FALLING prices and production levels for cotton should not be a cause of panic for NSW cotton growers, according to analysts.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its most recent quarterly report on agricultural commodities last week, which stated the world indicator price for cotton in September had reached its lowest point since the start of the year.
The report also forecast a drop of 16 per cent for export earnings for cotton across Australia in the coming season, and a decrease in total production from 1.3 million tonnes to 992,000t.
Despite the forecast, analysts said cotton growers should not be worried.
Cotton Compass director Pete Johnson said close to 50pc of the crop had been pre-sold.
“It’s certainly not all doom and gloom,” he said.
This would be good for farmers who had locked in better prices for their cotton, he said.
A spokesman for ABARES also suggested the recent low price for cotton was not a cause for concern, saying price fluctuation can be influenced by sudden changes in market expectations.
The ABARES report also forecast a rise in the cotton price for the 2013-14 season, compared with 2012-13.
“The average return to Australian cotton growers at the gin-gate is forecast to be $523 a bale of lint (including the value of cottonseed and net of ginning costs) in 2013-14 compared with $474/bale received in 2012-13,” the report stated.
“The forecast higher return reflects the forecast higher world cotton prices and an assumed depreciation of the Australian dollar.”
Namoi Cotton trader Pedr Harvey said a recent downward trend in cotton futures could be traced back to speculative selling and northern hemisphere harvest pressure.
“At the end of last season’s harvest, prices started at about $400/bale for the 2014 crop.
“As growers were making planting decisions prices had moved up to $500 per bale,” Mr Harvey said.
“Prices have since drifted back to $440-$450/bale.”
Mr Johnson agreed, saying large cotton reserves in China were causing uncertainty for the market.
By the end of 2013-14 China is expected to be holding about 62pc of world cotton stocks.
The ABARES report also warned of the impact this could have on the market.
“China’s cotton stock management policies will be an important influence on world cotton prices in 2013-14,” the report said.
“If China was to stop purchasing cotton for stock building or to draw down its cotton stocks, world cotton prices could be significantly lower than currently forecast.”
