World Cotton Production Remains Concentrated Among Five Countries
The latest U.S. Department of Agriculture (USDA) projections for 2012 indicate that global cotton production is forecast at 113.8 million bales, 7 percent below the 2011 record estimate of 122.7 million bales. Despite a 1.5-million-bale reduction from last month—due mainly to decreases in India and Pakistan—the global production forecast remains above projected consumption for 2012/13, resulting in rising world stocks for the third consecutive season.
The top five cotton-producing countries continue to account for approximately 80 percent of total world production, with 2012 projected at 78 percent. Figure 1 illustrates the production shares for each of the major producers. For 2012, the projected shares for China and India account for a combined 48 percent, down from recent years. Lower cotton prices resulting from rising stocks reduced 2012 area and production prospects for many producers. Although 2012 U.S. plantings are lower, harvested area and production are expected to rise from 2011’s drought-related losses.
U.S. Cotton Crop Projection Unchanged Despite Lower 2012 Area
The U.S. cotton production forecast for 2012 remains at 17.0 million bales this month and is projected 1.4 million bales above the 2011 crop. Despite a reduction in planted area based on the June Acreage report (see table 10), the crop was left unchanged as abandonment and yield were adjusted based on current conditions. While drought conditions are still prevalent across parts of the Cotton Belt this year, they are much improved from those in 2011. Abandonment and yield projections are based on 2009-11 averages, weighted by region; however, harvested area is further adjusted to include estimated abandonment of 30 percent in the Southwest.
Based on the June Acreage report, U.S. producers indicated that they had planted or intended to plant more than 12.6 million acres to cotton in 2012, 4 percent below the March Prospective Plantings report and 14 percent below 2011. Although planted area is below last season, harvested area is projected 10 percent higher at 10.4 million acres. Improved moisture and crop conditions in the Southwest— compared with last season—are expected to reduce abandonment dramatically from 2011 when the region lost over 60 percent of the intended area. Nationally, U.S. abandonment for 2012 is projected at 18 percent (2.2 million acres), above the long¬term average of 13 percent. The projected 2012 abandonment compares with a record of 36 percent (5.3 million acres) set last season (fig. 2); the previous abandonment record of 27 percent occurred in 1933.
Upland cotton area projections are lower for each region of the Cotton Belt for 2012, ranging from 11 percent to 22 percent lower, as higher alternative crop prices provided the incentive to reduce cotton area. Area in the Southwest was reported at about 7.2 million acres (11 percent lower); this region is expected to have an above average abandonment once again in 2012. In the Southeast and Delta regions, area is estimated at about 2.7 million acres (22 percent lower) and 2.1 million acres (13 percent lower), respectively. Upland area in the West is estimated to decline 20 percent from 2011 to 400,000 acres. In addition, extra-long staple area—most of which is in the West—is expected to reach 235,000 acres, 23 percent below 2011.
U.S. cotton crop development in 2012 continues ahead of both last season and the 5-year average. As of July 8th, 70 percent of the crop was squaring, compared with 56 percent a year earlier and the 5-year average of 64 percent. Likewise, area setting bolls had reached 23 percent as of early July, compared with 18 percent in 2011 and the 2007-11 average of 19 percent. Meanwhile, early season U.S. cotton crop conditions are above the corresponding period from last year and similar to the 5-year average (fig. 3). As of July 8th, 44 percent of the U.S. area was rated “good” or “excellent,” compared with 28 percent last season, while only 18 percent was rated “poor” or “very poor,” compared with 42 percent in 2011.
The U.S. yield is currently projected at 785 pounds per harvested acre, slightly below last season’s final estimate. In August, USDA’s National Agricultural Statistics Service will publish its first survey-based results for 2012 cotton production.
Cotton Demand and Stocks Revised
As the start of the 2012/13 season approaches, demand projections for the upcoming season were revised slightly this month; 2012/13 total U.S. cotton demand is forecast at 15.5 million bales, 600,000 bales above the latest 2011/12 estimate. U.S. exports for 2012/13 were increased 300,000 bales this month as higher projected foreign import demand is expected to support exports of 12.1 million bales. U.S. mill demand for 2012/13 was reduced slightly to 3.4 million bales, reflecting recently reported mill activity that reduced the 2011/12 estimate this month.
Despite global cotton trade being projected smaller in 2012/13, the U.S. share of world trade is forecast to rebound from 2011/12. Larger U.S. exportable supplies are expected in 2012/13 as is less competition from some of the major cotton producers that reduced area. Based on the current projections, the U.S. share of world trade is forecast at 32 percent, between last season’s 27 percent and 2010/11 ’s 39 percent.
Based on the latest supply and demand estimates, 2012/13 stocks are forecast to rise for the second consecutive season from 3.3 million bales when the season begins on August 1st, to 4.8 million bales at season’s end. Just as actual stocks are likely to increase in 2012/13, the stocks-to-use ratio is also expected to rise from 22 percent in 2011/12 to 31 percent in 2012/13, the highest in four seasons. The 2012/13 upland farm price is expected to range between 60 and 80 cents per pound, compared with the 2011/12 estimate of 91 cents and 2010/11 ’s 81.5 cents.
Global Cotton Production To Decline in 2012/13
World 2012/13 cotton production is forecast at 113.8 million bales, a 7-percent decline from the previous year. The expected output decline is driven mainly by a combination of relatively weak global cotton prices and rising production costs, encouraging major growers to shift area to more profitable alternatives.
China and India are forecast to produce 30.5 million bales and 24.0 million bales, respectively, each a 9-percent decline from a year earlier. China’s harvested area is also expected to decline 9 percent from the previous year to 5.0 million hectares in 2012/13. India’s harvested area is forecast at 10.8 million hectares in 2012/13, down 11.5 percent from a year earlier. India’s production is revised down 4 percent from last month to 24.0 million bales, as low prices and a delay in the monsoon season have shaved production prospects. Australia and Brazil are forecast to produce nearly 4.3 million bales and 7.0 million bales in 2012/13, a decline of 13 percent and 20 percent, respectively, from the previous year. Australia’s harvested area is expected to decline 18 percent to 475,000 hectares, while Brazil’s area is forecast to contract 23 percent from a year earlier to nearly 1.1 million hectares.
Pakistan and Uzbekistan are expected to produce 9.7 million bales and 4.1 million bales in 2012/13, down 9 percent and 2 percent, respectively, from the preceding year. Area harvested in Pakistan and Uzbekistan is forecast to decline 3 percent from a year earlier to 3.1 million hectares and 1.3 million hectares, respectively.
The United States and the African Franc Zone (AFZ) are forecast to produce 17.0 million bales and 3.1 million bales in 2012/13, up 9 percent and 2 percent, respectively, from the previous year.
Globally, 2012/13 harvested area is forecast at 33.3 million hectares, down 7 percent from a year earlier, and yield is projected at 745 kg/ha, similar to 2011/12.
World Cotton Consumption To Rebound, Stocks at Record in 2012/13
Global 2012/13 cotton mill use is forecast to increase 2 percent from a year earlier to 109.0 million bales. China is expected to consume 39.5 million bales in 2012/13, down 1.5 bales (-3.7 percent) from the preceding year. If realized, the projected mill use will reduce China’s global share of cotton consumption to 36 percent, the lowest in 8 years. The projected decline in China’s cotton mill use is expected to be more than offset by increases in other countries such as India, Pakistan, and Vietnam.
India and Pakistan are forecast to consume 21.5 million bales and nearly 11.3 million bales, 5-percent and 10-percent increases, respectively. Vietnam’s 2012/13 cotton consumption is expected to rise 9 percent from the previous year to nearly 1.8 million bales. Brazil and Turkey are forecast to consume nearly 4.3 million bales and 5.6 million bales in 2012/13, an increase of 6 percent and 7 percent, respectively, from the previous year. The United States is forecast to consume 3.4 million bales in 2012/13, a 3-percent increase from a year earlier.
Global cotton 2012/13 ending stocks are projected at a record 72.4 million bales, up 9 percent from the preceding year, as global production outpaces consumption.
World stocks are forecast at their highest level relative to cotton consumption since at least 1960. World stocks are forecast at 66 percent of annual consumption in 2012/13, compared with only 40 percent in 2009/10 and a 10-year average of 51 percent.
China’s policy of continued accumulation of cotton in the national reserve accounts for most of the projected increase in world stocks and would raise China’s share of total world stocks to 44 percent. At the same time, the divergence between China’s domestic price support level and world prices is constraining China’s consumption, such that stocks there could reach 80 percent of total offtake. USDA continues to assume that China will release a portion of the cotton acquired by the national reserve during 2012/13, thereby partially offsetting China’s need for imports. If the Government of China does not release reserves, then China’s stocks are likely to rise even higher than the current projection.
With China absorbing most of the world’s cotton surplus, stocks in other countries mostly show balanced supply and use. Stocks in the United States are forecast at 4.8 million bales, a 45-percent increase from the previous year, but the forecast stocks-to-use ratio of 31 percent is only marginally above the 10-year average. Stocks in foreign countries outside of China would account for about 39 percent of their use, in line with the previous two seasons. Southern Hemisphere stocks are anticipated to fall about 1.2 million bales, mainly reflecting lower expected production in Brazil and Australia. Projected stocks in India and Pakistan, at 30 percent and 28 percent of total use, respectively, are adequate but not excessive to support projected offtake.
Global Cotton Trade Forecast To Decline in 2012/13
World 2012/13 cotton imports are projected to decline 14 percent from the previous year to 37.4 million bales. Several countries are expected to increase imports in 2012/13 but not cumulatively enough to offset a major import contraction by China. Bangladesh and Indonesia are forecast to import 3.6 million bales and 2.1 million bales, up 14 percent and 6 percent, respectively, from a year earlier. Pakistan and Turkey are forecast to import 2.2 million bales and 3.0 million bales, an increase of 83 percent and 30 percent, respectively, from the preceding year.
On the export side, increases in several cotton exporting countries are expected to be more than offset by export declines in Brazil and India (fig. 4). Brazil’s 2012/13 cotton exports are forecast at 4.0 million bales, down 17 percent from the preceding year’s record. India is expected to export 3.7 million bales in 2012/13, down 63 percent from the previous year, due to lower supplies and higher domestic consumption. Australia and the AFZ are forecast to export 4.5 million bales and 2.8 million bales, an increase of 7 percent and 24 percent, respectively, from a year earlier. If realized, Australia’s share of world trade will rise to 12 percent, while AFZ’s share will be 7.4 percent. Uzbekistan and the United States are expected to export 2.8 million bales and 12.1 million bales in 2012/13, up 10 percent and 4 percent, respectively, from the preceding year.
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