Does the official US cotton condition score matter?
The US Department of Agriculture overnight released its first estimate of 2022 for the health of the domestic cotton crop.
It is, at 44% rated good or excellent, doing OK – although the headline figure does disguise a stark contrast between the condition of cotton in top growing state Texas, where drought is testing growers, and the better-watered crops elsewhere.
Yield vs condition score
Crop condition scores certainly aren’t always reflected in harvest yields – especially ratings taken so early in the season.
Still, that does not mean that the figure holds nothing for investors.
In extreme cases – as in 2017, when the initial rating came in at a substantial 63% good or excellent, or 2011, when it started at just 28% – there is a good chance of the final yield following the expected trend.
The record US yield of 1,014 kilogrammes per hectare (905 pounds per acre), was set in 2017, while 2011’s result ended up at just 886 kilogrammes per hectare, the second-lowest reading of the past 15 years.
And even in other years, the data hold some clues.
Since 2000, in all but six harvests, the US cotton yield has ended higher and lower than the previous year in relation to whether the initial condition score was above or below the first rating of the previous year.
So in 2021, for instance, when the initial rating of 43% good or excellent was (a touch) below the first reading of 2020, the end-yield dropped too.
The (inverse) correlation between initial scores and crop abandonment rates is pretty good too, in simple directional terms.
Outlook for 2022
What does that tell us about 2022? If the relationship holds, this year’s yield will beat last year’s result of 918 kilogrammes per hectare.
That is indeed what the USDA is factoring in – a rise of 5.9% year on year in fact.
What looks less likely is the inference that crop abandonment will ease, from last year’s already-low rate of 8.5%.
The Texas crop’s low rating would hint at its farmers at least being forced to scrap more cotton. And the state is expected by officials to account for 6.82m acres of cotton this year, more than half the 12.2m acres expected US-wide.
It could be back to the drawing board on condition rating correlations…