Cotton was the lone crop to receive an update to U.S. production in USDA’s December WASDE and Crop Production reports.
The agency increased its estimate to 14.268 million bales, up 149,000 bales from the previous forecast. Analysts were generally expecting an increase to national production, but some of the state yields are now at record-setting levels that shot the national number higher than previously thought.
Record yields are expected in seven states: Alabama (1,011), Arkansas (1,538), Florida (960), Louisiana (1,486), Mississippi (1,329), North Carolina (1,152) and Tennessee (1,440). Average yields are notably above three bales per acre in the states comprising the middle to southern portions of the Delta, a remarkable level to eclipse.
The national average yield for all cotton stands at 929 pounds, second only to the 953-pound record set in the 2022-23 crop year.
With prices remaining near five-year lows producers will need every bit of lint they can to get closer to breaking even or squeezing out a profit on their crop. Earlier this year, USDA’s June acreage report showed area planted to cotton plummeted by 1.063 million acres, or 9.5%, from the previous year. At the time this was a small lift to the cotton market, helping to alleviate somewhat worries about supply vastly outstripping demand.
The most recent forecast shows USDA expects 7.368 million acres to be harvested, down 436,000 acres from 2024. Despite the sizable drop in acres, total production is only down 145,000 bales from last year due to the higher yields. The higher-than-expected production and lackluster exports will make it difficult for cotton prices to rally in the near-term.
Cotton is also suffering from abundant supplies outside the U.S., with the average world price currently at 51.28 cents, triggering loan deficiency payments should producers decide to sell.
Will USDA’s production estimate continue to fluctuate?
Cotton can be a difficult crop to estimate yield for due to the physical properties of the crop and its ability to bounce back from harsh conditions. One method to gauge how volatile USDA’s future updates might be is examining another report they produce, Cotton Ginnings.
The report tracks one thing: the amount of cotton ginned in the U.S. for the current crop year. By taking the bales ginned and dividing it by the total forecasted production, we have an idea of how much of the crop has been processed. The higher the amount ginned, the more likely USDA is to not make big swings to production.
Currently 61% of the expected cotton crop is ginned — up less than 1% from the ten-year average, meaning we can expect the typical amount of variation in their forecasts. The agency will publish two more reports in the near future when ginning is in full swing, on December 19th and January 12th that will give more clues ahead of the future adjustments.
Adjustments are typically light after the January report for ginnings, especially for the southeast.