearly double their previous record level. Sales to Turkey have been strong with record forecast consumption exceeding the previous year’s record by 800,000 bales; imports are forecast at their second-highest level.

    While overall sales have been adequate to reach the export forecast, shipments have been extremely slow, particularly in the last 2 months reflecting low beginning stocks, lags in harvesting and processing, and logistical issues. Shipments through December are down 45 percent from last season (2021/22 exports are forecast down nearly 10 percent from the previous year). Exports to eight of the top 10 markets are down, with China down over 70 percent and Vietnam down by half.

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    China’s total imports during August-November 2021 are down nearly 60 percent from the same period, and U.S. market share has fallen from 61 to 42 percent. Slower demand is attributed to China liquidating record stocks of foreign cotton in bonded warehouses since the beginning of the marketing year.

    Vietnam’s total imports are up 15 percent through mid-December while U.S. shipments to the country are down 55 percent. Australia has greatly benefited from the fall in U.S. market share.

    However, U.S. shipments are up to destinations outside last season’s top ten, particularly to Central American markets. Logistical issues affecting textile and apparel shipments to the United States from Asia and the Withhold Release Order on cotton from Xinjiang are likely supporting stronger mill demand in Central America.

    Similarly, the primary and secondary shocks of the COVID pandemic have altered typical seasonal patterns for U.S. cotton exports on both the plus and negative sides at various times since February 2020. Late harvested cotton is reportedly moving into position for export and later-season U.S. shipments are expected to be above typical seasonal norms.

    Shipments in the remainder of 2021/22 are expected to total more than 11.4 million bales, 30 percent above last season and 25 percent above the average of the last 10 years. In only 2 years since 1974 has the United States shipped that level of cotton.

    In addition to logistical issues, tighter beginning stocks and delayed classing have also contributed to the slow start. As shippers adjust to logistical issues and COVID-affected classing catches up, exports are expected to accelerate significantly enabling exports to reach the forecast. Similarly, during August-December 2020 U.S. cotton exports shot up 34 percent from the year before and 66 percent from 2 years earlier to a record high as shipments delayed by the pandemic’s start were completed.

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