2017/18 Cotton Outlook

Transcription

1 217/1 Cotton Outlook 217 Ag Econ In service Training Dr. S. Aaron Smith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee Overview Domestic (U.S.) Supply and Demand Tennessee Global Supply and Demand Price and Crop Insurance 21 Price Outlook 1

2 Recent Past Cotton Economic Factors Declining Demand High Stocks World and China High stocks were not as influential on price because the majority was held in China and the market knew that most of that was not going into the world pipeline. It was China s stocks policy that was important, not the actual stocks number. Declining US Acreage and Production Demand is Improving The New Dynamics of the Cotton Market China stocks have been reduced Massive stocks had less impact on prices than most imagined because China reduced area and production, cut imports, and utilized stocks in their mills 2 years of very good government reserve sales. Emergence of new export markets US has gained market share 2

3 U.S. Supply Increased production Growing domestic stocks

4 U.S. Upland Cotton Acres Planted and Harvested, Millions of Acres Harvested Planted 1% U.S. Upland Cotton Harvested to Planted Ratio, % Harvested to Planted Ratio (%) % 7% 6% 5% % % 2% Min 6% Max 97% Average 91% StDev 7% Abandonment in Texas drives domestic production 1% %

5 1 9 7 U.S. Upland Cotton Yield, US Yield = 7.666x R² =.5 Yield (lbs/acre) National yield increasing on average 7. lbs/acre/year

6 U.S. Cotton Production, Billions of Dollars $.7 $5.2 $2. $.6 $6.9 $6. $5. $.7 $.7 $.7 $ Millions of lb bales $ Bales 6

7 12 U.S. Cotton Marketing Year Ending Stocks Millions of lb. Bales Tennessee Acres up Near record yield 7

8 Acres, 7, 6, 5,,, 2, 1, Tennessee Cotton Acres Planted and Harvested, % 9% 96% 9% 92% 9% % 6% % Harvested to Planted Ratio (%) Harvested Planted H/P Cotton Acres Planted In Tennessee, 217 (FSA Certified)

9 Tennessee Top 5 Planted Acres of Cotton, 217 (FSA Certified) 9

10 12 Tennessee Upland Cotton Yield, TN Yield = 7.756x +.9 R² =.5 Yield (lbs/acre) 6 2 Tennessee yield increasing 7.76 lbs/acre/year greater than the national average! Tennessee Cotton Production, Billions of Dollars $. $.16 $.1 $.15 $.2 $.7 $.26 $.16 $.15 $.9 $ Millions of lb bales $ Bales. 1

11 U.S. Demand Reliance on exports Millions of lb Bales U.S. cotton use moved from roughly 5/5 exports to domestic consumption to 7 5% exports in the early 2s U.S. Cotton Use,

12 25 U.S. Cotton Days on Hand [Ending Stocks/(Use/65)], Days on Hand Cotton Domestic Balance Sheet, USDA WASDE 217/1 Projected September 217/1 Projected October 217/1 Change From Previous Month Change 216/17 to 217/1 21/1 21/15 215/16 216/17 Est Planted and Harvested Acres & Yield Planted (Million Acres) Harvested (Million Acres) U.S. Yield (lbs/acre) Supply (Million Bales) Beg. Stocks Production Imports Total Supply Use & Ending Stocks (Million Bales) Domestic Exports Total Use U.S. Ending Stocks Foreign Stocks Chinese Stocks Price and Stocks to Use Ratio U.S. Avg. Price ($/lb) $.779 $.61 $.612 $.6 $.5-$.66 $.55-$.65 $. -$. U.S. Stocks/Use 17% 25% % 15% % 2% -.% 17.6% Chinese Stocks/Use 12% 197% 166% 129% 1% 1%.% -26.6% 12

13 Global Supply & Demand Southeast asia 1 World Cotton Acres Harvested, Millions of Acres India United States China Pakistan Uzbekistan Brazil ROW 1

14 1 9 World Cotton Harvested Acres, Acres Harvested (millions) % Increase in Cotton Acres Harvested From 196 to 217. Corn 1%; Soybeans 2%; and Wheat 9% World Cotton Yields by Country(lbs/acre) Country 26 Yield 1 Year Average Yield 217/1 Yield Difference from 1 Year Average Australia 1,79 1,762 2,2 261 Brazil 1,2 1,297 1,7 China 1,159 1,27 1,52 25 India Pakistan United States World

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17 1 12 Global Cotton Production (millions of lb. bales), India China ROW United States Pakistan Brazil Australia US share of world corn production has decreased from 21% in 26 to 17% in 217. Millions of lb. Bales Millions of lb. Bales Global Cotton Production, Consumption, and Ending Stocks, Ending Stocks Production Domestic Consumption 17

18 Global Cotton Consumption Per Capita, lbs/person/year : 7.27 lbs/person/year Rise in use of synthetic fibers has limited cotton market expansion. 217: 7.5 lbs/person/year % U.S. Share of Global Cotton Exports, U.S. Share of Global Cotton Exports (%) 5% % 5% % 25% 2% 15% 1% 5% %

19 Millions of lb Bales Cotton Imports By Country (Millions of lb. Bales), China s share of global importers has decline from 5% in 211 to 1% in ROW Bangladesh Vietnam China Indonesia Turkey Pakistan India Millions of lb. Bales Cotton Exports by Country (Millions of lb. Bales), United States ROW India Australia Brazil Uzbekistan 19

20 Global Cotton Stocks by Country, Percent of global stocks held in China is down to % (peak of 61% in 21) Millions of lb. Bales China India Brazil United States ROW 6 "China's Gap" Consumption less Production, Production Domestic Consumption 5 Millions of Bales

21 Cotton Global Days on Hand [Ending Stocks/(Consumption/65)], Days on Hand World Cotton Supply and Use (Million lb Bales) 217/1 (October) Country / Region Beginning Stocks Production Imports Domestic Use Exports Loss Ending Stocks World US Foreign Central Asia Afr. Fr. Zone Australia Brazil India Mexico China EU Turkey Pakistan Indonesia Thailand Bangladesh Vietnam ROW

22 Price and Crop Insurance Big push to get cotton back into commodity programs Continuous Nearby Cotton Futures Price and Marketing Year Average Price 211/12 $. 29/1 27/ $ /7 $.59 2/9 $.65 $.7 21/11 $ /1 $ /1 $ /15 $ /16 $ /17 $ /1 $.55 $.65 22

23 December Cotton Futures 7 Cents / lb Dec 1 Dec Jan 1 Mar 1 Mar Apr May 29 Jun 29 Jul 2 Aug 27 Sep 27 Oct 26 Nov Daily Cotton Spot Price Quotes (1 5), May 15, 217 Price cents per lb March 2, 216 Southeast North Delta US Average 2

24 Fiber Prices 27 Cents per Pound 25 A FE Index Asian Polyester Staple Source: NCC October Outlook Acres 1,, 1,6, 1,, 1,2, 1,,, 6,, 2, Tennessee Base, Planted, and Insured Acres 21: 26,12 acres of cotton planted on generic base 215: 157,5 acres of cotton planted on generic base Base Acres FSA Planted ('1 '16) NASS Planted ('1 '16) RMA Insured ('1 '16) 2

25 Tennessee Corn Crop Insurance Summary AVERAGE ANNUAL NUMBER OF CROP INSURANCE POLICIES PURCHASED BY INSURANCE PLAN FOR COTTON IN TENNESSEE, STAX, 19 ARP, 2 AYP, 5 RPHPE, YP CAT, 1,5 RP, 1,1 Number of Policies Revenue Protection Crop Insurance For Coton by Buy up Level Purchased in Tennessee, YP, 11 5% 55% 6% 65% 7% 75% % 5% Buy up AVERAGE ANNUAL NUMBER OF ACRES INSURED BY INSURANCE PLAN FOR COTTON IN TENNESSEE, STAX, 29 ARP, 92 RPHPE, 1 AYP, YP CAT, 65,1 Number of Policies Yield Protection Crop Insurance For Coton by Buy up Level Purchased in Tennessee, YP, 1,976 RP, 19,6 5% 55% 6% 65% 7% 75% % Buy up Price Outlook Production projected to exceed global demand again..but for how long. 25

26 Hurricane Harvey Texas 9. million bales Estimates, to, bales loss Hurricane Irma Georgia 2.7 million bales Estimated 1 to 2% loss, highly variable 26

27 Tennessee Considerations for 21 Old crop (217) Tennessee producers should take advantage of quality premiums Macro conditions and USD Export sales pace Harvest weather New crop (21) Domestic carry over will weigh on prices Planted acreage will be dictated by relative prices 27

28 21 Price Projections Source 21 Price CBOT $.69 CBO $.6 FAPRI $.6 WASDE $.55 $.65 Cotton - Net Return Table ($/acre) Assumes a cost of production of $65/acre Yield (lb/acre) , 1,5 1,1 1,15 1,2 6. (2) (2) (17) (1) (11) () (5) (2) (229) (199) (16) (1) (17) (76) (6) (15) (221) (19) (15) (127) (96) (6) () (2) (212) (1) (1) (116) () (5) (21) (2) (171) (1) (16) (7) (1) () (19) (161) (12) (95) (62) (29) (16) (152) (11) () (51) (17) Price 6.75 (177) (1) (1) (7) (9) (5) (cent/lb) 7. (16) (1) (9) (6) (2) (159) (12) () (5) (17) (151) (11) (7) (2) (6) (12) (15) (6) (1) (1) (96) (5) (21) (12) (6) () (1) (116) (77) () (17) (6) (2)

29 Soybean/Corn (s/c) Price Ratio Monthly U.S. Price Ratios Corn, Soybeans, and Upland Cotton, Price ratio is one out of three relative ratios to consider (price, yield, & cost) Cotton/Corn and Cotton/Soybean Price Ratio s/c ct/c ct/s Key Issues for 21 USDA numbers will reduce the crop but by how much Look to see if projected exports remain strong Will demand continue to improve? Crops in India, China, Australia Prices likely 6 to 7 cents (maybe 55 65) Cottonseed program still a possibility USDA may look to authorize CGCS Program for 217 and 21 Getting cotton back into commodity programs 29

30 Resources Crop Economics Webpage Market highlights Crop Budgets UT Crop Blog Quarterly Market Zoom Meeting (next one Nov ) Thank you Questions?