THE dry start to spring coupled with a bearish market outlook will be responsible for a pullback in the area of cotton production in 2012-13.
Namoi Cotton manager of grower services David Lindsay said with about 50 per cent of east coast cotton planted, things were on track for a national yield of 4.1 to 4.2 million bales.
Though this estimate is still one of the highest of the past 20 years, it is back significantly on last season’s record yield of five million bales.
Mr Lindsay said the dry conditions were causing both dryland cotton producers and irrigators to scale back sowing.
“Irrigators are saying they’re using a lot more water this season when pre-watering,” he said.
“Having said that, conditions for germination are good apart from the strange cold snap we had recently.”
With cotton trading at US78.4 cents a pound, returns for Australian producers would be constrained to about $380 to $400 a bale, low enough to convince some dryland growers to abandon cotton this season.
“Prices are constrained; the futures are nowhere near as high as they have been,” Mr Lindsay said.
“If the Aussie dollar was back at US90 cents that would make huge changes.”
Queensland Cotton marketing services manager Meagan Abdy said growers and analysts were readying themselves for a price dip.
“Although the price is in the high US70c/lb range, everybody is acutely aware of the global surplus,” she said.
She agreed dryland yields would be down significantly on previous years.
“The biggest decreases will be on the Darling Downs and in Central Queensland,” she said.
Ms Abdy said virtually no dryland cotton would be planted near Emerald while the Darling Downs’ output was forecast to reach about 300,000 bales, down more than half on last year’s yield of 650,000 bales.
“The dryness and the price will make growers who can consider an alternate crop do that,” she said.
Sorghum was proving popular among growers looking to minimise risk.
Ms Abdy said as a result of the bearish cotton outlook, the 2013 crop stood undersold.
“Out of the four million or so bales, maybe 500,000 odd bales have been sold,” she said.
“Historically, maybe 30pc of the crop would have been sold by planting so it shows some growers are feeling a bit nervous and are holding out.”
Rabobank cotton analyst Tracey Allen said she expected cotton prices to dip to US70c/lb shortly after a brief price rally last week caused mainly by quality concerns for the US crop.
“Looking further ahead to 2013, the market is likely to drop back to US65c/lb,” she said.
The global cotton surplus and China’s huge strategic reserve – which is at its highest level since the late 1990s – were the drivers of the negative outlook, she said.
“Not until we use enough of that surplus will we see the market lifting again,” she said.
She said decreased plantings around the world as a result of lower prices would see some of that surplus eaten away, steadying the market.
