Pandemic casts shadow on sunny cotton outlook
Global demand for cotton would reach an all-time high this year, thanks to the economic resurgence from the pandemic that has driven cotton prices to their highest level in a decade, said the National Cotton Council on Sunday. Despite the sunny outlook, prospects for this year’s crop are clouded by rising production costs, supply chain disruptions, and uncertainties about future impacts of COVID-19.
U.S. growers plan a 7% increase in cotton plantings this spring, crowding out corn, sorghum, and wheat, according to the council’s survey of planters, released at its annual meeting in Houston. With normal weather and yields, the harvest would be 17.3 million bales weighing 480 pounds each, said NCC chief economist Jody Campiche.
Cotton mills around the world were projected to consume 125.9 million bales in spinning cotton fiber into thread and weaving clothing during the 2022 marketing year, an all-time high for cotton demand, said Campiche. Domestic mill use also would rise. As a result, the U.S. cotton stockpile would shrink to its smallest size, 3.1 million bales, in six years. The lion’s share of American cotton production is exported.
The USDA estimates the 2021 cotton crop will sell for a markedly high season-average price of 90¢ per pound, 36% above the farm-gate price of 66.3¢ for the 2020 crop. Cotton prices were even lower, at 59.6¢, for the 2019 crop, which was on the market when the pandemic struck and caused an economic slowdown worldwide.
“A tighter U.S. balance sheet, supply chain disruptions, speculative money flow, overall increases in commodity prices, and strong demand are creating a bullish sentiment for cotton prices,” said the NCC. “However, additional restrictions related to the COVID-19 pandemic, a slowdown in world economic activity, and low man-made fiber prices could put downward pressure on cotton prices in 2022.”
In the NCC survey, growers said they expected to plant 12 million acres of cotton this year, split between 11.9 million acres of upland cotton and 158,000 acres of pima cotton, which the NCC estimated would produce 17.3 million bales. Last year, they grew 11.1 million acres of upland and 127,000 acres of pima for a crop of 17.62 million bales.
The NCC survey is closely followed because it is conducted as growers are finalizing plans for the new crop. The survey was mailed in the middle of December and responses were accepted through mid-January.
USDA analysts have projected upland cotton plantings of 12 million acres this year, a bit more than the NCC survey.
The USDA also expects higher yields, 865 pounds an acre compared with 850 projected by the NCC, for an upland crop of 17.8 million bales — 1 million bales more than the NCC estimate of 16.8 million bales. The NCC estimated the pima crop at 438,000 bales. The USDA will project 2022 pima production later this month.
The USDA projections, released in November and based on conditions in October, said the season-average price for the 2021 cotton crop would be 90¢ a pound, then drop to 80¢ for this year’s crop, and fall again to 72¢ a pound for the 2023 crop.
To read the NCC’s economic outlook for cotton, click here.
To read the results of the NCC grower survey, click here.