USDA - Cotton and Wool Outlook
Posted : August 19, 2019

USDA - Cotton and Wool Outlook

Global Cotton Mill Use Growth Varies by Country

The latest U.S. Department of Agriculture (USDA) cotton projections for 2019/20 (August-July) indicate that world cotton mill use is forecast to resume its growth after a 1.3-percent decline in 2018/19. Global cotton consumption is projected at 124.3 million bales in 2019/20, 2.6 percent above 2018/19’s 121.1- million-bale estimate, as lower global cotton prices support the rebound. Mill use is projected to increase in each of the leading raw cotton spinners in 2019/20, with China accounting for nearly one-third of the world total.

Cotton mill use growth varies by country and year of comparison. With 2016/17 as the base year, 2019/20 global cotton consumption is projected 7 percent higher (fig. 1). Relative to 3 years ago, 2019/20 cotton mill use is forecast 5 percent higher in both China and India, while in Pakistan, the growth is expected at 4 percent. Meanwhile, cotton mill use growth rates have been more pronounced in recent years for Bangladesh and, in particular, Vietnam. For Bangladesh, 2019/20 mill use is projected 9 percent higher than in 2016/17, while the growth for Vietnam is a remarkable 41 percent above just 3 years ago.

Domestic Outlook

U.S. 2019 Cotton Crop Projection Unchanged in July

U.S. cotton production in 2019 is projected at 22.0 million bales this month, unchanged from June and 20 percent (3.6 million bales) above the 2018 crop. A slightly higher yield projection in July offsets a marginally lower estimate for area. Based on USDA’s Acreage report released June 28, U.S. producers had planted or intended to plant 13.7 million acres to cotton in 2019, below the March indications and 3 percent below 2018 (see table 10).

Upland cotton regional area projections for 2019—compared with 2018—are mixed, with three regions lower and one region higher (fig. 2). Area in the Southwest is forecast at nearly 8.1 million acres, 7 percent below 2018 but the second highest since 1981; in addition, the Southwest is expected to account for 60 percent of the total U.S. upland area in 2019, illustrating the significance of the region’s cotton production.

In the Southeast, cotton acreage is projected at 2.8 million acres in 2019, marginally below 2018 but one of the largest of the decade. The Southeast is forecast to account for 21 percent of the U.S. area in 2019, slightly above the previous 2 years but still one of the lowest since 2010. For the Delta, 2019 cotton area is estimated at nearly 2.3 million acres, 15 percent above last season and the highest since 2011; the region is expected to contribute 17 percent of the U.S. upland area in 2019, the highest in 8 years. Meanwhile, upland cotton area in the West is forecast at 265,000 acres (2 percent of the total), 7 percent below 2018 and the lowest in 3 years. In addition, extra-long staple (ELS) cotton—largely grown in the West—is forecast at 275,000 acres, 10 percent above a year earlier and the highest since 2011.

Total cotton harvested area is projected in July at 12.5 million acres, 22 percent above 2018. U.S. abandonment is forecast at 9 percent, well below 2018’s 28 percent and the lowest in 3 years. The abandonment forecast is based on 10-year averages by region, with the Southwest adjusted downward to about 13 percent to reflect crop conditions and favorable moisture to date; three previous seasons with a similar situation resulted in Southwest abandonmentranging between 8 percent and 20 percent. The U.S. cotton yield—projected at 845 pounds per harvested acre—is based on 5-year average yields by region. The yield reached 864 pounds per harvested acre in 2018 and a record 905 pounds in 2017. In August, USDA’s National Agricultural Statistics Service (NASS) will publish its first survey-based estimates for 2019.

U.S. cotton crop development as of July 7 indicated that 47 percent of the 2019 crop was squaring, below last season’s 57 percent and the 2014-18 average of 54 percent. In addition, cotton area setting bolls reached only 13 percent, compared with last season’s 20 percent and the 5-year average of 16 percent. However, U.S. cotton crop conditions have remained above last season as of early July and are close to the 5-year average (fig. 3). As of July 7, 54 percent of the U.S. cotton area was rated “good” or “excellent,” compared with 41 percent in 2018, while 19 percent was rated “poor” or “very poor,” compared with 27 percent a year ago.

U.S. Demand Reduction in 2018/19 Raises Stock Estimates

The U.S. cotton demand projection for 2019/20 was unchanged in July at 20.1 million bales—3.1 million bales of mill use and 17.0 million bales of exports. However, the 2018/19 estimate was reduced to 17.5 million bales and reflects recent activity. The U.S. cotton mill use estimate was reduced 100,000 bales in July to 3.0 million bales based on USDA data through May.

Based on cotton shipments reported in USDA’s Export Sales reports through June, U.S. exports for 2018/19 are estimated at 14.5 million bales—250,000 bales lower this month—partly due to a reduced global mill use estimate that lowered total import demand expectations; limited 2018/19 U.S. cotton exports to China have also contributed to this season’s reduced total. The latest estimate places the U.S. share of world cotton trade at 35 percent for 2018/19, with the share rising to 38 percent for 2019/20, as global mill use and import demand expectations rise.

Based on USDA’s July supply and demand estimates, 2019/20 U.S. cotton ending stocks are projected at 6.7 million bales, 1.7 million bales (34 percent) above the beginning level and the highest since 2007/08 when ending stocks were nearly 10.1 million bales. In addition, the 2019/20 stocks-to-use ratio (33 percent) is forecast to rise for the third consecutive season to its highest level since 2008/09. As a result, increased stocks and a rising stocks-to-use ratio are expected to pressure prices; the 2019/20 upland cotton farm price is forecast at 63 cents per pound, down 1 cent this month and a decrease from 2018/19’s estimate of 70 cents per pound.

International Outlook

Global Cotton Production To Increase in 2019/20

World cotton production in 2019/20 is projected at 125.8 million bales, 5 percent (nearly 6.5 million bales) above 2018/19 and the second largest crop on record behind 2011/12’s 127.2 million bales. In 2019/20, cotton production projections for the major-producing countries are mixed, with the increases more than offsetting the decreases. World cotton harvested area is forecast at 34.7 million hectares (85.8 million acres), 3.5 percent above 2018/19 and the highest since 2011/12; most of the 2019/20 area increase is attributable to the United States, where expected abandonment is reduced considerably from 2018/19 as a result of improved moisture in the Southwest. The 2019/20 global cotton yield is forecast at 789 kilograms/hectare (kg/ha) (704 pounds per acre), slightly above the previous 3-year average.

Global cotton production continues concentrated among a few countries (fig. 4). In 2019/20, the top five cotton-producing countries are forecast to account for more than 78 percent of total production, similar to 2018/19 but 2 percentage points above the 2015/16-2017/18 average. India is forecast to be the leading producer in 2019/20, contributing 23 percent of the global crop estimate, while China and the United States are projected to account for 22 percent and 17 percent, respectively. Meanwhile, Brazil is expected to contribute 10 percent, and Pakistan accounts for an additional 6 percent.

India is projected to produce 29.0 million bales of cotton in 2019/20, 9 percent above the previous year but equal to 2017/18, as India’s yield rebounds to the 3-year average; area is forecast unchanged at 12.6 million hectares. For China, 2019/20 cotton production is expected to match the year ago level at 27.75 million bales; slightly lower area is offset by a higher national yield (1,751 kg/ha), which is only 1 percent below the 2017/18 record. At the same time, Pakistan’s 2019/20 crop is forecast at 8.0 million bales, 4 percent (300,000 bales) above 2018/19, as higher area and a nearly unchanged yield push the crop above the 3-year average.

Meanwhile, cotton production in Brazil and Australia is expected to decrease in 2019/20 as lower area and yield are projected. For Brazil, production is forecast at 12.0 million bales, 800,000 bales (6 percent) below the record 2018/19 crop. For 2019/20, lower cotton prices are expected to reduce area slightly while yield declines from the record set in 2018/19—1,747 kg/ha (1,558 pounds per acre). For Australia, production is forecast at 1.9 million bales, 500,000 bales (21 percent) below 2018/19, as area and yield expectations are reduced.

Global Cotton Mill Use Estimates Reduced in July

Estimates of world cotton mill use were lowered in July for both 2019/20 and 2018/19 largely due to reductions for Bangladesh and China. For 2019/20, global cotton consumption is projected at 124.3 million bales, 3.2 million bales (2.6 percent) above 2018/19; expectations for growth in the global economy and lower cotton prices support the year-to-year increase. If realized, global cotton mill use would surpass the 124.2-million-bale record from 2006/07. China and India remain the largest users of raw cotton, with a combined total of 66.0 million bales, or 53 percent of the world total.

Cotton mill use in China—the largest spinner of raw cotton—is projected at 40.5 million bales in 2019/20, 1.0 million bales (2.5 percent) above 2018/19. For India—the second largest spinner—cotton mill use is forecast to rebound to a record 25.5 million bales for 2019/20, 500,000 bales (2 percent) above 2018/19 as India’s mill use is aided by yarn exports to China. For Pakistan, 2019/20 cotton mill use is projected slightly higher at 10.7 million bales, one of the largest levels of the decade. Expanding mill use is also seen in a number of other countries that are important to global cotton consumption growth. Among these other countries, Vietnam, Bangladesh, and Turkey are expected to lead the way with cotton mill use forecast to reach 7.6 million bales (+7.0 percent), 7.4 million bales (+4.2 percent), and 6.7 million bales (+1.5 percent), respectively.

World Cotton Trade and Stocks Higher in 2019/20

Global cotton trade in 2019/20 is forecast at 44.2 million bales, 7.5 percent above 2018/19. With total trade up 3.1 million bales, exports from the United States and Brazil account for the majority of the increase. The United States is forecast to boost its shipments by 2.5 million bales (17 percent), as increased supplies and higher foreign import demand in 2019/20 support higher exports. Brazil will also have increased supplies from its record crop in 2018/19, with exports there forecast to rise 1.8 million bales (29 percent). Exports from India are forecast at 4.4 million bales (+600,000 bales) in 2019/20, while shipments from Australia are projected to decrease by 50 percent to 1.8 million bales as supplies decline significantly due to production shortfalls.

Meanwhile, higher import projections for most of the leading importing countries are forecast for 2019/20. China—the leading importer—is expected to import 10.5 million bales of raw cotton, 13.5 percent above 2018/19 and the highest in 6 years. Similarly, imports by Vietnam and Bangladesh are expected higher in 2019/20, as textile industries in these countries expand. For Vietnam, cotton imports are forecast at 7.8 million bales (+800,000 bales) in 2019/20, while Bangladesh’s imports reach 7.3 million bales (+400,000 bales). Meanwhile, imports for Pakistan (+100,000 bales) and Turkey (-200,000 bales) are each projected at 3.0 million bales.

World ending stocks are forecast at 80.4 million bales in 2019/20, a 1.2-million-bale increase from 2018/19, as global cotton production is projected to exceed mill use once again. Despite the increase, 2019/20 stocks remain at one of the lowest stock levels of the last 7 years. Similarly, the global stocks-to-use ratio is forecast to remain flat at 65 percent, which would
equal the lowest ratio since 2010/11. Although China continues to hold the largest share (41 percent) of world cotton supplies, 2019/20 ending stocks there are projected to decrease 2.4 million bales (7 percent) to 33.0 million bales—half the level reached in 2014/15. However, stocks outside of China are expected to rise 8 percent (3.5 million bales) in 2019/20, with a stocks-to-use ratio outside of China rising for the third consecutive season to 38 percent, the highest since 2011/12. Consequently, the average world cotton price (A Index) in 2019/20 is expected to decline from the 2018/19 estimate of 84.5 cents per pound.

 

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