Cotton conflict: prices, quality at odds

Namoi Cotton trader Pedr Harvey said about 80 to 85 per cent of the Australian crop had been sold and growers had recorded an improvement in prices compared with this time last year.

“Australian cotton growers have seen prices above $500 a bale for several months now,” he said.

“Prices in April have been about $75/bale higher than the same period last year.”

For growers who didn’t pre-sell their cotton, current prices were looking promising and were giving growers the incentive to sell.

“The July futures have been trading above US90 cents a pound for the past month and a half,” Mr Harvey said.

“July futures have gained nearly US4c/lb in the past three weeks and are trading at levels not seen since early 2012.”

Cotton Compass director Pete Johnson, Toowoomba, said growers who forward-sold received good prices, although they were slightly below current values.

“We’ve seen prices gradually increase through the growing season and they’re at their best at picking time,” he said.

Cotton Australia chief executive officer Adam Kay said 60pc of Australian cotton had been picked with harvest only just getting started in the south.

With this season well under way, buyers for next season were offering growers close to $500/bale.

But Mr Kay said farmers still were not in a great position to forward sell cotton.

Low water storage was making farmers hesitant to take the high prices.

“People won’t forward sell if they don’t have the water for it,” he said.

With a lot more cotton to be picked it’s still too soon to know the overall quality of Australia’s cotton.

Mr Kay said generally the cotton being picked in Australia had been good although there had been more of a variation in quality than previous seasons.

“There’s been a little bit of downgrading because of the early rain when some of the cotton was open and ready to pick,” he said.

On the global front, West Texas in the US grew about 60pc of the cotton area in that country and Mr Johnson said the area was experiencing a harsh drought.

Mr Johnson said the uncertainty in US production potential had been supportive for Australian prices although growers were concerned about a potential reduction in Chinese import appetite due to its large stock pile.

Last Friday the US Department of Agriculture (USDA) released its monthly World Agricultural Supply and Demand Estimates report predicting China’s imports were likely to fall to 8.5 million bales in 2014-15.

“The market’s been aware China’s imports were likely to fall because its stockpile is so big,” Mr Johnson said.

“China’s stocks are currently estimated at 59.56 million bales and its consumption is only 35.5 million bales.”

Despite the size of China’s stock, Mr Johnson anticipated Australian cotton would still be in high demand from Chinese customers due to its quality profile.

WITH 75 per cent of picking done, “Strathguyle” manager Andrew O’Connor, Garah, said this cotton season had been an improvement on last year.

This year he planted 1214 hectares of irrigated cotton on the 2630ha property.

Despite the price improvement, Mr O’Connor said this season has been slightly disappointing with the yield not being as good as expected.

“It was a very hot summer, it was just too hot,” he said.

“I’m just a bit underwhelmed by it (the season) really.

“It was a lot of watering and a lot of work for not the greatest results.”

Mr O’Connor said about 13,000 bales would be harvested this season averaging about 11.8 bales a hectare.

Although the season was tough, he said the quality of the cotton being picked had been good and a large majority of the crop had already been marketed.

“We’re happy with prices we sold for,” he said.

“We haven’t been badly affected by downgrading.”