Global Cotton Stocks Forecast at Record High
The latest U.S. Department of Agriculture (USDA) projections for 2012/13 indicate that world cotton stocks are expected to rise for the third consecutive season, reaching a new record. Global ending stocks are currently projected at 74.5 million bales for 2012/13, nearly 11 percent or 7.2 million bales above 2011/12 (fig. 1).
World cotton stocks have grown considerably as a result of the recent record cotton prices that encouraged area increases in 2010 and 2011 and subsequently led to large crops. Meanwhile, the higher prices promoted fiber substitution at mills and the slowdown in the global economy reduced demand further, exacerbating the stocks rise. The growth in world stocks for the 2011/12 and 2012/13 seasons is largely occurring in China, where purchases for its national reserve program have been extensive and stocks are projected to expand by nearly 20 million bales over the 2-year period. However, most of this cotton will be unavailable to mills outside of China as demand rebounds.
2012 U.S. Cotton Production Projection Unchanged
USDA’s projection for the 2012 cotton crop remains estimated at 17 million bales this month. In 2011, the U.S. cotton crop totaled nearly 15.6 million bales. The higher production is based on an increase in harvested area from last season’s drought-reduced crop despite prospective plantings that reduced cotton area about 11 percent.
The planting estimate—currently at 13.2 million acres—will be updated in the Acreage report released by USDA on June 29th. This report will include actual plantings as of early June as well as estimates for any remaining cotton to be planted. As of June 10th, 96 percent of the expected cotton area had been planted, slightly above both last season and the 5-year average. In addition to planting progress, cotton development is running ahead as well with 19 percent of the cotton area squaring, compared with 11 percent for both 2011 and the 5-year average.
Based on the current projections, U.S. harvested area is forecast at 10.5 million acres, implying an abandonment rate of 20 percent; last season’s final abandonment reached a record 36 percent. The U.S. cotton yield remains forecast at 777 pounds per harvested acre for 2012, compared with 790 pounds per harvested acre for 2011. USDA will begin “in field” production surveys in August.
Revisions to Supply and Demand Estimates
Adjustments to June’s U.S. cotton supply and demand estimates were limited to exports and stocks. Offsetting export changes were made in 2011/12 and 2012/13 as foreign import demand was increased for 2011/12 but reduced for 2012/13. The U.S. cotton export estimate for 2011/12 was increased 200,000 bales this month to 11.6 million bales based on recent shipment data, while the 2012/13 forecast was reduced by an equal amount to 11.8 million bales. Based on the current export estimates, the U.S. share of world trade in 2012/13 is expected to rise from an 11- year low of 27 percent to 32 percent.
As a result of the export adjustments in June, U.S. ending stocks were lowered for 2011/12, but were unchanged for 2012/13. Stocks are now estimated at 3.2 million bales for 2011/12 and 4.9 million bales for 2012/13, for stocks-to-use ratios of 21 percent and 32 percent, respectively. Based on the latest supply and demand estimates, the forecast for the 2012/13 U.S. average farm price is projected to range between 60 and 80 cents per pound, with the midpoint of this range well below the latest estimate of 91 cents per pound for 2011/12.
U.S. Cotton Textile Trade Update
U.S. cotton textile trade during the first quarter of 2012 declined from that of a year earlier as consumer demand for apparel products has been affected by the sluggish growth in the economy. During January-March 2012, cotton product imports approached only 1.9 billion (raw-fiber equivalent) pounds, 10 percent below the amount imported in the corresponding period of 2011. Similarly, cotton textile and apparel exports for the first 3 months of 2012 were below a year earlier at 413 million pounds. As a result, the cotton product trade deficit for first-quarter 2012 was 1.4 billion pounds, compared with 1.6 billion for the comparable period in 2011. Cotton continues to account for the largest share of the total fiber product deficit, contributing more than 50 percent during first-quarter 2012.
Although the volume of U.S. cotton product imports was lower from most sources, the five leading suppliers’ combined share rose slightly during first-quarter 2012 at the expense of other countries. Among the top five countries, however, only India and Bangladesh experienced share growth from the most recently completed calendar year (fig. 2). During the first 3 months of 2012, India’s share approached 10 percent, compared with 8 percent for both 2010 and 2011 calendar years, while Bangladesh’s share rose less than 2 percentage points to 7.6 percent. Meanwhile, the share for China—the single largest source for U.S. cotton products—reached 28.5 percent during the first 3 months of 2012. While above the corresponding period of 2011, the share is considerably lower than both 2010 and 2011.
U.S. cotton product exports remain more concentrated than imports. During January-March 2012, the top five countries accounted for 85 percent of the total, compared with 84 percent a year earlier. Although the share for the leading destinations was similar to a year ago, individual country shares varied. For Honduras—the top destination for U.S. cotton products—the share declined from 40 percent a year ago to 36 percent. In contrast, the shares for Mexico, El Salvador, and Canada each increased during first-quarter 2012, combining to capture the share lost by Honduras.
World 2012/13 Cotton Crop Forecast Revised Downward
Global 2012/13 production is forecast to decline 6 percent from the preceding year to 115.3 million bales. The revised forecast reflects a 1.4-million-bale reduction from the previous month due to expectations that Australia, Argentina, and Brazil will reduce area (and thus production) in response to the continuing decline in world cotton prices. Australia and Brazil are forecast to produce 4.25 million bales and 7.0 million bales in 2012/13, respectively, a decline of 10 percent and 23 percent from the previous year. Area harvested in 2012/13 is expected to decline 18 percent to 475,000 hectares in Australia, while Brazil’s area is forecast to contract 23 percent to 1.1 million hectares.
China and India are forecast to produce 30.5 million bales and 25.0 million bales, respectively, down 9 percent and 6 percent from the previous year. Pakistan’s 2012/13 crop is forecast to decline 6 percent from a year earlier to 10 million bales. The United States is the only major producer where the 2012/13 crop (17 million bales) is expected to increase (9 percent) from the preceding year, the result of last season’s devastating drought. Global harvested area is forecast at 33.7 million hectares, down 6 percent from the previous year, while yield is forecast at 746 kg/ha, similar to 2011/12.
World 2012/13 Mill Use To Rebound; Ending Stocks To Reach a Record
Although world 2012/13 cotton consumption is revised downward by a million bales (1 percent) from the previous month, the forecast of 109 million bales represents an increase of nearly 3 percent from a year earlier. China is forecast to consume 40 million bales in 2012/13, down 2 percent from the previous year. This would be the lowest mill use in 8 years, if realized. The forecast contraction in consumption by China is expected to be more than offset by increased mill use in India, where 2012/13 cotton consumption is forecast at 21.3 million bales, up 6 percent from the preceding year.
In Pakistan and Turkey, 2012/13 mill use is forecast at 11.0 million bales and 5.6 million bales, respectively, up 7 percent and 6 percent from the previous year.
Brazil is forecast to consume nearly 4.3 million bales, up 6 percent from the preceding year, while in the United States 2012/13 consumption is expected to rise 3 percent to 3.5 million bales. Thailand is expected to consume nearly 1.6 million bales in 2012/13—a 22-percent increase from the preceding year, as mills there recover from the severe flood problems experienced in 2011/12.
Global 2012/13 ending stocks are forecast at a record 74.5 million bales, an increase of 11 percent from the previous year, as expected production outpaces forecast consumption. Not surprisingly, the resulting increase in the stocks-to-use ratio to 68 percent is expected to weaken global cotton prices. China’s 2012/13 ending stocks are forecast at 31.3 million bales, a 15-percent increase from the preceding year, leaving the world’s top cotton consumer to account for 42 percent of global ending stocks (fig. 3). India and Brazil are forecast to account for 12 percent and 10 percent of global 2012/13 ending stocks, respectively. The United States, Pakistan, and Australia are expected to account for 7 percent, 5 percent, and 4 percent, respectively.
Global Cotton Trade To Contract in 2012/13
China’s 2012/13 imports are forecast at 13.5 million bales, down 42 percent from a year ago due to a record level of 2012/13 beginning stocks, estimated at 27.3 million bales. The decline from previous year’s imports is made more pronounced by the June WASDE’s revision of China’s 2011/12 imports to 23.3 million bales, an increase of nearly 1.8 million bales from the previous month’s estimate, as shipments continue to arrive from Australia, Brazil, India, and the United States.
Bangladesh and Indonesia are forecast to import 3.6 million bales and 2.1 million bales in 2012/13, an increase of 14 percent and 6 percent, respectively, from the previous year. Pakistan and Turkey are forecast to import 2.2 million bales and 3.0 million bales, respectively, up 83 percent and 30 percent, from the previous marketing year.
Global 2012/13 exports are forecast at 37 million bales, down 15 percent from the previous year. The 2-percent export increases forecast in 2012/13 in Australia (4.3 million bales) and the United States (11.8 million bales) are far less than the declines projected in Brazil and India. Brazil is forecast to export 4.1 million bales in 2012/13, a 16-percent contraction from the preceding marketing year due to a smaller expected crop from which some of the exports will be derived. India, usually the world’s second largest exporter, is expected to export only 4 million bales in 2012/13, down 60 percent from the previous year. If realized, India will lag behind Australia as the third largest exporter globally. Uzbekistan’s 2012/13 cotton exports are forecast at 2.6 million bales, up 4 percent from the preceding year.
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