Lower world cotton production and higher world consumption in 2009-10 has reduced world cotton stocks and contributed to the A-Index exceeding 80 cents in mid-February, according to a world and U.S. cotton outlook presented at USDA’s Agricultural Outlook Forum 2010 in Arlington, Va.

To read all the forum presentations, go to USDA Forum.

In 2009-10, world cotton production fell for the third consecutive season as credit problems, higher returns for alternative crops, and a weak economic outlook depressed cotton area. At the same time, adverse weather reduced yields, especially in the United States and India.

Global consumption has rebounded however, growing an estimated 5 percent, as the world economy recovered from the financial crisis and ensuing recession of 2008-09. With world stocks expected to fall sharply, the A-index has averaged just over 70 cents per pound for August-December, 2009 and has exceeded 80 cents as of mid-February. The U.S. season average price received by producers for upland cotton is currently forecast at 62 cents per pound, 30 percent above last season.

For 2010-11, both world cotton production and consumption are forecast to rise, but production gains are unlikely to keep pace with consumption, and world stocks are projected about 2.5 million bales lower. World production is projected to increase more than 10 percent to about 113.5 million bales, as both area and yield show gains from the 2009-10. World consumption is anticipated to continue its recovery, albeit at a slower growth rate of about 2.5 percent, reaching 118.5 million bales.

For the United States, production of 16 million bales is projected, 3.6 million bales above 2009-10, but higher offtake will absorb the increased supply, leaving ending stocks nearly unchanged. The U.S. season average price is projected to rise to 64 cents per pound as continued tight supplies relative to demand will be supportive.