The NOAA early- February seasonal drought outlook indicates that persistent drought will continue through the end of April for the Southwest; in addition, below-average precipitation probabilities continue for the region at least through June. These conditions could exacerbate the drought situation and further impact both planted area and abandonment there.

USDA is forecasting a national average yield of 800 pounds per harvested acre, based on 3-year regional averages. U.S. 2013 crop production is projected at 14.0 million bales, nearly 18 percent below 2012 and, if realized, would be the lowest since 2009.

With carry-in stocks at 4.5 million bales, total supply—18.5 million bales—would decrease 9 percent from 2012/13.

U.S. domestic mill use is projected at 3.5 million bales, slightly above 2012/13. In recent years, U.S. cotton mill use has been sustained mostly by semi-processed textile and apparel exports— mainly to Mexico and the CBI countries—that are finished and shipped back to the U.S. market.

High cotton prices, relative to manmade fiber prices, during the past year have resulted in fiber substitution at the mill. Cotton’s fiber share is expected to improve slowly into 2013/14, thus providing a slight growth projection for cotton mill consumption.

U.S. cotton exports are projected at 11.3 million bales in 2013/14, a decrease of nearly 10 percent, as reduced supplies and a lower foreign import demand are projected.

Although foreign import demand is expected to decline to its lowest in 3 seasons, the United States is projected to account for a global trade share similar to that in 2012/13. Projected ending stocks of 3.7 million bales would decrease for the first time in 3 seasons, constituting 25 percent of total disappearance, slightly above the 5-year average.

Lower U.S. stocks and tighter world “free” stocks are factors likely to support farm prices in 2013/14, as the ratio of world stocks-to-use outside of China is forecast to decline.

At the same time, however, lower prices projected for the 2013 crops of corn and soybeans, resulting from a return to normal weather in the United States, will weigh on cotton prices. The 2013/14 marketing year average price received by U.S. cotton producers is projected at 73 cents per pound, slightly above the 2012/13 estimate.

Supporting the higher price projection are December 2013 cotton futures which, as of early February, are above 80 cents per pound.