Cotton Outlook: U.S. Textile and Apparel Trade Declines

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    The latest U.S. Department of Agriculture (USDA) estimates indicate that U.S. cotton textile and apparel trade decreased during the first half of 2016. U.S. cotton product imports totaled the equivalent of 8.5 million 480-pound bales during January-June 2016, 2 percent below the first 6 months of 2015.

    During the corresponding period, cotton product exports declined 7 percent to 1.8 million bale-equivalents. Based on these volumes, the cotton textile and apparel trade deficit was unchanged from 2015 at 6.7 million bale-equivalents.

    Domestic Outlook

    2016 U.S. Cotton Production Forecast Marginally Higher in August

    According to USDA’s first survey-based forecast of the 2016 crop, U.S. cotton production is estimated at nearly 15.9 million bales; this compares with July’s projection of 15.8 million bales and the final 2015 crop estimate of 12.9 million bales. The 2016 production increase of 3 million bales is the result of higher area and yield estimates.

    Based on the August forecast, total cotton planted area in 2016 is estimated at 10 million acres, the same as indicated in the June Acreage report but 1.4 million acres above 2015. Harvested area is projected at 9.5 million acres this season, indicating an abandonment rate of 5 percent, which is slightly below the reported 6 percent in 2015. The U.S. yield is forecast at 800 pounds per harvested acre this season, compared with 766 pounds in 2015.

    Upland cotton production in 2016 is projected at 15.3 million bales, nearly 2.9 million bales above the previous crop. During the past 20 years, the August upland production forecast was above the final estimate 12 times and below it 8 times. Past differences between the August forecast and the final production estimate indicate that chances are two out of three for the 2016 upland crop to range between 14.2 and 16.4 million bales.

    Compared with 2015, U.S. upland production is expected higher in each Cotton Belt region. Based on the August estimates, the Southwest crop is forecast to approach 6.9 million bales in 2016, compared with 6.1 million in 2015; more harvested area than in the past several seasons is projected to push the Southwest crop to its highest level since 2010. A relatively low abandonment rate of 7 percent is forecast for 2016, while the region’s yield is projected at a 5-year low of 609 pounds per harvested acre.

    For the Southeast, production is expected to increase in 2016, approaching 4.5 million bales or 29 percent of the U.S. cotton crop; however, production is forecast below the 5-year average. Area and yield are forecast higher in the Southeast in 2016, with the Southeast yield projected at its second highest on record.

    The Delta crop is forecast higher at 3.3 million bales, similar to the 5-year average, as area rebounds to 1.5 million acres from a record low in 2015. The Delta yield is also expected to rise to its second highest level in 2016, pushing the region’s share of U.S. cotton production to 22 percent.

    In the West, upland production is projected at 630,000 bales in 2016 as area increased from last season’s historic low. In addition, a yield of 1,527 pounds per harvested acre, the second highest on record, is expected to keep the region’s share of the U.S. crop at 4 percent. In contrast, extra-long staple (ELS) cotton area and yield are forecast to decrease slightly from the previous season. As a result, the ELS crop, which is concentrated in the West, is projected to decline 11 percent from 2015 to 565,000 bales.

    U.S. cotton crop development is ahead of last season and the 5-year average. As of August 14, 88 percent of the cotton area was setting bolls, compared with 72 percent last season and the 2011-15 average of 83 percent. Although the U.S. development was above the average in mid-August, several States–Missouri, California, and Kansas–were considerably behind, while Texas and Tennessee were slightly ahead. Meanwhile, 2016 U.S. cotton crop conditions are below the previous two seasons but above the 5-year average.

    As of August 14, 48 percent of the crop area was rated “good” or “excellent,” compared with 55 percent last year, while 18 percent was rated “poor” or “very poor,” compared with 9 percent a year earlier. The recent decline in U.S. crop conditions was largely attributable to dry weather in the Southwest.

    2016/17 Demand Unchanged in August; Stocks Adjusted Slightly

    U.S. cotton demand for 2016/17 is projected at 15.1 million bales, unchanged from last month’s forecast but 19 percent (2.4 million bales) above the latest 2015/16 estimate and the highest since 2012/13. U.S. exports account for most of this increase, as sluggish demand for U.S. cotton products limits the growth of mill use, which is forecast only modestly above the 2015/16 estimate at 3.6 million bales.

    However, with raw cotton supplies projected lower for the major producers outside the United States, U.S. exports are expected to expand in 2016/17. U.S. cotton exports are forecast at 11.5 million bales, 25 percent (2.3 million bales) above 2015/16 and the highest in four seasons. Consequently, the U.S. share of global trade is forecast to climb from 2015/16’s 26 percent to nearly 34 percent this season.

    With U.S. cotton production projected to exceed demand in 2016/17, ending stocks are forecast to increase 800,000 bales to 4.7 million bales. This season’s stocks-to-use ratio, however, is expected to be similar to that of 2015/16 at 31 percent. As of August, the 2016/17 upland farm price is forecast to range between 57 and 69 cents per pound. The midpoint of 63 cents per pound is 5 cents above the 2015/16 estimate.

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