Cotton stocks are expected to decrease
The latest U.S. Department of Agriculture (USDA) projections for 2010/11 indicate that world cotton stocks are expected to decrease for the second consecutive season and drop below 50 million bales for the first time in 7 seasons. Global ending stocks are currently projected at 49.6 million bales for 2010/11, 5 percent (2.6 million bales) below 2009/10 and the lowest since 2003/04's 48.1 million bales (fig. 1).
Global cotton stocks have been drawn down considerably in most countries since 2008/09, as a result of lower production and higher consumption. Favorable competing crop prices reduced world cotton area between 2007/08 and 2009/10. While an area rebound and increased output are expected for 2010/11, projected production is not forecast to offset the combination of sharply lower beginning stocks and slightly higher consumption. The reduction in world stocks in 2010/11 is largely attributable to China, where stocks are projected to decline 2 million bales in 2010/11 to 18.6 million. See the Highlight section of this report for more details about China's cotton stock situation.
Planting of the 2010 U.S. cotton crop was complete or near completion in all but a few States across the Cotton Belt in early June. As of June 6th, 91 percent of the expected U.S. cotton area had been planted, compared with 86 percent last year and the 5-year average of 88 percent. Although planting progress was below 90 percent in early June for Georgia, Kansas, Oklahoma, and Texas, these States' progress was above their respective 5-year averages. In addition to planting progress, 8 percent of the national crop area was squaring, slightly below the 5-year average.
Meanwhile, early cotton crop conditions indicate a very good start to the U.S. growing season. As of June 6th, 66 percent of the cotton area was rated “good” or “excellent,” while only 4 percent was rated as “poor.” This season's conditions are similar to the beginning of the 2004 season, when conditions remained very good throughout the season and a then-record yield was produced.
Minor Revisions to 2009/10 and 2010/11 Estimates
Adjustments to the U.S. cotton supply and demand estimates were limited in June. This month's revisions included a 200,000-bale reduction in ending stocks for each season that resulted from an increase in 2009/10 exports. For 2009/10, U.S. cotton exports were increased to 12.25 million bales in June, reflecting strong sales which reached 13 million bales as of early June. As a result of the increased demand, 2009/10 ending stocks are now estimated at 2.9 million bales, 3.4 million below the beginning level and the lowest since 1995/96.
For 2010/11, there were no revisions to production or demand this month. The U.S. crop remains forecast at 16.7 million bales based on area reported in USDA's Prospective Plantings. An update to cotton area will be issued at the end of June in the Acreage report, which will combine actual plantings as of early June with estimates for any remaining cotton to be planted. Projected demand in 2010/11 remains estimated at 16.8 million bales, 7 percent above the latest 2009/10 estimate and similar to 2008/09. Consequently, the reduction in 2009/10 ending stocks followed through to the 2010/11 projection, as stocks on July 31, 2011 are now forecast at only 2.8 million bales, the lowest in 15 years. Likewise, the stocks-touse ratio—at 16.7 percent—is at its lowest since 1995/96. The forecast for the 2010/11 U.S. average farm price is projected to range between 60 and 74 cents per pound, compared with a 62.5-cent average estimated for 2009/10.