Australian Cotton Looks To The Future
March 27, 2009 During the five seasons from 1997 to 2002, Australia’s cotton production eclipsed 3 million bales each year and crested at 3.7 million in 2000/01. Those were good times for Australia’s flourishing cotton industry, as the quantity was buttressed by high-quality fiber. Five years later, Australian quality still reaches benchmarks that make the country a favorite location for cotton breeders worldwide, but total production has lagged, reaching just 1.1 million bales last year – less than half the previous year’s crop. While the drought improves quality, production has been desiccated. That’s a dichotomy many growers could live without.
Tony Geitz, managing director of Paul Reinhart Australia and chairman of the Australian Cotton Shippers Association, looks to the bright side, emphasizing the benefits of Australian cotton and reminding that growers from his country are resilient.
“By and large, it was an exceptional year in terms of quality. In excess of 65% of the crop has a staple length of 1-5/32 or longer, and the color grade and leaf was 21-2s or better. It was probably one of the better crops we have produced in the last five years,” Geitz said.
“But unfortunately, this is attributed mainly to the drought. Obviously with no rainfall, water issues such as water-logging or other agronomic problems like that were not prevalent, and the crop was allowed to grow with the benefit of ideal irrigation timing.”
Industry estimates pin this year’s crop at 1.1 million 500-lb. bales, significantly lower than the 2006 crop. Australia’s production could dip lower next year, below one million bales.
“This past crop may actually be larger than industry estimates of 1.1 million bales because of increased yields, but that is the rough industry estimate at the moment,” Geitz said. “Last year we were roughly at 2.4 million bales, so the drought has had a significant effect with more than a 50% reduction in the crop size this year. With the drought prevailing, that decrease could be to the same extent next year.”
How bad could a lack of rainfall and decreasing acreage be for the 2007/08 crop? Australia could see fewer bales produced this year than the late 1970s or early 1980s, when production hovered in the half-million bales range. It would be the first time since 1985 that production dipped below a million bales.
“Without any additional rainfall between now and planting time, probably the best-case scenario would be half a million 500-lb. bales. It is a situation this year where you have growers with very low soil moisture ranges, very small if any on-farm storage of water, and very little allocations of public water for irrigation. So it’s really a function of four years of prolonged, less-than-average rainfall in Australia,” Geitz said.
Finding Some Good News
It’s hard not to focus on the disastrous times Australia faces, but there is some good news for spinners and mills who buy cotton from Australia. Due to the drought, fiber quality reached very high levels, and mills are seeking Australian growths for their characteristics and value. Some mills are even getting a premium on their forward contracts.
“Are mills buying Australian cotton? Absolutely. Demand has been good. Obviously the timing with New York appreciating as much as it did in July made it fairly difficult to sell, but with New York starting to decrease, we are starting to see more volume move,” Geitz said.
“And there are other benefits. Most mills that forward purchased this year probably would have received a staple length longer than what they actually forward contracted for. That is certainly true for the forward contracting that was done on the core grades, such as the 1-1/8 inch, G5 and 3.8-4.5 micronaire range. So that is helping.”
Even with the four-year drought, Australia is looking to the future. Research continues to look for drought-tolerant varieties and more efficient uses of water. New varieties with high yields and better quality are also in trials. Geitz said the Australian industry prides itself on its past and current research, and emphasized that even during difficult times, “significant money” is being spent on research and development. That’s the dedication and investment it will take, in addition to rainfall, to see the Australian cotton industry sustain itself for the future.
“Certainly the industry is continuing to work in those areas of research, and remember: a decent wet season could make a significant difference in the amount of cotton that we grow,” Geitz said. “I am not trying to understate the seriousness of the cotton situation in Australia, but cotton growers are by nature very resilient, and if we can just get a reasonable amount of rainfall, you will see cotton come back to what it was – maybe 3.5 to 4 million bales – at peak production, particularly if we see some domestic AUD price improvements..”
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Tony Geitz, Chairman of Australian Cotton Shippers Association
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