El Nino seen boosting U.S. cotton output after worst drought in years

By Ashitha Shivaprasad

(Reuters) – The El Nino weather pattern could boost yields in the second half of the year for U.S. cotton farmers, who were forced to abandon a big chunk of their cropland in 2022 after one of the worst droughts in years.

While El Nino typically brings dry weather to Asia, with impacts already being felt in Australia, Indonesia and India, it is known for wet weather in parts of North and South America.

The National Weather Service has forecast a more than 50% chance of El Nino forming during the northern summer of 2023.

“If we move into an El Nino pattern, we would see more rainfall in the U.S. and this would mean higher production, higher yields and less abandonment this year,” said Bailey Thomen, cotton risk management associate at StoneX Group.

Last year, more than three-quarters of Texas, which accounts for about 40% of U.S. cotton output, suffered from one of the worst droughts in years.

As a result, U.S. farmers were forced to abandon a record amount of their land, with the resultant supply shortfall driving prices to an 11-year peak in May.  

“Last year, Texas had almost 70% abandonment due to drought,” the Texas Farm Bureau said.

However, too much rainfall may prove to be a spoilsport, leading to yield losses and quality downgrades.

“The most crucial part will be when the rains arrive. It will be great if they arrive by April-May,” Kansas-based commodity analyst Sid Love said.

Expectations of higher U.S. cotton output come at a time of weakening global demand for the fiber.

Demand concerns have prompted about 6% decline in U.S. cotton futures this year, and prices hit a 20-week low this week amid the ongoing banking sector crisis. [COT/N]

The USDA lowered its 2022/23 world cotton consumption estimates to 110.11 million bales in March, from 110.66 million bales forecast a month ago.

The market will be highly dependent on what happens with the global economy, said Matthew Looney, data scientist at International Cotton Advisory Committee, predicting consumption would remain low into the 2023/24 season.

“China’s recovery is a positive sign while the ongoing banking crisis poses economic risks which could weigh on demand,” said Jim Nunn, owner of Tennessee-based cotton brokerage Nunn Cotton.

Source link