USDA’s May WASDE report is notable for having USDA’s first comprehensive U.S. and world cotton supply and demand forecasts for the 2024 crop. I consider it a regular, annual milestone report that the market anticipates and sometimes to which it reacts. (That’s milestone, not millstone. Just to be clear.)    

The U.S. cotton projections in this report were not surprising. The May production forecast of U.S. cotton was predictably based on the March Prospective Plantings report forecast of 10.67 million planted acres of U.S. all cotton (upland and pima combined). Because we’re not in a widespread drought, the safest thing to do is multiply the Prospective Plantings acreage times an assumed yield times the percent harvested, the latter two variables based on historical averages.  That is what USDA did in the May WASDE, and that is what I and most other analysts are already doing. 

Having said that, I am inclined to think that 10.67 million planted acres of cotton is a little low. The next milestone measurement of planted acreage is USDA’s June 30 Planted Acreage report. I believe that the June measurement will be 11.0 million or higher, incorporating likely prevented corn plantings that switched to cotton in the Midsouth. Higher plantings will raise the forecasted production and supply in July and in subsequent reports. 

Related:Lack of in-season, objective yield data adds to uncertainty

Export demand

So, then the question turns to export demand. Will it be enough to balance out a larger crop in the U.S., and in Brazil, Australia, and Turkey? USDA is assuming a healthy 13 million bales of U.S. exports for the 24/25 marketing year. This would be higher than the previous two marketing years. Such a demand outcome depends on the general economic outlook, i.e., a continued growing economy, with no economic hiccups in the battle against inflation. And, of course, no “black swans” like a trade war or a real war.   

The safest thing to assume is that demand conditions will be similar to what they are now, which is ok, but a little bit uncertain. If demand is the same, and we have a larger crop, I expect to see modestly lower prices at harvest. For example, I wouldn’t be surprised by Dec’24 ICE cotton futures to erode to the lower 70s. Until then, the uncertainty of all these supply/demand outcomes will likely give us our market highs for the season. 

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