U.S. and global cotton production in the new 2013/14 season will be higher than forecast by the U.S. Department of Agriculture, boosting expected global inventories to a fresh record high, according to a poll of 15 cooperatives, traders, and analysts.

U.S. output in the 2013/14 crop year that began on Aug. 1 will climb to about 13.75 million 480-lb bales, 1.9 percent higher than the USDA's July forecast of 13.5 million bales, the median forecast from the survey showed.

The USDA will publish its first monthly supply and demand report of the new season on Aug. 12.

While that outlook is in essence bearish news for prices, particularly after struggling with falling mill demand over the past four years, traders say prices will remain elevated at historically high levels because of concerns about the impact of a prolonged drought on U.S. supplies. 

The December cotton contract on ICE Futures U.S. traded at about 89 cents per lb on Thursday. 

The higher expectations for the 2013/14 crop come on improved growing weather in Texas, the largest producing state, and other key growing regions, though traders cautioned the actual outlook will become clearer as more of the harvest gets underway.

"The weather has been comparatively favorable in the western cotton belt and good in the central belt, though there are some questions coming into the east" because of recent rains, said Sterling Smith, a futures specialist with Citigroup in Chicago.

Poll respondents were divided on whether output will be above the USDA's July expectations. The highest forecasts for the crop were above 14 million bales, while the lowest pegged it at 13.15 million bales.

Even with the improved outlook, the 2013/14 crop is expected to be down by more than 20 percent from the USDA's production estimates for the previous season and the smallest crop since 2009/10, according to USDA data. Lower prices in 2012 deterred farmers from planting cotton this spring in favor of higher priced grains.

While the South West may have received rainfall in recent weeks, the USDA has previously warned that U.S. farmers in the region may abandon crops due to a prolonged drought in Texas, the country's main producing state, at their highest level in two years. 

At 3.0 million bales by the end of July 2014, U.S. stocks are expected to be 3.4 percent higher the USDA's previous forecast of 2.9 million bales, but still at the lowest level in three years.

Global output is also expected to be slightly higher than previously forecast, as favorable monsoon rains boost output in India, the world's second-largest producer.

World production is expected to total 118.5 million bales, 0.4 percent above the USDA's July forecast of 118.02 million bales but down 2.3 percent from the 2012/13 crop year, according to last month's USDA estimates.

Global cotton inventories will climb to 94.68 million bales by the end of the crop year, about 0.4 percent higher than July USDA expectations of 94.34 million bales. The record inventories will be driven by the continuation of a government stockpiling program in China, though worry is growing that the pace of U.S. exports to the country will slow, traders said. 

"Aside from the anticipated U.S. harvest size, the biggest factor coloring the outlook for new-crop cotton exports is likely to be China and its rather opaque cotton policy," said INTL FCStone analyst Gary Raines.

A potential increase in mill use in Vietnam, India, and Pakistan amid higher textile activity will help boost global demand. 

The median estimate pegged global consumption at 110 million bales, up slightly from 109.79 million bales forecast by the USDA last month and 2.4 percent higher than the USDA's July estimates for the 2012/13 crop year.

 

U.S. Output*

U.S. Demand*

U.S. Carryover*

World Production*

World Demand*

World Carryover*

Mike Quinn, Carolinas Cotton Growers

13.9

3.5

3

118.4

109.9

94.75

Sterling Smith, Citigroup

13.7

3.5

2.9

118.6

110.1

94.4

Jordan Lea, Eastern Trading

13.8

3.5

2.7

118.8

107.5

96

John Flanagan Trading

13.75

3.5

3.15

120

110

95.85

Gary Raines, INTL FCStone

13.5

3.5

2.9

118.5

110

94.6

Sharon Johnson, KCG Futures

13.34

3.5

2.84

117.9

110.3

93.8

Jobe Moss, MCM Inc.

14.1

3.5

3.4

118.5

109

95

Cliff White, Omnicotton

13.95

3.5

3.85

119

110

94.6

Peter Egli, Plexus Cotton

14.2

3.6

3.6

118.5

110.4

94.1

John Robinson, Texas A&M University

13.31

3.5

2.91

117.83

109.6

94.35

Darren Hudson, Texas Tech University

13.15

3.45

2.85

118.02

105.5

95.5

Trader, United States

14

3.5

3

119

110

95

Trader, United States

13.4

3.6

3.1

 

 

 

Trader, United States

13.9

3.5

3.5

119

110

95

Trader, United States

13.25

3.6

2.8

118

109

94.5

Median 13/14 forecast

13.75

3.5

3

118.5

110

94.675

USDA’s July 13/14 forecast

13.5

3.5

2.9

118.02

109.79

94.34

USDA’s July 12/13 estimate

17.32

3.45

3.9

121.25

107.38

85.58

 * Measured in millions of 480-lb bales