Expected Reduction Of Cotton Production In Major Cotton Producing Areas In The United States

 

15 June; The increasingly hot climate is threatening the local water supply, and some states have begun to implement water restriction measures.

 

The United States is the world's largest exporter of cotton, exports three to four times its domestic consumption. Cotton is grown in 17 states in the United States. Among them, Texas has the largest cotton production, followed by Georgia and Mississippi. The Mediterranean and subtropical desert climate in the western part of the United States has sufficient heat, which improves the fiber quality of cotton. California, Arizona and New Mexico are the production bases of high-grade cotton in the United States. Among them, svacala cotton flower and C / a cotton which are well-known all over the world come from this region.

 

At present, it is the planting period of American cotton, during which the weather changes will have a certain impact on the final yield and quality of American cotton. The disturbance of weather will increase the uncertainty of cotton price fluctuation. According to the latest USDA weekly crop growth report, as of June 6, 2021, cotton planting progress in the United States was 71%, 5 percentage points behind the same period last year, and 7 percentage points lower than the average value in the past five years. The cotton budding progress in the United States was 9%, 3% lower than the same period last year and 2% lower than the average value in the past five years. Both of them are behind the average of the same period last year and 5 years. However, the normal proportion of cotton plant was 85%, which was 2% behind the same period of last year.

 

In the USDA balance of supply and demand released on June 10, the main keynote of global cotton production decline in 2021 / 2022 was opened. It can be found that the extreme weather in the main cotton producing areas of the United States has slowed down the planting progress and growth rate of cotton, and the expectation of cotton yield reduction has been significantly enhanced. In May, the drought in Texas was also a key factor affecting its planting period. The latest data showed that the weighted average value of soil moisture in the cotton planting area of Texas (78.1% area) was 24%, and the weekly decrease was 10% and the year-on-year decrease was 50%; The weighted average value of underground soil moisture was 43%, which was 9% lower than that of the previous year, 29% lower than that of the previous year. The drought problem in Texas has not come to an end, and the drought in the west is becoming more and more serious.

 

California is the most developed agricultural state in the United States, with an industrial scale of up to 50 billion US dollars. At present, the shortage of water resources and the threat of wildfire caused by the continuous drought have a sustained impact on it. At this time last year, no part of the state was classified as "rare drought", only 2% of the area was classified as "extreme drought" at that time, while this year, more than 85% of the state is in "extreme drought" and the entire state is currently in drought. California's reservoirs and the sparse snow in the Sierra Nevada Mountains, which is the source of the reservoirs, are evaporating faster and the reservoir capacity is in short supply.

 

Pima cotton has long been typical of California cotton production because the weather favors longer season varieties. Pima noodles are famous all over the world for its soft touch and excellent toughness. This kind of cotton is exported to China and India in large quantities every year. It is difficult to find a reliable source of Pima cotton from outside the United States, because there are not many places to produce Pima cotton except California. Before India has also planted some varieties of Pima cotton, but the quality is not satisfactory. Many textile mills have obtained the right to use the trademark of Pima cotton. If they want to continue to produce relevant products, the only way is to buy American Pima cotton.

 

Today, the arid climate in the west of the United States and the lack of irrigation supply have begun to affect the planting area and yield of Pima cotton in the United States. In addition to the farmers' earlier transfer of other crops with higher income, the cotton planting area in the western United States this year may be the lowest in decades. California used to have more than a million acres of Pima cotton, but this year it's less than 100000. According to preliminary data from the California cotton growing and ginning Association, the Pima cotton area in 2021 was only 91000 acres, and 35500 acres of upland cotton were planted. According to the Arizona cotton research and Conservation Council, the total cotton area in Arizona also fell by about 5.6%. Preliminary data show that about 112000 acres of upland cotton and less than 7000 acres of Pima cotton have been planted in the state this year. Affected by drought, the production of Pima cotton in the western region of the United States in 2021-2022 may be only 80000-90000 tons.

 

However, Pima cotton production accounts for less than 5% of the total cotton production in the United States, and the United States is still mainly upland cotton. As a result, the drought in the western region will still have limited driving force for the rise of cotton prices. However, it is not ruled out that the influx of money bulls will continue to drive up the price of cotton. The current ice US cotton contract in December has been rebounding for more than a month since it hit a low of 80.99 cents / pound on May 14, among which the forecast of weather premium has peaked so far. In addition, the low inventory in 2020 / 2021 and the sharp decrease in the ratio of warehouse to consumption have appeared on the whole. If the future cotton price wants to have a larger market space again, it needs at least two or more factors from the aspects of supply, demand, inventory structure and macro level.

 

From the current situation, from the macro point of view, the global new crown vaccination is accelerating, the basis for stable economic recovery remains unchanged, inflation will still exist objectively, and the probability of the Fed maintaining the interest rate resolution unchanged is high. In terms of demand, consumption is still in the process of further recovery. It can be seen from USDA's June report that the recovery and growth trend of global cotton consumption is still continuing. The epidemic situation or more has prompted downstream orders to shift to countries with better epidemic control. Therefore, the global cotton consumption in 2021 / 2022 is still relatively strong, with 980000 tons more than that in the previous year, Further promote the export of American cotton. On the downstream side, the replenishment will continue, the macro improvement will drive the recovery of production and profits, and the yarn external price has strong signs. On the whole, the contradiction between the supply side of the main cotton producing countries such as the United States has not been completely eliminated, coupled with the recovery of demand, the center of gravity or probability rate of cotton prices in the medium and long term continues to rise.