According to the Outlook Forum report released by the U.S. Department of Agriculture on February 19, the U.S. cotton planting area in 2021/22 will be 12 million acres, slightly lower than the 12 million acres in 2020/21, and the lowest level since 2016.
From a historical perspective, the price relationship between cotton, corn, and soybeans has a great impact on U.S. cotton planting intentions. From mid-January to mid-February 2021, ICE cotton futures rose about 10 cents year-on-year, or 14%, corn rose 13.5% year-on-year, and soybeans rose 24.5%. Therefore, competing crops are roughly similar to cotton, or more competitive than cotton.
Other factors that affect cotton farmers’ planting intentions include farmers’ planting experience in the previous year and soil moisture conditions. Although cotton yields in three of the four major cotton-producing regions in the United States are close to normal levels in 2020, yields in the Southwest have dropped significantly, and only half of the upland cotton area has been harvested. In addition, dry weather in the southwest this winter also brings uncertainty to cotton production in 2021.
The U.S. cotton area forecast by the USDA Outlook Forum in 2021 is 500,000 acres higher than the 11.5 million acres predicted by the National Cotton Council (NCC). The NCC’s forecast was released on February 10 and reflects planting intentions from December 2020 to mid-January 2021. According to the NCC survey, planting intentions in the four major cotton-producing regions in the United States have all decreased year-on-year, including a 4% decrease in the southeastern region, a 3.5% decrease in the south-central region, a 5.5% decrease in the southwest region, a 2.5% decrease in the western region, and a 21% decrease in Pima cotton area. . The U.S. Department of Agriculture will release the official intended cotton planting area on March 31.
Based on the USDA Outlook Forum forecast of 12 million acres and a 17% abandonment rate, the U.S. cotton harvest area in 2021 is expected to be 10 million acres, a year-on-year increase of 15%. However, the rejection rate in the southwest region of the United States is very unstable, and its impact on U.S. cotton production is very prominent. According to forecasts from the National Oceanic and Atmospheric Administration, the drought in the southwestern United States will last until April this year.
The Outlook Forum predicts that the average U.S. cotton yield in 2021 will be 840 pounds/acre, up from 825 pounds/acre in 2020. Based on this projection, U.S. cotton production is expected to be 17.5 million bales in 2021. The increase in harvest area is expected to increase U.S. cotton production by 2.5 million bales, an increase of 17%. Except for the southwest region, the output in each cotton-producing area is expected to be similar to that in 2020/21. Cotton production in the Southwest could reach its highest level in nearly four years. As the U.S. opening stocks in 2021/22 are expected to decrease to 4.3 million bales, and cotton production is expected to increase, the total U.S. cotton supply in 2021/22 is expected to be 21.8 million bales, a slight decrease year-on-year, which is the lowest level in the past five years.
In 2021/22, domestic cotton consumption in the United States is expected to be 2.5 million bales, a slight increase year-on-year. Export volume is still expected to be 15.5 million bales, flat year-on-year, accounting for 15% of global exports. The proportion is still 35%. Although Brazilian cotton exports are expected to decline from previous historical highs, the United States will still face competitive pressure from increased Australian cotton production and India’s CCI inventory digestion. U.S. cotton ending stocks are expected to be 3.8 million bales, a decrease of 500,000 bales year-on-year, the lowest level in the past five years. Lower cotton inventories outside the United States and China will reduce pressure on cotton prices, with the average upland cotton farm price expected to be 75 cents/lb, up from 68 cents/lb in 2020/21.
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