The past year proved to be full of uncertainty and volatility for world cotton market. Prices reached decade high during the year as the COVID-19 restrictions relaxed and world economies reopened. However, the pandemic exerted exceptional strain on global supply chains. The situation continues in 2022 with the new Omicron variant of affecting global markets and cotton supply chain, says Jody Campiche, Vice President, Economics & Policy Analysis, National Cotton Council.

US cotton acreage to rise in 2022

In her survey titled ‘NCC Annual Planting Intentions’, Campiche says, the NCC projects US cotton acreage 7.3 per cent higher than 2021 at 12 million acre during the year. Input costs are also likely to surge on account of higher fertilizer and chemical costs. In 2022, the total area under cotton harvest in the US is estimated to be 9.8 million acre with abandonment rate likely to reach 18.9 per cent. Cotton production in the country is likely to touch 17.3 million bales with an average yield of 850 pounds per acre. This also includes 16.8 million upland bales and 438,000 extra-long staple bales.

Domestic mill use of cotton in the US is expected to rise to 2.7 million bales during 2022 crop year, says Campiche. Domestic cotton mills will continue to remain important for the US cotton industry as it accelerates new investments and adopts new technologies to boost trade, she adds.

Shipments to lag in marketing year

In the 2021 marketing year, the US cotton exports are estimated to have declined to 13.8 million bales, according to USDA’s February 2022 estimates. So far in the 2021 marketing year, exports remained strong. However, weekly shipments are lagging well behind the five-year average pace due to lack of available supply and transportation issues.

In the current marketing year, cotton shipments are expected to reach 13.8 million bales. So far, 4.5 million bales have already been shipped. Compared to last year, shipments lag by 3.2 million bales while compared to a five-year average they lag by 1.1 million bales. To achieve the set target, the US needs to ship 370,000 million cotton bales weekly, adds Campiche. Decline in cotton exports in 2021 are also likely to impact US ending stocks that may increase by 1.2 million bales to 4.4 million bales, adds Campiche.

End stocks to fall

In 2022, global cotton production is expected to increase to 122.6 million as the total acreage area will increase. Similarly, global mill consumption of cotton is expected to increase to 125.9 million bales, leading to a 48.3 million bales rise in world cotton trade, Campiche affirms.

In 2022, US’ total cotton consumption is expected to exceed production, leading to 3.4 million bales fall in world ending stocks to 81.6 million bales. This will further result in a stocks-to-use ratio of 64.8 percent.

Cotton prices in the US are currently rising amid a tighter balance sheet, supply chain disruptions, speculative money flow, overall increases in commodity prices, and strong demand. However, analysts do not expect the celebrations to last as additional COVID-19-related restrictions, slowing of the world economy and a decline in manmade fibers may dent cotton prices in 2022.