The latest U.S. Department of Agriculture (USDA) cotton estimates for 2016/17 project world cotton ending stocks to decline 10 percent from the previous season to 87.3 million bales. With back-to-back reductions projected–the first in seven seasons–global cotton stocks would drop to their lowest level since 2011/12, as China continues to reduce the surplus supplies accumulated during the 2011-14 seasons.
Domestic Outlook
2016 U.S. Cotton Crop Estimate Lowered Slightly in October
According to USDA’s October Crop Production report, 2016 U.S. cotton production is estimated at 16.0 million bales, slightly below last monthΆs forecast but 3.1 million bales (24 percent) above the 2015 crop. With harvested area unchanged and the national yield reduced 5 pounds per acre, the U.S. production estimate declined 108,000 bales this month.
The U.S. upland cotton crop is forecast at 15.5 million bales, above last season and the 5-year average. During the previous 20 years, the October estimate has been below final cotton production 11 times and above it 8 times; the October forecast equaled final production in 1 year.
Past differences between the October estimate and final production indicate that chances are two out of three that the 2016 U.S. upland cotton crop will range between 14.7 million and 16.2 million bales.
Upland cotton production is expected to increase in each of the Cotton Belt regions this season. In the Southwest, the 2016 upland crop is forecast at 7.1 million bales, 1 million above last season as higher area more than offsets a lower yield.
Abandonment expectations remain relatively low this season as the region received beneficial rainfall; Southwest abandonment is forecast at 7 percent, compared with 6 percent in 2015 and a 10-year average of 29 percent. The Southwest yield is estimated at 609 pounds per harvested acre, compared with the previous 3-year average of 637 pounds per harvested acre.
In the Southeast, 2016 cotton production is forecast at 4.3 million bales, above last seasonΆs relatively modest crop but 500,000 bales below the 5-year average. With area similar to that in 2015, the production increase is attributable to a higher yield, which is forecast at 963 pounds per harvested acre–the second-highest on record; however, the effect of Hurricane Matthew is not reflected in this monthΆs estimate, and any necessary adjustments will be incorporated in subsequent reports.
In the Delta, the cotton crop is projected at 3.3 million bales, above last yearΆs historically low level but near the 5-year average. Cotton area rebounded in 2016 as alternative crops were less favorable; the Delta yield is projected to reach 1,090 pounds per harvested acre, the second-highest on record.
In the West, the upland cotton crop is forecast at 677,000 bales in 2016, up from last season but still one of the lowest in the last 80 years. Both area and yield are projected to increase in 2016 but remain below their respective 5-year averages. In addition, the extra-long staple (ELS) crop–grown mainly in the West–is forecast at 562,000 bales in 2016, above last season but similar to 2014, as this seasonΆs area and yield are projected to increase.
Total 2016 U.S. cotton harvested area is estimated at nearly 9.7 million acres, compared with 8.1 million acres last season. The national yield is projected at 797 pounds per harvested acre, near the average of the previous two seasons.
2016/17 U.S. Demand and Stock Estimates Revised
The U.S. cotton demand estimate for 2016/17 was increased to 15.5 million bales in October, 500,000 bales above the September projection and nearly 3 million bales above 2015/16. U.S. exports accounted for the entire increase this month and are now projected at 12 million bales in 2016/17.
This monthΆs higher global import demand, coupled with the larger U.S. crop this season, is contributing to the highest export forecast in four seasons. In addition, the United States had relatively large 2016/17 carry-in stocks compared with most of its competitors, which have boosted early-season export sales.
The U.S. share of global trade is forecast at 34 percent in 2016/17, up from 26 percent last season and the highest since 2010/11 when the share reached 41 percent.
With the U.S. demand projection higher in October and production slightly lower, ending stocks are forecast at 4.3 million bales, 500,000 bales below the beginning level. As a result, the stocks-to-use ratio is forecast at 28 percent in 2016/17, compared with last seasonΆs 30 percent.
Based on the latest supply and demand estimates and the most recent prices, the average upland cotton farm price is projected to range between 59 cents and 69 cents per pound in 2016/17. The midpoint of 64 cents would represent a 6-cent increase from last seasonΆs estimate of 58 cents per pound and the highest in 3 years.
