From the Cotton Grower 2015 Annual
BY DR. JODY CAMPICHE
Based on the October 2015 USDA National Agricultural Statistics Service estimate, U.S. producers planted about 8.5 million acres of cotton in the 2015 marketing year – about 23% less than last year.
Acreage is down in all regions, with some areas, such as south Texas, being particularly low due to excessive rains.
In addition to excessively wet weather deterring some acres, lower cotton prices, relative to prices of competing crops, resulted in lower cotton acreage in the Mid-South and Southeast.
As the 2015 U.S. cotton harvest progressed, USDA estimated a 2015 U.S. crop of 13.3 million bales, 18% less, or 3 million fewer bales, than in 2014. Upland production was seen reaching 12.9 million bales, with Pima production forecast at 451,000 bales.
World production for 2015 is projected to be 107 million bales, which is more than 10 million bales less than last year. China is responsible for the largest decrease in production – 4.7 million bales less than last year. The Pakistan crop is expected to be about 1 million bales less in 2015. Production in both India and Brazil is expected to decline by 500,000 bales in 2015, while Turkey is projected to lower production by 400,000 bales.
For the first time in six years, world consumption is expected to exceed production in 2015. USDA projected an increase in world mill use of about 2%. U.S. textile mills are expected to consume 3.7 million bales – 100,000 bales more than 2014 – which marks the fourth consecutive year of increased consumption as a result of new investment and growth in textile mills in the United States.
The United States will remain the largest exporter of cotton, with 2015 shipments estimated at 10.2 million bales.
Though China remains the largest cotton importer, it was projected to significantly lower imports in 2015.
China’s fiber policies have been one of the largest factors influencing cotton markets over the past five years. For the 2011-13 crops, China supported its cotton farmers by purchasing large amounts of China’s production into government reserves at a price well above the world market, essentially establishing a floor on internal cotton prices.
By late 2011, China’s cotton prices were well above international cotton prices and polyester prices. As a result, Chinese mills turned to lower priced polyester and other manmade fibers.
China continues to hold approximately 50 million cotton bales in government reserves. Efforts to reduce the reserve have not been successful, and large ending stocks still hang over the market.
The decline in Chinese imports is expected to be partially offset by increased imports from Bangladesh and Vietnam. In the past five years, the share of U.S. exports by country has changed considerably, particularly for China, Vietnam and Indonesia.
In 2014, China accounted for 23% of U.S. cotton exports, compared with their 2010-14 average of 37%. Vietnam accounted for 15% of U.S. cotton exports in 2014, compared to its 2010-2014 average of 6%.
Turkey, Indonesia and Mexico have continued to remain important export customers as well. Over the past five years, Turkey has continued to be our second largest customer, accounting for about 15% of U.S. cotton exports.
However, the demand for U.S. cotton by Turkey has been affected by an ongoing anti-dumping investigation by the Turkish government against the U.S. cotton industry. For the past year, Turkish authorities have been investigating U.S. cotton exporting companies to determine if U.S. cotton is being dumped into the Turkish market.
According to international trade rules, dumping occurs when product is sold into a market at below costs of production or at a price below that being sold in other markets. An affirmative finding by Turkish officials would mean that an anti-dumping duty would be applied to U.S. cotton imports, while imports from other countries would remain duty free.
A duty would undermine U.S. cotton’s competitiveness and directly affect prices received by U.S. cotton producers.
Looking ahead, one of the key factors affecting the demand for U.S. cotton is quality – an extremely important factor in determining the price of cotton. U.S. cotton quality has been improving continuously over the past decade due to enhanced crop management practices and technologies, including the use of new and improved seed varieties.
In the past 10 years, the average staple length has increased with about 60% of the U.S. Upland crop averaging a staple length of 36 or higher. At the same time, the average color grade is higher due to improved harvesting and ginning technologies.
Many of our major importers prefer U.S. cotton due to the excellent quality and longer staple length needed for certain spinning technologies.
Producing high quality U.S. cotton for textile mills in the United States and abroad is essential for our industry to remain competitive, as about 75% of the U.S. crop is exported each year. The main competition for U.S. cotton is from man-made fibers, as well as other high quality machine-harvested cotton from Brazil and Australia.
Campiche is Vice President, Economics & Policy Analysis, National Cotton Council of America