Global Cotton Consumption Is Rebound Marginally in 2012-13

The latest U.S. Department of Agriculture (USDA) cotton forecast for 2012/13 indicates that global cotton consumption is expected to rise 3 percent from last season’s 8-year low as the global economy experiences a slow recovery. This season’s projected increase follows 2 consecutive years of decline when cotton prices reached unprecedented levels.

At 106.5 million bales, 2012/13 world cotton consumption is 14 percent below the 2006/07 peak. China remains the world’s largest cotton spinner, but declines have occurred there over the last three seasons as raw cotton and labor costs increased and spinning shifted elsewhere.

In 2012/13, India and Pakistan are expected to see their mill use climb and largely offset the decline in China. Combined, these three spinners continue to account for the bulk of 2012/13 global consumption, with a share forecast at 65 percent of the total. China alone accounts for a third of 2012/13 world consumption.

Domestic

U.S. Cotton Crop Forecast Reduced in December

The USDA December forecast of 2012 U.S. cotton production was reduced 1 percent (190,000 bales) this month to about 17.3 million bales, as production was adjusted in a number of States. The latest estimate indicates an 11-percent increase from the 2011 season in which the crop was affected considerably from the extreme drought conditions in the Southwest region. The 2012 national yield is projected at 793 pounds per harvested acre, 9 pounds below a year ago and 6 pounds below the 5-year average.

The harvested area estimate was unchanged in December at 10.4 million acres, one of the largest since 2006. Upland production is estimated at 16.6 million bales, 1.9 million bales above last season, while the extra-long staple (ELS) crop remains estimated at 657,000 bales. For current production estimates by State and region.

Upland production is estimated to increase this season in two of the four Cotton Belt regions, as record yields occurred in three of the regions. In the Southwest, upland production is estimated at 5.7 million bales, up 2 million bales from 2011 as a lower abandonment this season raised harvested area. The Southwest yield, estimated at 534 pounds per harvested acre, would be its lowest since 2003.

In the Southeast, cotton production is expected to reach 5.5 million bales, near the record of 5.6 million bales produced in 2001. Although area was lower this season, a record yield of 974 pounds per harvested acre pushed the crop 10 percent above 2011. Similarly, the Delta area was reduced in 2012 but a record yield of 1,011 pounds per harvested acre kept the crop from decreasing significantly. In 2012, Delta production is estimated at 4.1 million bales, the second highest in 5 years.

In the West region, upland production is estimated at 1.2 million bales, compared with 1.5 million last season. Despite a lower area, a record upland yield of 1,517 pounds per harvested acre in the West kept the crop there above average.

U.S. Demand Forecast Increased

U.S. cotton demand for the 2012/13 season was raised 200,000 bales this month to 15.2 million bales; the current estimate is also 200,000 bales above last season. U.S. cotton mill use—based on data collected by USDA’s Farm Service Agency— remains forecast at 3.4 million bales for 2012/13, compared with the 3.3-millionbale estimate for 2011/12.

On the other hand, U.S. cotton exports were increased in December; exports are now projected at 11.8 million bales, slightly above last season’s final estimate. Despite lower world cotton trade in 2012/13, larger U.S. supplies are expected to boost the U.S. share of global trade this season. The current trade share is forecast at 31 percent, compared with last season’s 26 percent and 2010/11’s 40 percent.

U.S. Stocks Revised; Farm Price Range Narrowed

With U.S. cotton production exceeding demand in 2012/13, U.S. ending stocks will rise above the beginning level. Ending stocks are currently projected at 5.4 million bales, 2 million bales above last season. Both the stock level and the stocks-to-use ratio—estimated at 35 percent—would be the highest in four seasons. Based on the latest supply and demand outlook for 2012/13, the average upland cotton farm price is now forecast to range between 65 and 71 cents per pound, compared with the final 2011/12 price of 88.3 cents per pound.

U.S. Cotton Textile Trade Lower During First 9 Months of 2012

U.S. cotton textile trade continues to be affected by the sluggish global economy in 2012. During the first 9 months of 2012, cotton product imports reached about 6.2 billion (raw-fiber equivalent) pounds, 7 percent below the comparable period in 2011.

Cotton product exports saw a decline as well, with exports totaling only 1.2 billion pounds during January-September 2012, 13 percent below the 2011 comparable period. As a result, the net cotton trade deficit has declined 5 percent during the first 9 months of 2012 to 4.9 billion pounds.

The top five suppliers of cotton textile and apparel products to the United States continue to account for more than 60 percent of the total. For January-September 2012, the share equaled 63 percent, up from 62 percent posted in for the comparable period of 2011 as well as calendar 2011.

Each of the leading suppliers, with the exception of India, had lower volumes to the United States during the first 9 months of 2012; India’s volume rose about 2 percent. Based on the latest data, the shares of total imports were mixed. China accounted for 32 percent of the volume so far in 2012, similar to calendar 2011. Pakistan and India each accounted for an additional 9 percent, while Bangladesh and Mexico each provided an additional 7 percent of total U.S. imports.

International Outlook

World Cotton Production To Decline in 2012/13

Global 2012/13 cotton production is forecast at 116.9 million bales, down 6 percent from the previous year as more profitable competing crops crowd out cotton from area under cultivation. Output decline is expected in almost all major producing countries.

Australia and Brazil are forecast to produce 4.0 million bales and 6.5 million bales, respectively, down 27 percent and 25 percent from the previous year. India and Pakistan are expected to produce 25.5 million bales and 10.0 million bales, respectively, down 7 percent and 6 percent from the preceding year. India’s 2012/13 production decline is driven by reductions in both area and yield, while the reduction in Pakistan is mainly a function of lower yields.

China, the world’s leading producer, is forecast to produce 31.5 million bales, down 5 percent from a year earlier. China’s area harvested is expected to decline 7 percent from a year ago to 5.0 million hectares in 2012/13. The United States is expected to produce 17.3 million bales in 2012/13, an increase of 10 percent from the preceding year. The United States is the only major producer whose output is expected to rise in 2012/13.

World 2012/13 cotton area harvested is forecast at 34.2 million hectares, a decline of 4 percent from the previous year. Global yield is forecast at 744 kg/ha.

Global 2012/13 Mill Use and Ending Stocks To Rise in 2012/13<O:P>

World 2012/13 cotton mill use is forecast at 106.5 million bales, up 3 percent from the previous year. China’s cotton consumption is forecast at 35.5 million bales, down 7 percent from the previous year as domestic price support and national reserve policies combine to depress the margins of domestic cotton spinners. China’s large procurement of the 2012/13 crop is expected to limit the availability of cotton to local mills.

However, the forecast reduction in China’s mill use is more than offset by increases in other countries, resulting in an increase in global 2012/13 consumption. India’s 2012/13 cotton consumption is forecast at a record 22.0 million bales, up 10 percent from a year ago.

Pakistan is forecast to consume 11.5 million bales in 2012/13, up 14 percent from the previous year, due partly to a substantial increase in yarn exports to China. Brazil, Turkey, and the United States are forecast to consume 4.1 million bales, 6.0 million bales, and 3.4 million bales in 2012/13, respectively, up 3 percent, 7 percent, and 3 percent from a year ago.

Turkey and the United States are forecast to consume 6.0 million bales and 3.4 million bales, respectively, up 3 percent and 6 percent from the previous year. World 2012/13 ending stocks are forecast at a record 79.6 million bales, an increase of 15 percent from a year earlier. China’s stocks are expected to account for 70 percent of the forecast increase in global stocks.

China’s ending stocks are expected to increase 25 percent to 37.6 million bales. If realized China’s share of world stocks will be 47 percent. China’s ongoing policy of cotton procurement for the national reserve has contributed to this buildup in ending stocks. While India’s ending stocks are forecast to increase 13 percent to 8.7 million bales, Pakistan’s ending stocks are expected to rise 12 percent to 3.4 million bales in 2012/13.

Ending stocks in the United States and Turkey are forecast at 5.4 million bales and 1.3 million bales, respectively, up 61 percent and 5 percent from a year earlier. With larger world stocks, the A-index has fallen more than 20 percent below the year-ago level.

World 2012/13 Trade To Decline<O:P>

World 2012/13 imports are forecast at 37.7 million bales, down 16 percent from the previous year. The forecast decline in world imports is driven largely by an expected decline in China, where 2012/13 imports are forecast to decrease 53 percent to 11.5 million bales. China’s ongoing national reserve policy has reduced its demand for foreign cotton.

Bangladesh and Indonesia are forecast to import 3.7 million bales and 2.3 million bales in 2012/13, respectively, both up 16 percent from a year earlier. Pakistan and Turkey are expected to import 2.4 million bales and 3.5 million bales in 2012/13, respectively, up 140 percent and 47 percent from the previous year.

Exports by Australia and Brazil, the main Southern Hemisphere suppliers, are both forecast at 4.2 million bales, respectively, down 10 and12 percent from a year earlier. The African Franc Zone is expected to export 3.3million bales in 2012/13, an increase of 40 percent from the previous marketing year. India is forecast to export 4.0 million bales in 2012/13, down 64 percent from a year earlier, leaving Brazil and Australia tied as the world’s second largest cotton exporter.

The United States—the world top cotton exporter—is expected to export 11.8 million bales in 2012/13, marginally above last year.