National Cotton Council economists see restrained optimism for the U.S. cotton industry’s 2021 outlook.
■ What general business climate is foreseen?
The COVID-19 pandemic still is creating disruptions in the supply chains and markets for the U.S. and world cotton and textile industries, but the overall global economy is recovering at a faster pace than originally expected. The distribution of vaccines has created optimism for world economic conditions, yet some uncertainty is present due to new virus strains in some parts of the world along with renewed restrictions.
■ How do you see U.S. cotton’s outlook unfolding?
First of all, U.S. export commitments and shipments have been strong thus far into the 2020 marketing year (ending Aug. 1, 2021). As of early February, total U.S. commitments had reached 14.1 million bales while 7.8 million bales had been shipped. Based on those numbers, NCC projects U.S. exports to reach 15.8 million bales for the 2020 marketing year.
Looking ahead to the 2021 marketing year, the NCC projects 2021 U.S. cotton acreage to be 11.5 million acres, 5.2% less than 2020 — primarily the result of strong competing crop prices. With U.S. crop abandonment assumed at 18.1%, Cotton Belt harvested area would be 9.4 million acres.
Using an average 2021 U.S. yield per harvested acre of 855 pounds generates a cotton crop of 16.7 million bales, with 16.3 million upland bales and 431,000 extra-long staple bales. U.S. cottonseed production is projected to increase to 5.2 million tons in 2021.
The NCC is projecting a partial recovery in U.S. mill use at 2.8 million bales while U.S. exports are projected to drop slightly to 15.4 million bales in the 2021 marketing year. With large stocks in other major exporting countries and a partial recovery in Australia’s production, the United States will continue to face strong export competition in the coming year.
When combined with U.S. mill use, total offtake exceeds expected production, and ending stocks are projected to fall to 2.6 million bales. If realized, these U.S. stocks would represent one of the lowest levels in the past 20 years.
■ What about the global market and prices?
World production is estimated to increase by 1.5 million bales in 2021 to 115.6 million due to a slight increase in acreage. World mill use is projected to increase to 120.9 million bales in 2021. Ending stocks are projected to decline by 5.4 million bales in the 2021 marketing year to 90.4 million bales.
Although global stocks remain high, there is a growing bullish sentiment for cotton prices due to:
• A tighter U.S. balance sheet.
• Low supply chain inventories.
• Increased purchases from China.
• Speculative money flow.
• Weaker U.S. dollar.
• Higher grain and oilseed prices.
• Post-COVID demand expectations.
However, additional restrictions related to the COVID-19 pandemic, large stocks in some key exporting countries, and low man-made fiber prices could put downward pressure on cotton prices in 2021.
More details are in the NCC’s 2021 Cotton Economic Outlook at www.cotton.org/econ/reports/annual-outlook.cfm.
Gary Adams is president/chief executive officer of the National Cotton Council of America. He and other NCC leaders contribute columns on this Cotton Farming page.