2022/23 Fundamentals, Outlook, and Caveats

ICE cotton futures provide a forecast of the 22/23 cotton market.  Dec’22 futures are currently trading in the low 80s, which are historically strong.  The early fundamental indicators appear to justify such price levels.

The 22/23 carry-in could start things off with three million bales to the U.S. new crop supply.  Then there is the new crop planted acreage question.  The Dec’22 CBOT corn/Dec’22 ICE cotton ratio = 6.2 as of September 22.  Assuming the price ratio stays at that level, history suggests an outcome of 11 or 12 million planted acres of U.S. all cotton (see below).

Planting 11.5 million acres with average/higher abandonment (18%)and 10-year average yield (855 lbs) could give us an 17+ million bale U.S. crop and a 20+ million bale supply.  Assuming U.S. domestic spinning is 2.5 million bales and U.S. exports are 15 million bales, the result could be another year of U.S. ending stocks around three million bales.  That is a neutral-tightening year-over-year change, and suggests that new crop futures prices may range around similar levels as in the current marketing year, i.e., from the 70s to the 90s.


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