Industry Observation: The Cotton Planting Area In The United States Decreased By 20.8% Year On Year

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In 2022/2023, the cotton growing areas in the United States were plagued by drought, resulting in a high abandonment rate of 45.94%, especially in Texas, the main producing area. The abandonment rate exceeded 70%, resulting in a year-on-year increase of 22.5% in the planting area, but a decline of 17.4% in the total output. In the second quarter, the northern hemisphere will enter a critical planting period again. Is the US cotton yield expected to return to the previous level in the new year?

In February, USDA held the Agricultural Outlook Forum. It is estimated that the cotton planting area in the United States in 2023/2024 will be 10.9 million acres, a year-on-year decrease of 20.8%, the harvested area will be 8.9 million acres, a year-on-year increase of 19.6%, the yield of abandoned cotton will be 18.3%, a year-on-year decrease of 27.6%, and the average unit yield will be 852 pounds/acre, a year-on-year decrease of 10%. The final yield is expected to be 3.44 million tons due to a sharp decline in the yield of abandoned cotton, It increased by 7.6% year on year. On the whole, the planting area decreased more than expected, and the market was worried about the supply of American cotton in the new year.

On April 1, the United States Department of Agriculture (USDA) released the 2023/2024 annual crop planting intention report. The intended planting area of American cotton in the new year is expected to be 11.256 million acres, a year-on-year decrease of 18.2%, of which the intended planting area of upland cotton is expected to be 11.102 million acres, a year-on-year decrease of 18.2%; The intended area of Pima cotton is 154000 acres, a year-on-year decrease of 15.8%. In contrast, USDA raised the planting area in this report, and the market's concern about American cotton production continued to ferment before the report was released, hitting the ceiling continuously. After the report was released, the forecast data basically met the market expectations, and American cotton fell slightly.

The United States is the third largest cotton producing country, which is mainly divided into four regions: the southeast region, the south central region, the southwest region, and the western region. Among them, Texas has more than half of the planting area of the United States, and its cotton is mainly used for export, so it has become the focus of our attention. On the whole, Texas is a semi-arid region, with an average annual precipitation of 300-400mm. The precipitation in the western part of the plateau is less. The soil and climate conditions differ greatly between different regions. Generally, there are strong winds from January to April, and hail from June to August. Therefore, it is easy to reseed large areas of cotton fields, or lose harvests after planting. The temperature from August to September plays an important role in the increase and decrease of cotton yield and quality, At the same time, the arrival time of the first frost will also affect the yield of the cotton region. Therefore, we need to pay close attention to the weather conditions during the planting period and the possibility of weather speculation.

At present, the drought situation in the United States has significantly improved compared with the planting period last year. The cotton regions in the south central, southeast and west experienced continuous rainfall in the early stage. The overall drought area in the cotton planting areas decreased by 15% compared with the same period last year. However, by March 28, about 47% of the cotton planting areas in the United States were still affected by drought, of which the area of severe drought and above accounted for 39%, However, in recent days, under the hot and windy weather in Texas, the drought has worsened again. About 95% of cotton areas are affected by the drought, an increase of 4% over the previous week. Among them, the area of areas with severe drought and above accounts for 79%, a significant increase of 9% over the previous week. In addition, it is expected that there will be no significant precipitation in recent days. At present, spring sowing has been carried out in the new year, and the planting of new cotton will still face great challenges, USDA estimates that the area of American cotton in Texas will be slightly lower than that in 2021/2022. Therefore, if the drought in Texas continues and the abandonment rate is high, the final output will still be worrying, and some areas in the western highlands will also reduce the cotton planting area due to irrigation water restrictions.

At the same time, the cost of cotton planting in the United States in 2022/2023 will rise sharply as in China, about 1115.7 US dollars/acre, about 35% higher than the previous year, but the final purchase price is not as expected, while the price of corn will rise significantly, the price of cotton and grain will be at a low level, the advantage of income will be small, the enthusiasm of cotton farmers may be weakened Some areas in the southwest may change to wheat, soybeans, corn and other food crops, and the area of corn planting intention in the United States will increase by 3.84% year on year in 2023/2024.

On the whole, American cotton experienced serious drought when it expanded significantly last year, and the cotton price was lower than expected, so the enthusiasm of cotton farmers was reduced. This year's sown area was significantly reduced, which was equivalent to the area before the expansion. However, the unit yield of cotton in the new year still faces great challenges. If the weather conditions are not satisfactory, there will be speculation in the planting period, However, the recovery of demand side is relatively slow, which may drag down the cotton price and limit the space above it.