USDA :: The US department of agriculture (USDA) has lowered the country’s cotton export target for 2017-18 to 14.5 million bales of 480 lb each, down 300,000 bales from the previous forecast. To meet the revised forecast, however, exports will still have to average over 350,000 bales per week, a rate just over last year’s then-second-highest level on record.
During the first half of the current marketing year, cotton shipments from the US have lagged compared to the same period of the previous year. As of last week in January, accumulated exports this season totalled 4.57 million running bales or just 32.5 per cent of the new forecast. This is the second-lowest level in the last decade and well below the 38 per cent decadal average.
The only lower year, 2014-15, saw Feb-July US exports supported by two events: a very small crop in Australia due to drought, and large MSP operations in India reducing its exports. Both of these limited competition with—and helped accelerate—US exports during Feb-July. No such favourable factors are evident so far this season to support second-half exports.
“Additionally, several factors are likely to pressure US exports in the coming months. In Australia, the cotton crop is expected to be the largest in six years, and harvest appears to have begun appreciably earlier than usual, which may enable early export shipments. As a result, US exports may face fiercer competition from Australia than is typical for the early Northern Hemisphere spring months,” the Foreign Agricultural Service (FAS) of the USDA said in its monthly report ‘Cotton: World Markets and Trade’.
Additionally, US exports would also be affected due to increase in cotton production in Mexico this year. In normal years, export shipments to Mexico have a fairly even pace over the course of the marketing year; however, the doubling of Mexican crop this year is expected to curtail imports in the second half of the season relative to the first half of the season. As such, shipments to that major market may slow noticeably.
Finally, since the beginning of cotton year 2018, implementation of new US trucking regulations has reportedly caused delays in transporting cotton from US warehouses, a situation which may not be entirely resolved and backlogs cleared before the end of the season.
As a result of these three factors, the US balance sheet at the end of 2017-18 cotton year is likely to have lower exports and higher ending stocks.
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