August WASDE shows mixed, major adjustments

John Robinson, Extension economist, cotton marketing 

Cotton futures trading in the month of August used to be known for several things. Seasonally low trading volumes frequently happened in August, likely due to a shortage of tradeable information and a reduced supply of (vacationing) traders. This resulted in the proverbial “dog days of August.” Potentially offsetting this situation, mid-August was the time frame when USDA-NASS occasionally released potentially game-changing field sample data on U.S. cotton yields.   

NASS changed its data collection pattern in 2024, shelving the field sampling of cotton yield data that used to begin in August. As a result, I was expecting a rather boring WASDE report. Boy, was I wrong.  

First, August trading volumes of ICE cotton futures have been on the strong side. And then I must give USDA credit for boldly moving forward with whatever new data-collecting tools they have (e.g., grower surveys and perhaps satellite imagery). 

The August WASDE saw mixed but major adjustments to the 2024/25 U.S. balance sheet compared to the prior month (third column of numbers in Table 1). To begin with, U.S. beginning stocks were raised by 100,000 bales. Planted acreage decreased by half a million acres compared to the previous month's estimate. The abandonment rate was increased from 17% to 22%. And finally, U.S. all cotton yield per harvested acre was cut from 844 to 840 pounds. The last three adjustments combined for a 1.89 million-bale cut in forecasted U.S. production, month-over-month, down to 15.11 million bales.   

Cotton exports

On the demand side, U.S. exports were cut a million bales, month-over-month, to 12 million bales. The bottom line of these mixed adjustments was a net 800,000 cut in U.S. ending stocks, to 4.5 million. The monthly adjustment would historically be price-supporting, at least in the short run. The resulting level of ending stocks is probably neutral. 

USDA's month-over-month adjustments also reflected a dramatic tightening of the 2024/25 world cotton balance sheet. World beginning stocks were cut 3.53 million bales, mostly in China (-3.4 million). World production was lowered 2.6 million bales, mostly in the U.S. (-1.89 million), India (-500,000) and West Africa (-200,000). This resulted in a huge six-million-bale reduction in world supply, month-over-month. World cotton imports continued to be cut with slightly under a million fewer bales compared to last month, mostly in China (-1.5 million) offset by India (+500,000). 

On the demand side, world exports were reduced just over a million bales, month-over-month, mostly in the U.S. World domestic use was also cut just under a million bales (mostly in China). The supply side cuts dominated those on the demand side, resulting in a five-million-bale reduction in world ending stocks, which is historically bullish in both the monthly adjustment and the resulting level.