The 2014 US cotton crop has been revised upward by 1 million bales from the July estimate. The August USDA crop production and supply/demand numbers released Aug. 12 are the first estimates of the season based on actual producer survey.
The August numbers are best described as a mixed bag. Increase in the US crop is bearish but this may have been anticipated and already largely factored in to the current level of prices. Certainly, however, there is fear this could push prices even lower. But, the increase in US exports is good news and the increase in World Use is good news. Ending stocks did not increase and that is good news.
The July estimate was 16.5 million bales—based on estimated acreage abandonment of 15 percent and yield of 816 lbs/acre. These first produced-based numbers show abandonment of only 10 percent and a yield of 820 lbs/acre. The crop is forecast at 17.5 million bales—1 million bales higher than the July estimate.
Abandonment is estimated at only 16 percent for Texas and yield forecast at 632 lbs/acre. Yields appear strong just about everywhere. Much of the Mid-South looks to be over 2 bales per acre and the Southeast also looks good—with yields approaching 900 lbs/acre or more.
The 1 million bale increase in the US crop is offset somewhat by a ½ million bale increase in expected US crop exports for 2014/15. This likely reflects the increase in production and available supply and perhaps the impact of the lower tier of prices we are experiencing. US ending stocks are still expected to rise 3 million bales from last season.
Looking at the World and foreign numbers, production overall is changed very little other than in the US. The China crop estimate is unchanged, the Australia and Brazil crops are lowered, the India crop is increased. World cotton Use is increased 1.3 million bales from the July estimate. World ending stocks are revised downward by 600,000 bales.
At this point (with prices having lost 12 cents since mid-June), we take anything positive we can find. But in reality, aside from a major supply shock somewhere, prices likely have a rough road ahead. The US crop looks promising but the World and foreign situation is less known. Longer-term (into winter and spring 2015), the outlook will depend on the eventual US and World supply and trends in demand (US exports).