USDA: Early Forecast Data Of Cotton Planting Area

The US Department of Agriculture's early prediction of the US cotton planting area in 2024 was 11 million acres, an increase of 7.5% from 10.2 million acres in 2023, but still the second lowest level since 2016. Historically, the relationship between cotton and the expected harvest prices of corn and soybeans has played an important role in cotton growing areas. The cotton harvest futures price from mid January to early February 2024 is 3.5 cents (4%) lower than the expected price at the beginning of 2023 on average. However, in the same period, the harvest price of corn in 2024 fell by nearly 20%, and the price of soybeans fell by about 13%. Therefore, these relative crop prices indicate that cotton is more competitive than alternative crops this year.

The decision of planting area this spring may be affected by other factors, including the experience of cotton farmers in the previous season, insurance reference price, fixed cost investment and soil moisture conditions entering the planting season. In three of the four cotton belt regions, the cotton yield per acre in 2023 will be higher or close to the level of the previous season, with the unit yield in the delta region hitting a record high in 2023.

The situation in the southwest region has led to a higher than average waste rate (51%) in 2023 for the second consecutive year, and led to a decline in production prospects. However, although the reference price of crop insurance is far lower than that in 2022, the financial losses of producers are limited to a certain extent. The reference price of cotton in 2024 is slightly lower, about 82 cents per pound. At the same time, with the approaching of the spring planting season in 2024, the wet conditions in the cotton planting belt (especially in the southwest) have improved, and the drought situation has improved. However, concerns about weather conditions and rainfall during the growing season have brought some additional uncertainties.

The US Department of Agriculture will conduct the first survey of producers' planting intention (i.e. expected planting area) in early March, and issue it on March 28, 2024. Prior to this, for the purpose of this analysis, it is estimated that the cotton planting area in 2024 will be 11 million acres (+7.5%), and the harvested area will be close to 9.3 million acres, an increase of about 31% over 2023. The national waste rate is expected to be 15.5%. Based on the 10-year regional average, the waste rate in southwest China is expected to be lower than the 10-year average of 32% in 2024. The abandonment rate of Southwest Airlines varies greatly, reaching 12% in 2021 and 73% in 2022. The situation later this spring will have a considerable impact on cotton cultivation and crop yields in the United States. According to the latest seasonal outlook of the Southwest of the United States by the National Oceanic and Atmospheric Administration (NOAA), it is expected that the drought in cotton growing areas in the region will be greatly improved in 2024, at least until May.

The US Department of Agriculture predicts that the national average yield based on the five-year regional average yield will be 827 pounds per acre, while the yield in 2023 will be 845 pounds. In 2024, the cotton output of the United States is expected to be 16 million bales, while in 2023, it is expected to be about 12.4 million bales. The reason for the increase in yield is that the expected harvest area has increased by 31%, offsetting the 2% decrease in unit yield, because it is expected that a large proportion of low yield cotton will be harvested in the southwest in 2024. The cotton output is expected to be similar to that of the previous season in each cotton planting belt area, except for the southwest region, where the cotton output is expected to more than double in 2024. Based on the decrease of 2.8 million packages of American carry forward inventory and the increase of production in 2024/25, the total supply of 18.8 million packages will increase by about 12.5% over the previous quarter, which is the largest in three years.

It is estimated that the consumption of American cotton mills will be 1.75 million bales in 2024/25, the same as that in 2023/24. Although the global cotton mill consumption is expected to exceed the long-term annual growth rate, compared with many cotton spinning countries, the expansion of American cotton mill consumption in 2024/25 may still be limited. The intensified competition from foreign synthetic fiber manufacturers such as cotton and polyester is expected to keep the use of American cotton mills at the lowest level since the 1880s. As the opportunities for the increase of American raw cotton exports outweigh the opportunities for the sharp rebound of exports of semi processed textiles and clothing products, it is estimated that the consumption of American cotton mills will only account for 11% of the total demand for American cotton in 2024/25.

As it is expected that global cotton mills will increase their use to replenish their stocks, American cotton exports are expected to grow by 12% to nearly 13.8 million bales in 2024/25. Similarly, the world cotton trade volume is expected to increase in 2024/25, and many major production/export countries may benefit. Since the United States will again maintain its leading position as a cotton exporter in 2024/25, it is expected that the increase in U.S. cotton production in 2024/25 will also support the highest export volume in three years. It is estimated that the share of the United States in world trade will rise to more than 30% in 2024/25, but due to the continuous competition from other foreign cotton producers, it is still lower than the five-year average (33.5%).

As the output is expected to be higher than the previous volume year, the US cotton ending inventory in 2024/25 is expected to increase significantly (25%) from the relatively low level in 2023/24. The inventory at the end of 2024/25 is expected to be 3.5 million packages, an increase of 0.7 million packages over 2023/24, but lower than the previous four seasons. At the same time, the inventory to use ratio is expected to rise slightly to about 22.5% in 2024/25, while the five-year average is 26%. According to the preliminary forecast of US and global cotton supply and demand in 2024/25, the average price received by US upland cotton producers is expected to be 80 cents per pound, while the current forecast for 2023/24 is 77 cents per pound.