What is in this article?:
- Huge cotton inventories in China continue to cause incertainty in the world market.
- The U.S. cotton crop was behind average in progress during most of 2013.
- Unless China acts, cotton prices are expected to remain in the 70 to 80-cent range.
GLOBAL COTTON STOCKS continue to be weighed down by huge inventories in China.
Nothing operates in vacuum
“Nothing operates in a vacuum. Cotton acres will depend on what corn, soybeans, peanuts and rice do. Producers are pretty savvy, and they can see handwriting on the wall and know what to plant. Prices have been pretty range-bound for this entire year. We’ve pretty much stayed in that 80 to 90-cent range, outside of those days when prices jumped above 90 cents. Barring China doing something, it’s hard for me to see cotton prices moving out of that range.”
Nationwide, average cotton yields this year are ranging from 700 to 1,000 pounds per acre, says Riley. “For 2012, abandoned acres were higher in Texas than average, and it’s even worse in 2013. If you take out these states where a lot of acres were abandoned – like in Texas and Oklahoma – the maximum abandoned acres are at about 6 percent.”
U.S. cotton production dropped in 2008 and 2009 in terms of acres but picked back up when growers started hearing about $2 cotton in the winter and early spring, says Riley. Then, acreage slowly drifted back down, with 2013 acreage being lower than the previous couple of years.
“We decreased our acres in 2008 and 2009 because we had a huge buildup in our carryover, so pressure was put on prices. We were able to get that carryover down to a more manageable carryover.”
As for fiber consumption, cotton is holding its own, he says. “It slipped a little in 2008 and 2009, but we’ve slowly regained our share of fiber consumption. Other fiber content has made slight gains in the past two years, but in the big picture, total fiber consumption is holding its own in terms of the market share, and that’s a silver lining.”
Turning to export use and mill use, mill use has remained in the 3.5 million-bale range, says Riley. “If there’s less being produced, then there’s less to export. So the drop-off in exports shouldn’t be a huge concern, but domestic mills continue to hang in there and use their usual 3 to 3.5 million bales per year.”
From a balance sheet standpoint last year, there were 17.3 million bales of production, 16.5 million of total use, ending stocks of 3.9 million bales, and a stocks-to-use of 23.6 percent, he says.
“This year, there’s a projected production of 12.9 million bales and use in the 3.5 million-bale range.