MEMPHIS, Tenn. – National Cotton Council economists point to a few key factors that will shape the U.S. cotton industry’s 2021 economic outlook.
This past year was characterized by significant uncertainty and volatility in both the global economy and the world cotton market. The most challenging issue facing the global cotton market in 2020 was the COVID-19 pandemic. The pandemic caused unprecedented disruptions in the supply chains and markets for the U.S. and world cotton and textile industries during the first half of 2020. The COVID‐19 pandemic devastated textile supply chains as retail outlets shuttered their doors for months. As the collapse in cotton demand persisted throughout 2020, the negative impacts were felt across the U.S. cotton industry.
Now, in the early weeks of 2021, while the pandemic is still creating disruptions in various parts of the world, the overall economy is recovering at a much faster pace than originally expected. However, current economic projections for the U.S. and global economies should be viewed with caution given the lack of clarity regarding the potential impacts of the ongoing pandemic. The distribution of vaccines has created optimism for world economic conditions, yet some uncertainty is still present due to increased infections and new virus strains in some parts of the world along with renewed restrictions.
In her analysis of the NCC Annual Planting Intentions survey results, Campiche said the NCC projects 2021 U.S. cotton acreage to be 11.5 million acres, 5.2 percent less than 2020. The expected drop in acreage is primarily the result of strong competing crop prices. With abandonment assumed at 18.1 percent for the United States, Cotton Belt harvested area totals 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.
Regarding domestic mill cotton use, the NCC is projecting a partial recovery in U.S. mill use at 2.8 million bales during the 2021 crop year. U.S. mills were severely impacted by the COVID-19 shutdowns in 2020. As one of largest markets for U.S. cotton, U.S. mills continue to be critically important to the health of the cotton industry.
World trade is estimated to be higher in the 2020 marketing year as consumption recovers from the COVID-19 pandemic. Based on sales and shipments for the year-to-date, U.S. exports are projected to reach 15.8 million bales in the 2020 marketing year. As a result of a large carryover sales from the 2019 crop year and increased purchases from China, U.S. export commitments and shipments have been very strong for the 2020 crop year. As of February 4, total commitments reached 14.1 million bales while 7.8 million bales have been shipped. Current commitments are at the highest level at this point in the marketing year since the 2010 crop year.
While export competition from Brazil remains strong, the United States was able to regain market share in China in 2020 as a result of the Phase I agreement. The United States also had increased opportunities for higher export sales to other markets in the 2020 crop year due to lower production in Australia, Pakistan, and Turkey.
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 2021. 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, U.S. stocks represent one of the lowest levels in the last 20 years.
Campiche said 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, resulting in a stocks-to-use ratio of 74.8 percent.
Although global stocks remain high, 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, and post-COVID demand expectations are contributing to bullish sentiment for cotton prices. However, additional restrictions related to the COVID-19 pandemic, large stocks outside of China, and low man-made fiber prices could put downward pressure on cotton prices in 2021.
On the NCC's website are additional details of the 2021 Cotton Economic Outlook.