Encouraging Signs for U.S. Cotton
March 31, 2010 Lingering effects and uncertainties for the general economy continue to present challenges for the U.S. cotton industry. But data suggests the worst has been weathered and recent concerns are being replaced with prospects for recovery and growth, National Cotton Council Economist Dr. Gary Adams said in his Annual Meeting presentation.
A major reason for optimism, Adams said, is an estimated global stocks reduction of 9.4 million bales – the largest single-year drawdown since 1986. Projected 2009 global mill use of 114.6 million bales — 3.1 percent higher than 2008 — and ending stocks of 51.5 million bales, would result in a global stocks-to-use ratio of 45 precent.
“An unknown at this point is the extent to which the rebound in mill use is due to stronger consumer demand or the replenishing of pipeline inventories,” Adams said. “For the 2010 marketing year, world mill use is projected to grow by 2.3 percent, reaching 117.3 million bales. This growth, though, is predicated on the continued improvement in the general economy.”
Adams said that ending U.S. cotton stocks are projected to have fallen to 3.7 million bales by the 2009 marketing year’s end — the lowest stocks since the 2003 marketing year, and a dramatic change from the 10 million bales of stocks just two years earlier. For the 2010 marketing year, U.S. cotton stocks are projected to remain at 3.7 million bales. Worldwide, 2010 stocks are expected to decline by 900,000 bales, bringing the stocks-to-use ratio down to 43.2 percent.
For the 2010 marketing year, Adams sees a world crop of 113.9 million bales. “While an 11-million bale rebound in production is substantial, the expected crop falls short of mill use at 117.3 million bales,” said Adams. He said that scenario is supportive of cotton prices, which gained momentum in the latter half of 2009.
U.S. Planting Intentions on the Rise
Two separate surveys of U.S. cotton producers indicate 2010 planting intentions in the neighborhood of 10 million acres, up more than 10 percent from 2009.
The National Cotton Council’s 27th annual survey yielded intention for 10.1 million acres of cotton to be planted in the U.S. this spring. The annual Cotton Grower magazine acreage survey, projected 9.912 million acres would be planted. The NCC survey also indicates a 24 percent increase in extra-long-staple (ELS) planting intentions – at 176,000 acres.
All four U.S. production regions show intended Upland cotton planting increases from last year. The largest acreage increase — 475,000 acres — will come in the Southwest, where acreage is projected to increase by 9.1 percent.
“Prevailing market conditions this year are more favorable for cotton prices than some of the main competing crops versus the previous couple of years,” said NCC Senior Economist Dale Cougot. “Part of this is due to further tightening of world and U.S. cotton supplies, while other competing crops experience a reduction of pressure on their supplies from either higher production or lower demand. It is still too early to fully evaluate the impact of weather, ground moisture and water availability, but most of the U.S. Cotton Belt at this point is better off than in the last several years, which may alleviate some of the drag on acres and yields.”
Increases in U.S. ELS cotton acreage comes in response to better Pima prices, which are finding support in strong export demand and tighter stocks. California leads the way with an increase of 28 percent.
The National Cotton Council has its complete 2010 Economic Outlook in downloadable PDF format available at www.cotton.org/econ/reports/annual-outlook.cfm
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