USDA, the US Departement of Agriculture has released its newest report on cotton developments, which we present to TextileFuture’s readers.
Australia cotton – Production forecast reduced slightly
The 2017/18 Australia cotton crop is forecast by USDA at 4.8 million 480 pound bales, down 0.2 million bales from last month but up 0.75 million or 19 % from last year. Harvested area is estimated at 0.48 million hectares, unchanged from last month, but down 17 % from last year. Yield is forecast at 2117 kg per hectare, 6 % above the 5-year average. Yield is expected to increase from last year because of a forecast decrease in the share of the area sown to lower-yielding dryland cotton.
Irrigated cotton yields are substantially higher than dryland yields and the difference widens in low-rainfall years. On average about 90 % of Australia’s total cotton production comes from irrigated areas. Dryland planting tends to vary with the seasonal weather forecast and prices at sowing. Irrigated cotton area is forecast to increase, reflecting adequate water storage levels in reservoirs supplying cotton Irrigated cotton yields are substantially higher than dryland yields and the difference widens in low-rainfall years. On average about 90 % of Australia’s total cotton production comes from irrigated areas. Dryland planting tends to vary with the seasonal weather forecast and prices at sowing. Irrigated cotton area is forecast to increase, reflecting adequate water storage levels in reservoirs supplying cotton.
Mali Cotton: Production estimated at a record level
Mali’s cotton production for 2017/18 is estimated at a record 1.37 million 480 pound bales, up 0.15 million or 12 % from last year’s record crop. Harvested area is estimated at a record 0.73 million hectares, up 75000 hectares or 11 % from last year’s record area. Yield is estimated at 409 kilograms per hectare, nearly the same as last year and 3 % above the 5-year average. Mali’s cotton is sown from May to July and harvest is from late October to December
Mali’s record cotton production is attributed to increased planted area resulting from strong prices and above-average yields due to favourable weather. The previous cotton production record of 1.22 million bales was set last year during the 2016/17 marketing season. Mali has been Africa’s second-largest cotton producer during the past five years, behind Burkina Faso. The Sikasso region in southern Mali produces approximately 60 % of Mali’s total output. Vegetation conditions in Sikasso were average to above-average from May through September.
Turkey Cotton and Products Update
The MY 2017/18 Turkish cotton planting estimate is up 18 % to 470,000 hectares and production is up 23 % to 870000 Metric t (4 million bales). Domestic cotton consumption for MY 2017/18 is projected to be 1.55 million MT (7.1 million bales), up about 11 %. Imports are expected to remain strong in MY 2017/18, about the same as last year at 800000 MT (3.67 million bales), in spite of the increasing local availability of cotton. Around half of the cotton imports to Turkey are from the United States, despite the 3 % antidumping duty.
The MY 2017/18 Turkish cotton planting and production are estimated at 470000 hectares and 870,000 MT (4 million bales). Planting is up about eighteen % and production is up 23 % compared to the last crop year. This was due to the attractive returns compared to other crops, such as corn, which stimulated an increase in planting. In the GAP region, where more than 50 % of local cotton is produced, yields were high despite the repeated planting in some areas at the beginning of the season. High quality seeds were used and favourable weather during the picking season helped raise yields. Growing conditions in Cukurova region were also favourable. In the Aegean region, while planting was up about 20 % compared to MY 2016/17, production was up only 15 % due to pest problems in some areas. In recent years, Turkish farmers have been improving their field yields by increasing utilization of high quality certified seeds, taking measures to prevent insect attacks, and using an increasing amount of cotton harvesters. Also, advancements in seed technology have enabled farmers to plant second crop cotton, following wheat and other field crops, which helped to increase overall planting. Cultivation of genetically engineered crops is not allowed in Turkey, based on the country’s Biosafety Law and implementing regulations, which went into effect in 2010.
The GAP project is progressing with a slow pace, but when finished, aims to irrigate about 1.3 million hectares of land in South East Anatolia. In MY 2017/18, only a marginal area, about 10000 hectares, was able receive irrigation water for the first time. However, in some areas where the main canal is completed, farmers draw water from the canal to replace their use of well water for farming, hence cutting their production costs.
In Turkey, corn and cotton are competing crops for planting area. To promote cotton planting, the Turkish government has been increasing the seed cotton production bonus during the last six years. Corn support however was reduced in MY 2016/17 and remained the same in MY 2017/18. Accordingly, MY 2017/2018 seed cotton production support increased to TRL 0.80 per kilogram (around 9 Cents per pound in USD) from TRL 0.75 per kilogram a year ago (as of 11/11/2017 USD 1= 3.85 TRL). The support is provided only to certified seed users. Corn support is TL 0.20 per kilogram.
Turkey became part of the BCI (Better Cotton Initiative) four years ago and final production for MY 2017/18 is expected to be 40000 MT.
Domestic consumption is expected to go up to 1.55 MMT (7.1 Million bales) in MY 2017/18, up about eleven % compared to last marketing year. This is due to the significant new investments of Turkish mills to increase their capacities to meet the increasing demand from domestic and international markets. Turkish mills have been investing in new machinery and technology to increase quality and lower costs to get ahead in the very competitive international textile trade.
Turkey’s increasing youth population, immigration to urban areas, and rapid growth in number of shopping malls with textile outlets significantly increased the total volume of textiles sold in the Turkish domestic market. An increased number of tourists visiting Turkey from neighbouring Middle Eastern countries also contributed to local sales of textiles. Turkish textile producers are increasing their store numbers in export markets, such as the Middle East, North Africa, and Europe, to penetrate more to the markets that they are in.
The rise in exports to Turkey’s traditional markets, such as Europe and Russia, and also in new markets such as Iran, will help to support the domestic cotton consumption in the future as well.
The industry is asking the Turkish government to take steps against the increasing amount of imported low cost cotton yarn which is expected to reach 200,000 MT during CY 2017. According to sources, the government is expected to impose new restrictions on imported yarn starting from CY 2018 which will support domestic cotton consumption.
Total cotton imports for MY 2016/17 were 801000 MT (3.67 Million bales). Turkey sourced about forty-seven % of their imported cotton from the United States, which was about 380000 MT (1.75 million bales) despite the 3 % anti-dumping surcharge on U.S. cotton. Brazil (85000 MT), Turkmenistan (78000 MT) and Greece (75000 MT) were the other leading suppliers during the same period. About 26000 MT of Syrian cotton also found its way to the Turkish market, despite turmoil in that region.
During the first two months of MY 2017/18, which are August and September, total imports were 165000 MT, of which 82000 MT was U.S. cotton. Australia (31000 MT), Burkina Faso (11000 MT), Brazil (10000 MT) and Benin (8000 MT) were the other leading suppliers.
The vast majority of Turkey’s cotton is used domestically, but during MY 2016/17, Turkey’s cotton exports were about 32200 MT. Bangladesh (10800 MT), Indonesia (5800 MT), and Vietnam (5800 MT) were the leading foreign destinations for Turkish cotton. About 1500 MT of cotton was also exported to the Mersin and Kayseri Free Trade Zone with a possibility of being re-imported later. Turkey also exported about 40000 MT (183000 bales) of hydrophilic cotton for medical use during the same period, which added to exports in the PSD.
Uzbekistan Showing Strong Consumption Growth
The 77th annual International Cotton Advisory Committee (ICAC) Plenary Meeting in Uzbekistan gave the international cotton trade an opportunity to see the changes underway in the country’s cotton and textile sector. Since its independence in 1991, it has been difficult to account for the final destination of Uzbekistan’s cotton exports, as a large share flow to countries with incomplete, inconsistent, or long- delayed trade data (for example, at least 200000 metric tons per year are believed historically to have been exported to Bangladesh). As such, it has been difficult to determine the exact quantity of these exports, given that Uzbekistan itself does not report consistent trade figures. However, information provided at the meeting indicated that exports in recent years were substantially overestimated.
Uzbekistan’s spinning industry has shown rapid growth, driven by extremely favourable tax and input price conditions for foreign investors, gradual liberalization of some economic regulations (most notably the recent liberalization of currency exchange), and the decline of key competing industries, such as Russia’s spinning sector. Especially in the last 3 years, Uzbekistan’s promotion of a special set of investment incentives and a new “textile cluster” program have generated strong interest and verifiable investments by spinners.
The government’s official estimate of spinning capacity, which apparently includes projects underway but not yet fully operational, is about 2.6 million bales of cotton yarn in 2017. Adjusting for utilization of capacity, marketing year seasonality, and the likely inclusion of projects that have not yet been fully scaled up produces the new cotton consumption estimates included in the WASDE. Meanwhile, the export figures shown more closely reflect the trade which can be verified in importer-country data, with adjustments for low-information countries.
Cotton – World Markets and Trade
Higher global production in several major producers is more than offset by higher use; historical revisions also result in lower world beginning stocks. The U.S. balance sheet has production up, resulting in higher ending stocks. The U.S. season-average farm price raised 3 Cents to 63 cents per pound.
Larger crops in several major producing countries have largely offset rising global demand. As a result, both the U.S. spot price and the A-Index have drifted sideways.
In addition to a substantial change to Uzbekistan, historical revisions were made to Argentina, Russia, Sudan, and Bangladesh. Revisions in Argentina result in a 740,000-bale reduction in global 2017/18 beginning stocks. Argentina’s consumption numbers were substantially revised based on newly-available cotton yarn production data provided by the government of Argentina, greatly increasing consumption estimates in recent years. Argentina’s estimated stock levels had previously shown a secular increase over time, but now show no such steady rise. Revised or newly available trade data for Russia, Sudan, and Bangladesh motivated the historic changes in those countries.
We add the latest forecast of ICAC of December 1, 2017:
Global Cotton Production to Increase in 2017/18
Following two years of declining planted area, global cotton area for 2017/18 is projected to increase by 11 % to 32.5 million hectares. Planted area in India is estimated at 11.55 million hectares for 2017/18, with production projected to grow by 8.7 % to 6.2 million tons. In 2017/18, planted area in the USA continues to grow for the second season by an estimated 20 % to 4.6 million hectares. Pakistan plantings for 2017/18 are expected to increase by 24 % to 3.1 million hectares after several years of declining area with an anticipated 24 % growth in production to 2.06 million tons. Production is projected to increase in all other major producing countries during 2017/18, including China, Brazil, Francophone Africa and Turkey. Global production in 2016/17 rose by 7 % and is forecasted to grow by 12 % during 2017/18.
Global cotton mill use is expected to grow in 2017/18 by 3 % to 25.2 million tons. The gap between cotton prices and polyester prices has continued to narrow since mid-2017 despite a recent upturn in cotton prices that may push cotton consumption higher. While mill use is rising, stocks will continue to grow as production outpaces consumption. Imports by China are expected to remain steady as the stock to use ratio decreases. Mill use in China is expected to grow at 1 % to 8.12 million tons. Cotton mill use is also projected to grow moderately in India, Pakistan, Turkey, Bangladesh, Vietnam and Brazil.