By Dr. Don Shurley
During winter Extension meetings with cotton growers, I called it “breaking the cycle.” It’s been expected, and the USDA numbers released on May 12 are the first signs. I’ve said that “breaking the cycle” was one thing that could help provide some support for this market.
The report contains the first U.S. and World estimates for the 2015 crop year, and the numbers are about as expected – some better than expected. For five consecutive years (2010-2014), World production outpaced Use. This is how/why the record level of stocks was created. For the 2015/16 crop year, we’ll break the cycle of overproduction.
These numbers will change, perhaps significantly, as we move forward in the season. As I said, this reversal has been expected and thus is likely already factored into the market. More significant will be how what actually happens compares to these estimates. If you look back at past years, you’ll see these May numbers are like my dove hunting skills – just throw the gun up and pull the trigger…you’re going to miss it no matter what.
The 2015 U.S. crop is estimated at 14.5 million bales – almost two million bales less than last year. This is offset by the fact that we’ll bring about two million more bales into the crop year on August 1 than we did back on August 1, 2014. The demand side for 2015/16 is expected to essentially be the same as 2014/15 – exports at 10.7 million bales and U.S. mill use up 150,000 bales.
World production is projected to decline about eight million bales (six million bales outside the U.S.), while World usage is projected to increase almost four million bales. Use will continue to recover/trend up and outpace production by four million bales. World stocks, therefore, are projected to decline by four million bales.
We’ve not heard that in a while! We’ll “break the cycle,” but still have a very large level of old-crop stocks. Prices will key on the eventual impact of those stocks and other factors to change the May numbers. What will U.S. and foreign production actually be? What will be the resulting actual demand for U.S. exports?
The China crop for 2015 is projected at 27 million bales – down three million bales, or 10 percent from this season. China’s imports are projected at six million bales – down 1.7 million bales. China’s mill use is projected at 36 million bales – up one million bales. India production is projected down only a half million bales from this season, with exports up 1.1 million bales.
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