Byline: Joanna Ramey

WASHINGTON — In a report reflecting the further tightening of world cotton supplies to critical levels, the Agriculture Department Thursday released an upward revision of estimates of cotton exports and U.S. textile mill cotton consumption.
The report doesn’t bode well for cotton prices, which have been hovering over a dollar a pound since late February — the highest levels since the Civil War. The New York Cotton Exchange closed Thursday with cotton for May delivery selling at $1.087.
Crucially, the USDA said the increase in U.S. cotton demand, coupled with existing worldwide cotton shortages — reflecting poor crops in China, India and Pakistan — and surging consumption will drain the nation’s cotton reserve to just more than a one-month’s supply. The reserve, or so-called ending stock, is what mills depend on during August to carry them during the month when the cotton harvest begins anew.
“This is going to make people very nervous,” said Terry Townsend, statistician with the Washington, D.C.-based International Cotton Advisory Committee. “We are literally running out of cotton to sell.”
The USDA forecasts U.S. mills and other cotton consumers will collectively hold an ending stock of 2.1 million bales of cotton in August, a downward revision from the agency’s 2.7 million-bale forecast in February. By comparison, ending stocks at the beginning of the current 1994-1995 season were 40 percent higher, or 3.53 million bales.
“This is drawing stocks down to a very low level,” said Russ Barlowe, a fiber analyst with the World Agricultural Outlook Board, an adjunct of the USDA.
Ironically, the slim ending stock forecast is coming at a time when the U.S. is expected to produce a record cotton crop of 19.7 million bales, a projection that went unchanged in the USDA’s recent cotton report. The report revised U.S. mill consumption up 2 percent to 11.3 million bales, the highest on record since the 1941-42 crop year consumption of 11.6 million bales. Cotton watchers, however, peg U.S. mill use of cotton this year at a much higher level. The ICCA, for example, forecasts use at 11.4 million bales and has a much more dire ending-stock estimate of 1.9 million bales.
Another measure of how tight supplies are is the increase in U.S. cotton exports, which the USDA has revised upward to show shipments of 10 million bales this crop year, up from 9.6 million bales forecast in February.
Townsend said the combined 600,000-bale increase in the forecast for U.S. mill and export cotton consumption for this crop year only works to further drain the nation’s ending stock cotton reserve, since projections for U.S. cotton production for the year are remaining steady.