Cotton and Wool Outlook
Leslie A. Meyer
U.S. Cotton Product Trade Increasing in 2019
The latest U.S. Department of Agriculture (USDA) estimates indicate that total U.S. cotton textile and apparel trade rose during the first half of 2019, compared with the corresponding 2018 period. U.S. cotton product imports totaled the equivalent of 9.0 million 480-pound bales of raw cotton during January-June 2019—compared with 8.8 million bales for the first 6 months of 2018—while cotton product exports declined slightly to 1.7 million bale-equivalents. As a result, the cotton textile and apparel trade deficit was 4 percent higher at 7.3 million bale-equivalents during the first half of 2019.
The source for U.S. cotton product imports remains concentrated among a handful of suppliers, with the top five countries accounting for nearly 68 percent of total imports during the first half of 2019. Compared with the same period in 2018, the share rose for four of the top five suppliers during the first 6 months of 2019 (fig. 1). Only imports from China saw a decrease, as manufacturers supplying the U.S. market appeared to adjust sourcing opportunities with other suppliers as a result of the U.S.-China trade dispute uncertainty. However, China remains the leading supplier of U.S. cotton product imports, accounting for nearly 30 percent of the total during January-June of 2019; India supplied 12 percent, while Pakistan, Vietnam, and Bangladesh each contributed an additional 9 percent.
U.S. 2019 Cotton Crop Forecast Higher in August
According to USDA’s first survey-based forecast of the 2019 cotton crop, U.S. cotton production is estimated at 22.5 million bales, compared with July’s projection of 22.0 million bales and last season’s final estimate of 18.4 million bales. Compared with 2018, a higher estimate for harvested area contributes to this season’s crop increase, as a lower yield is forecast.
Based on the August forecast, total cotton planted acreage in 2019 is estimated at 13.9 million acres, slightly above the area reported in the June Acreage report. While 200,000 acres below 2018, this season’s U.S. cotton planted acreage remains one of the largest of the decade. Harvested area is projected at 12.6 million acres this season, indicating an abandonment rate of only 9 percent, one-third the 2018 rate of nearly 28 percent. The U.S. cotton yield is forecast at 855 pounds per harvested acre this season, 9 pounds below 2018 but above the 5-year average of 848 pounds.
Upland cotton production in 2019 is forecast at 21.7 million bales, nearly 4.2 million bales above 2018 and, if realized, the largest crop since 2005. 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 2019 upland crop to range between 20.1 million and 23.3 million bales.
Compared with 2018, U.S. upland production is projected to increase in each of the Cotton Belt regions this season, with the Southwest and Southeast rebounding while the Delta continues its recent resurgence (fig. 2). Based on the August estimates, 2019 Southwest upland production is forecast at 9.7 million bales (45 percent of the U.S. crop), the second largest crop on record behind 2017’s 10.5 million bales. With improved growing conditions this season in the Southwest—compared with a year ago—2019 abandonment is projected to be significantly below last season and below the 5-year average; Southwest abandonment is forecast at 14 percent this season versus 42 percent in 2018. The Southwest yield is projected at 683 pounds per harvested acre, below both last season and the 5-year average, as a higher percentage of the lower-yielding dryland cotton is expected to be harvested in 2019.
In the Southeast, 2019 production is estimated at nearly 5.7 million bales (26 percent of the U.S. crop), the largest crop since 5.9 million bales were produced in 2012. In 2018, production reached 4.2 million bales. Southeast area in 2019 is forecast at its highest since 2011, while the yield is projected at 929 pounds per harvested acre, the third highest on record. Meanwhile, the 2019 Delta cotton crop is estimated to approach 5.6 million bales (26 percent of the U.S. crop), compared with 4.7 million bales in 2018. Higher area and a 1,132-pound-per-acre yield—slightly below last season’s record—is projected to increase the Delta crop to its largest since 2006 when 8.2 million bales were produced.
In the West, upland production is projected at 744,000 bales in 2019, similar to last season. Lower area is expected to be offset by an above-average yield (1,501 pounds per harvested acre) in 2019. In addition, extra-long staple (ELS) cotton production, which is primarily grown in the West, is forecast at 790,000 bales and one of the largest crops of the decade; while ELS area is estimated to increase in 2019, the yield is expected to average 1,462 pounds per harvested acre, which is 5 percent below last season.
U.S. cotton crop development is running ahead of both last season and the 5-year average. As of August 11, 20 percent of the cotton crop had bolls opening, compared with 12 percent in 2018 and 10 percent for the 2014-18 average. Meanwhile, 2019 U.S. cotton crop conditions remain well above last season and are also above the 5-year average (fig. 3). As of August 11, 56 percent of the cotton area was rated “good” or “excellent,” compared with 40 percent last year, while 10 percent was rated “poor” or “very poor,” compared with 34 percent a year ago. Favorable moisture conditions, particularly in the Southwest, have helped overall crop conditions generally improve this season.
U.S. Cotton Exports and Stocks Adjusted in August
U.S. cotton demand for 2019/20 and 2018/19 were revised this month based on recently released data. For 2019/20, demand is forecast at 20.3 million bales, slightly above the July projection and 3.1 million bales above the revised 2018/19 demand of 17.2 million bales. Higher supplies—from both larger beginning stocks and the higher August production forecast—are projected to increase U.S. cotton export opportunities in 2019/20 as global trade improves.
In 2019/20, U.S. cotton exports are forecast at 17.2 million bales, 200,000 bales above last month’s projection and nearly 3 million bales above the adjusted 2018/19 export estimate; final marketing year data for 2018/19 were reported in USDA’s U.S. Export Sales report on August 8. With both higher U.S. exports and global trade forecast for 2019/20, the U.S. share of world cotton trade is projected to increase from 35 percent in 2018/19 to 39 percent in 2019/20, similar to the U.S. share in 2017/18. U.S. cotton mill use remains forecast at 3.1 million bales for 2019/20, up slightly from the 3.0-million-bale estimate for 2018/19.
With U.S. cotton production expected to surpass demand for the third consecutive season in 2019/20, ending stocks are forecast to increase further to 7.2 million bales, compared with 2018/19’s estimate of 5.25 million bales and 2017/18’s estimate of 4.3 million bales. As a result, this season’s stocks-to-use ratio is expected to rise to 35 percent, the highest since 2008/09. Consequently, the 2019/20 upland farm price is forecast lower at 60 cents per pound for 2019/20, compared with 2018/19’s estimate of 70 cents per pound.
World Cotton Production Forecast To Exceed Mill Use in 2019/20
Global cotton production in 2019/20 is projected to surpass consumption for only the second time in 5 years (fig. 4). World production is forecast at 125.6 million bales this season, 6.4 million bales (5 percent) above 2018/19. Meanwhile, world cotton mill use in 2019/20 is forecast at 123.1 million bales, 2.5 million bales (2 percent) higher than the 2018/19 estimate. Larger crops are forecast for several major-producing countries, although Brazil and Australia are notable exceptions. More favorable weather conditions—particularly in the United States and India—are expected to support global cotton harvested area and yields this season. In 2019/20, world harvested area is forecast at 34.7 million hectares (85.8 million acres), 4 percent above 2018/19 and the highest since 2011/12. Likewise, the favorable conditions are expected to support a higher global yield, with the 2019/20 yield forecast at 787 kilograms per hectare (kg/ha) or 702 pounds per acre.
For India, cotton production is forecast at 29.0 million bales in 2019/20, 2.5 million bales (9 percent) above the 2018/19 crop that had a below-average yield. In 2019/20, an unchanged area of 12.6 million hectares coupled with a rebound in the yield to 501 kg/ha is expected to place India as the leading cotton producer this season. For China, the cotton crop is projected unchanged at 27.75 million bales in 2019/20, as area declines slightly but is offset by a higher yield. Area harvested in China is forecast at 3.45 million hectares while the national yield is projected at 1,751 kg/ha, the second highest on record as cotton’s concentration continues in the western region of Xinjiang.
Cotton production in Brazil, the fourth largest producer in 2019/20, is projected to decrease 6 percent (800,000 bales) from last season’s record crop of 12.8 million bales, as both area and yield are expected to be lower for the upcoming season. Harvested area is forecast at 1.55 million hectares while the projected yield of 1,686 kg/ha is below the 2018/19 record. In Pakistan, cotton production is forecast to rebound in 2019/20 to 8.0 million bales, 5 percent (400,000 bales) above last season’s crop that was limited by the lowest area since 1984/85. This season, area is expected to reach 2.5 million hectares, nearly 9 percent (200,000 hectares) above 2018/19, with an above-average yield of 697 kg/ha. Meanwhile, Australia’s crop is forecast to decline dramatically (21 percent) from last season as limited rainfall has reduced important reservoir levels to very low levels. Australia’s production is projected at only 1.9 million bales, the lowest in over a decade as area declines to a 5-year low.
World cotton consumption in 2019/20 is projected at 123.1 million bales, compared with an estimated 120.6 million bales in 2018/19. Global mill use is forecast to reverse last season’s decrease and reach the third highest level on record, behind only 2006/07 and 2007/08. Modest global economic growth is supporting the 2-percent expected mill use growth, with most major cotton-spinning countries forecast higher in 2019/20.
Cotton mill use in China is projected at 40.0 million bales in 2019/20, up 1 percent (500,000 bales) from last season. Increased imports of raw cotton in recent years, along with domestic supplies from China’s State Reserve, have helped sustain China’s spinning industry during a period of stable production. Yarn imports have also supplemented China’s apparel manufacturing, which supports China’s economy through its export of cotton products.
India’s cotton mill use is expected to rise 2 percent (500,000 bales) in 2019/20 to 25.0 million bales, as cotton supplies are rising and value-added product exports remain important to India’s foreign exchange. Likewise for Pakistan, consumption of 10.7 million bales is slightly higher for 2019/20 than the year before as cotton product export growth is seen continuing. Expansion is also forecast for Vietnam and Bangladesh, as the continuation of recent trends—albeit at lower growth rates—pushes cotton mill use higher. For 2019/20, Vietnam’s cotton mill use is forecast at 7.6 million bales (+7 percent), while mill use in Bangladesh is projected at 7.4 million bales (+4 percent).
Global Cotton Trade To Rise in 2019/20; Stocks Build
World cotton trade is forecast at nearly 43.9 million bales in 2019/20, compared with 40.8 million bales in 2018/19. China, Vietnam, and Bangladesh are expected to remain the leading raw cotton importers this season, with a combined increase of 2.2 million bales. Of the major-producing/exporting countries, most are expected to benefit from increased trade in 2019/20, with Australia an exception due to its reduced supplies. In addition to higher U.S. cotton exports, shipments from Brazil—the second largest exporter—are projected to rise by one-third to 8.0 million bales, as competitive, exportable supplies result from consecutively large cotton crops.
Global cotton ending stocks for 2019/20 are projected at nearly 82.5 million bales, about 3 percent (2.2 million bales) higher than last season and the highest in 4 years. While China’s cotton stocks have fallen considerably over the last several years, they continue to account for a significant share of the total world stocks (fig. 5). At the end of 2019/20, China’s cotton stocks are projected at 33.7 million bales, or 41 percent of global supplies, their lowest share since 2010/11. As a result, other countries’ shares are rising, including India and the United States. For 2019/20, India’s cotton stocks are forecast at 10.3 million bales, or 12.5 percent of world stocks, while the United States contributes an additional 9 percent. Meanwhile, the share of stocks outside of China, India, and the United States have been rising for several years; in