The International Cotton Advisory Committee based in Washington, DC, said in its “Outlook for World Cotton Supply and Use” forecast that the world cotton supply (production + beginning stocks) is expected to reach 35.5 million tons in 2011-2012 , 4 percent higher that the preceding period. The world cotton area will continue to increase by 4 percent to 34.7 million hectares in the current year.

The US Department of Agriculture officials also forecast a 13 percent increase in domestic production to 17.7 million bales for the new marketing year that began this month.

Against this backdrop, lower cotton prices are expected due to a global surplus.

The “World Cotton Outlook: Projections To 2015/16” report, projected that worldwide consumption of cotton and man-made fibers (mmf) are projected to continue their upward trends; cotton mill use grows by 17 percent and mmf by 16 percent by the end of the baseline period compared to current marketing year estimates.

Cotton usage relative to mmf is projected to remain relatively constant with cotton usage running 60 percent that of mmf.

Consumption of cotton at the mill level is projected to increase by 17 percent, or 20 million bales, over the forecast period.

Moreover, cotton production increases to meet rising mill use demand are expected to come primarily in the form of increased yields per acre rather than widespread increases in harvested area.

Worldwide, yields are projected to increase by 0.1 bales per acre (10.6 percent) over the baseline, or by about 50 pounds of lint per acre.
However, the stocks-to-use ratio is projected to decline gradually over the next 10 years and remain in the low 40 percent range.

A global surplus of cotton production has driven prices down, mitigating any benefit from harvests that should be better than last year’s disastrous crop.

“There’s a worldwide glut that has driven the price down to basically the cost of production,” said Dee Vaughn, a US cotton producer. “Market changes in places like China and Brazil have us pretty close to the break-even point.”

China, the world’s biggest importer and consumer of cotton, has accumulated stockpiles and reduced demand, according to financial services provider Morgan Stanley. Brazil, a major cotton producer, has enjoyed a significant increase in production, Texas Farm Bureau commodity specialist George Caldwell said.

Cotton prices are averaging just under 70 cents per pound. A surge that began in late 2010 sent numbers soaring to around $ 2 in the early part of 2011. The 2010 flooding in cotton- producing Australia, China and Pakistan was among the factors that drove that spike, economists said.
By this time last year, prices had begun their descent to more usual levels. Cotton futures averaged at a little over $ 1 a pound in August 2011.
The current rate is a middling price for a commodity that has shown high volatility since the global economic recession began in 2008.
Cotton values plummeted in the first year of the recession, struggling to stay higher than 50 cents per pound in early 2009.

US Department of Agriculture officials forecast a 13 percent increase in domestic production to 17.7 million bales for the new marketing year that began this month.

That overall rise takes into account regional ups and downs, depending on how cotton-producing areas have fared with this year’s weather compared to last year’s, the USDA reported.

In Texas, farmers throughout most of the state produce the crop, though production methods vary according to climate.

For those who grow dryland cotton, without irrigation, this harvest will be paltry if it occurs at all, Caldwell said.

Cotton farmers in the Coastal Bend have “really struggled,” while the mainly dryland acres in the Rolling Plains are “doing poorly,” Caldwell said.

In the South Plains, the primary cotton-producing region in West Texas, dryland acres are similarly desolate, Vaughn said.

“Most (South Plains) dryland fields had bloomed out of the top and reached hard cutout, signaling that no more blooms would be produced,” the USDA reported Friday.

The good news in West Texas is the irrigated cotton acres look good. “In the Panhandle, irrigated cotton is doing fine,” said Steve Amosson, a Texas A&M Agrilife Extension economist in Amarillo. “Cotton likes it hot. Yields will be good.”

The overwhelming majority of cotton acres in the Texas Panhandle are irrigated, and dryland cotton is rare north of Interstate 40, Amosson said.
Area cotton farmers expect a harvest close to the average of recent seasons, Caldwell said.

However, the modest price per pound will present a challenge to those farmers’ bottom lines, he said. In an effort to help domestic producers, the USDA’s Commodity Credit Corp. will implement an import quota on upland cotton, the most common variety, from Aug. 23 through Nov. 20.

During that time, the amount imported should not exceed the amount US mills typically use in one week, the USDA said.

However, global rather than domestic demand will determine the long-term future of the commodity, Joe Nicosia, CEO of Allenberg Cotton Co. said at a Southern Cotton Ginners Association meeting last month in New Orleans, La.

Nicosia said an increasing preference for cheaper, synthetic fibers bodes ill for cotton consumption.

“From what we see around the world, the consumer may prefer cotton, but he’s not buying it,” Nicosia said.