The US cotton industry can expect a slowdown in growth from the prior two years, new data shows, as a result of increased production costs, slumping consumer demand and supply chain disruptions.

The latest data from National Cotton Council economists shows US cotton acreage is projected to be down 170% on last year to 11.4m acres. While production costs remain elevated, cotton harvest-time futures prices are currently 16.5% less than a year ago and the prices of most competing commodities are relatively unchanged.

The current economic signals are reflected in the 2023 survey results as many growers indicated a shift away from cotton to other competing commodities.

In her analysis of the NCC Annual Planting Intentions survey results, Dr. Jody Campiche, the NCC’s vice president, economics & policy analysis, reveals an expected abandonment rate of 22.6% in 2023.  

Campiche says world production is estimated to increase slightly to 115.9m bales in 2023/24 due to an increase in harvested acreage. Overall, the outlook for world cotton demand for the 2023/24 marketing year takes on a more positive tone as compared to 2022/23 with the expectation of improving global economic conditions.

For the 2023/24 marketing year, world consumption is projected to increase by 4.7% to 116.1m bales. The removal of Covid-19 restrictions in China should provide a boost to cotton consumption in 2023. The International Monetary Fund has projected an increase in China’s growth rate from 3% in 2022 to 5.2% in 2023. With expanded consumption in key importing countries, world trade is projected to increase to 44.2m bales in 2023/24.

Regarding domestic mill cotton use, the NCC is projecting an increase in US mill use to 2.3m bales during the 2023/24 marketing year. As one of largest markets for US cotton, US mills continue to be critically important to the health of the cotton industry. In the face of rising textile imports from Asian suppliers, the US textile industry has focused on new investment and technology adoption in order to remain competitive. Preserving important trading arrangements in the Western Hemisphere is also critical to the US textile industry’s health, the NCC says.

A projected increase in world consumption for the 2023/24 marketing year along with a larger US supply results in a higher US export projection as compared to 2022/23. When combined with US mill use, total offtake is lower than expected supply, and ending stocks are projected to increase to 5.3m bales. World ending stocks are projected to decline slightly in the 2023/24 marketing year to 89.9m bales, resulting in a stocks-to-use ratio of 77.5%.

However, the NCC warns that the current economic outlook for the US and global economies should be viewed with caution as several downside risks are present. Continued impacts of tighter monetary policy, high inflation, the Russia-Ukraine war, potential for severe Covid-19 health impacts in China, geopolitical tensions, currency pressures in key importing countries, and slower economic growth could affect cotton demand in 2023 and put downward pressure on cotton prices.

By Just Style