Global cotton production for the coming year is expected to drop 4 percent, according to estimates by the US Department of Agriculture.
The projected decline is attributed to a significant reduction in Brazil, where the crop for the 2012-13 year is expected to fall by fully one-third.
Record soybean and corn prices, disease outbreak and erratic precipitation are expected to lower the crop in the central Brazilian states of Bahia and Mato Grosso, which together account for more than 80 percent of Brazil’s total annual cotton production, according to Southeast Farm Press.
In the US, production is expected to be slightly more than 17 million bales, which represents a 2 percent increase from the previous month’s USDA estimate and is 11 percent higher than the previous year’s crop, the publication added.
Worldwide, 2012-13 cotton production is estimated at nearly 120 million bales.
Global cotton stocks are expected to be significantly higher this year than last, the USDA also reported.
Last week, the Agriculture Department said global stockpiles of cotton will be 82.45 million bales in the year ending July 31, 18 percent more than a year earlier.
Not surprisingly, futures prices have dropped in recent weeks.
Cotton for July delivery was down to around 85.5 cents a pound as of Tuesday, off about 2.5 percent since the start of the month.
“We’ve just got too much supply in the world,” Keith Brown, the president of Keith Brown & Co., a broker in Moultrie, Ga., told Bloomberg. “The market’s coming to its fundamental senses and saying, ‘Why am I up here?’”