Cotton futures jumped limit-up after the US slashed its forecast for domestic supplies of the fibre to the lowest in nearly a century, citing crop losses to “historically high abandonment” in the face of drought and heat.

New York cotton futures for December, the best-traded contract, locked up the exchange limit of 4.00 cents, taking the lot to a seven-week high of 108.59 cents a pound.

Indeed, the front five contracts, out to July 2023, were all trading up the daily maximum 4.0-cent move allowed by the exchange.

The buying spree followed a sharp downgrade by the US Department of Agriculture to its forecast for domestic supplies, in the main on a cut to the area of this year’s cotton sowings expected to make it to harvest, following a survey of major growing areas.

‘Inadequate rain, excessive heat’

The USDA said that its “first survey-based estimate for production for 2022-23” had suggested a crop of 12.57m bales – a cut of nearly 3.0m bales on the previous forecast, and the lowest result in 12 years.

The estimate was “reduced by projected historically high abandonment in the southwest”, with harvested area in Texas, the top cotton-growing state, pegged at 2.22m acres – nearly 70% below the 7.10m acres that farmers seeded with the fibre, according to separate USDA briefing in June.

“Texas cotton producers in the [state’s] Southern Plains and the Northern Low Plains have reported inadequate rain along with excessive heat,” the USDA said.

“With this, some cotton fields are starting to bloom while others are struggling to keep up with moisture needs of the crop.”

The USDA added that the 2.00m acres of upland cotton, as opposed to high-quality pima cotton, expected to be harvested in Texas this year would be “the lowest on record”.

Harvested area in neighbouring Oklahoma was pegged at 260,000 hectares, implying the abandonment of more than half of plantings.

‘Lowest since 1924-25’

While the production loss was offset in part by a cut to export hopes, downgraded by 2.0m bales to a seven-year low of 12.0m bales, the USDA said it expected domestic cotton inventories to dwindle nonetheless to 1.80m bales by the close of 2022-23, as started this month.

That figure, a downgrade of 600,000 bales from last month’s estimate, would represent the lowest US carryout stocks number on data going back to 1960-61.

Compared with demand, to form the stocks-to-use ratio much used as a pricing guide, inventories would come in at “12.6% of expected use, 8 percentage points lower than in 2021-22 and the lowest stocks-to-use ratio since 1924-25”, the USDA said.

The department lifted by 2 cents, to a record high of 97 cents a pound, its forecast for average farmgate prices of upland cotton this season.

Global supplies

With the Uzbek crop downgraded by a more modest 100,000 bales, the USDA forecast for world cotton production in 2022-23 was cut by 3.1m tonnes, to 117.0m bales.

Global cotton stocks at the close of the season were pegged at 82.8m bales, a downgraded of 1.5m bales month on month, and a four-year low.

Besides the output cuts, “consumption in 2022-23 is projected lower than a month ago in the United States, Pakistan, Vietnam, Turkey, and Bangladesh”.