Farm Futures
   Search Site:  Search Site Monday, April 21, 2014 | Bookmark This Site   
Skip Navigation Links
Home
Markets
News
Weather
Farm Futures NOW!
Magazine Online
RSS News
Mobile
Subscribe
Reprints
Register
Login
About Us
Advertise

Smaller World and U.S. Cotton Crops Coming in 2013

Lower production suggests "A" index world price is likely to run 75 cents to 95 cents for 2013-14 crop cotton. Chinese trade policy remains key.

Published on: Mar 20, 2013

USDA projects global 2013-14 cotton production at 115.5 million bales, down 3% from 2012-13. World yields are projected roughly equal to 2012. But cotton plantings are projected to fall nearly 3% from 2012-13. Low cotton prices are encouraging world growers to shift to relatively more profitable alternatives.

USDA projects lower production in the United States, China and Australia. Those countries are projected to produce 44% of the 2013 world crop, compared with a 46% share in 2012-13. Brazil, India and Pakistan are projected to up production in 2013-14.

China, the world's top cotton grower, is projected to produce 33.0 million bales in 2013-14, down 3% (1.0 million bales) from 2012-13. Australia's 2013-14 production is projected to decline 17% from a year ago, to 3.5 million bales due to a weaker market price for cotton and declining reservoir supplies for irrigation. Brazil's 2013-14 crop is projected at 7.5 million bales, up 1.0 million from the previous year, as continued investment in cotton infrastructure and lower prices for competing crops support cotton production. India, the world's second largest cotton grower, is projected to produce 26.0 million bales in 2013-14, up 2% from the previous year. Pakistan's 2013-14 production is projected to rise 4% to 10.0 million bales.

Lower production suggests "A" index world price is likely to run 75 cents to 95 cents for 2013-14 crop cotton. Chinese trade policy remains key.
Lower production suggests "A" index world price is likely to run 75 cents to 95 cents for 2013-14 crop cotton. Chinese trade policy remains key.

Use should climb

USDA projects world cotton consumption to rise 2.6% to 109 million bales in 2013-14, stimulated by growth in world GDP, which is expected to accelerate slightly in calendar 2013 and again in 2014, according to the International Monetary Fund.

"The projected global consumption is 12% below the peaks of 2006-07 and 2007-08, despite population and income growth," notes USDA economist, Carol Skelly. "Cotton has regained only a fraction of the market share lost to synthetic fibers as a result of high prices of 2010-11 and 2011-12."

Recent data on textile imports into the United States, historically the world's largest retail consumer of textiles, show only a marginal recovery for cotton's fiber share from a year-ago level. Cotton's share remains well below recent years.

Although world cotton prices have declined, China's domestic price support policies encourage the use of polyester over cotton by the world's largest yarn spinner. China's cotton consumption is projected to decline 4% in 2013-14, reflecting a cumulative loss of nearly one-third over the past four seasons. Offsetting the decline in China is a projected 6% rise for the rest of the world.

"A" index projection

Skelly sees current projections of world supply and demand, combined with the assumed China policies, pointing to an "A" index range of 75 cents to 95 cents per pound. The underlying world economic growth, China's price support policies and a modest tightening of world stocks outside of China are factors supporting prices.

"World cotton exports to China (assuming a 40% duty) will likely be competitive with the assumed China reserve release price at A-index levels in the mid-80s," notes Skelly. "This means that any surplus world supplies from countries outside of China probably could be sold there at prices similar to 2012-13. At the same time, however, sharply lower prices projected for feed grains and oilseeds, which compete with cotton for area, could have a price-depressing impact."

Smaller World and U.S. Cotton Crops Coming in 2013