USDA is projecting a world cotton crop for 2009-2010 of 107 million bales, a 2.3 percent decline from the previous year and the lowest output since 2003-04. In a report presented at the Agricultural Outlook Forum in Arlington, Va., in late February, USDA said the decline reflects significant reductions in China, Pakistan and the African Franc Zone countries, which were partially offset by higher production in India and Australia.

The remainder of the world's major cotton producers are projected to produce the same or slightly less cotton in 2009-10, according to USDA. Global harvested area is projected to fall to 73.4 million acres while average yield is expected to increase to 700 pounds per acre.

In China, 2009-10 production is forecast at 33 million bales, down 3.5 million bales (nearly 10 percent) from a year earlier. Cotton area is forecast at 13.2 million acres, a decline of about 11 percent from the previous year. China's cotton prices have been weakening and prices to farmers fell below expectations for the 2008 crop.

Prices for food crops in China remain high enough to attract some acreage from cotton. USDA says state reserve purchases of cotton give some price assurance to cotton farmers, but the government is also supporting grain prices. Anecdotal reports suggest that cotton area will be reduced at least 5 percent in the Xinjiang region and more than 10 percent in the eastern production regions.

India's 2009-10 production is projected at 24.5 million bales, higher than the previous year's output by 6.5 percent. Area is projected to decline only marginally by 0.5 percent to 23 million acres, mainly because cotton prices to farmers were supported by the government purchase program in 2008-09. The yield is expected to grow by 7.1 percent assuming normal monsoon conditions.

The increased use of Bt cottonseed combined with improved crop management practices and irrigation systems are expected to support yields. However, the rate yield increase is slowing as Bt adoption reaches the saturation point. According to the government of India, Bt cotton now accounts for more than 70 percent of total cotton acreage in India.

For Pakistan, production in 2009-10 is projected to decline to 8.9 million bales as compared to a year earlier. This production decline derives solely from an expected 3.3 percent area reduction with yields remaining steady.

Australia's cotton production is projected to rebound by 50 percent to an estimated 2 million bales in 2009-10. Acreage is projected to expand about 40 percent as recent precipitation has partially replenished irrigation supplies. Cotton yield in 2009-10 is expected to increase slightly to 1,749 pounds per acre, about equal to the 5-year average.

In the Franc Zone of sub-Saharan Africa, the 2009-10 crop is projected at 2 million bales, down more than 20 percent from 2008-09 and the lowest output recorded since 1987-88. Domestic structural and economic problems continue to weigh on farmer incentives. Cotton sectors in Burkina Faso, Benin, and Mali - three of the major producers in the bloc - are struggling as a result of low international cotton prices, exchange rate fluctuations, debt burden, and government policy choices.

USDA says recovery in world cotton consumption in 2009-10 will depend on economic growth and its effect on global textile demand, which is estimated to fall sharply in 2008-09. Most macroeconomic forecasts now project that world GDP growth will bottom in the third quarter of 2009 and begin to recover thereafter, albeit slowly.

USDA says world cotton consumption has a history of rebounding sharply following periods of economic weakness, as the replenishment of yarn and textile inventories adds to the growth in consumer demand.

USDA projects that 2009-10 world cotton consumption will rise 2 percent to 115 million bales. This projection is likely to understate potential consumption if economic recovery begins in fourth quarter 2009 and follows a typical historical pattern. On the other hand, the projection will prove optimistic if the expectations of world economic recovery fail to materialize.

With lower world production and higher consumption, world trade is projected to recover 33 million bales in 2009-10, nearly 4 million bales above the estimate for 2008-09. Higher imports by China will be partially offset by lower imports in most of the developed economies.

On the export side, India, African Franc Zone and Central Asia are expected to recover market share due to large beginning stocks, more than offsetting a modest decline in U.S. exports. World ending stocks are projected at just above 56 million bales, a 9-percent decline from the previous year, but still sufficient to support projected demand.