Cotton growers on front selling foot

Cotton growers on front selling foot

File photo

File photo


THE falling Aussie dollar has been a big windfall for the cotton market and could buffer a looming cut in the Chinese import market.


THE falling Aussie dollar has been a big windfall for the cotton market and could buffer a looming cut in the Chinese import market.

Cotton Compass director Pete Johnson said growers had been doing a good job pre-selling with up to 70 per cent of their crops locked in, and they've been doing so at market highs of as much as $500.

"At the moment it's close to $500 a bale, which is historic- ally pretty good," Mr Johnson said.

"They started forward selling back in the middle of the year at about $450 a bale and gradually scaled up to about $500."

He said the selling pace slowed during the Christmas period because of the amount of crop already sold through spring, plus the emerging pressure on available water top finish the crop.

Eyeballs have been firmly fixed on China, the world's biggest producer and consumer of cotton, Mr Johnson said.

With the Chinese strategic national cotton reserve looking plump after hoarding its domestic supply throughout the past few years, a shift in China's import policy could have ramifications on the world price.

"USDA estimates the Chinese ending stocks for 2013-13 were 57.3 million bales," Mr Johnson said.

"Their consumption is estimated at 36 million - that's a stocks-to-use ratio of 160pc and included the national cotton reserve which has been building for some time.

"Because of that there's concern China will change its reserve policy."

According to Mr Johnson, last year China imported 20.3 million bales and market predictions suggest there could be a sharp reduction in imports to 11 million bales.

"Hence the growers have been aware of this and have been willing to sell into any rallies to take that risk off the table," he said.

There were roughly 390,000 hectares of cotton planted nationally and Mr Johnson said if there's a bit of rain and the crop finishes well, there could be 4.2 million bales nationally.

Should the season not end as well, this could fall below four billion bales, but Mr Johnson stressed it was still a big crop that continues the four bumper years.

The area planted included less-traditional cotton growing areas in the State's south.

Cotton Australia's chief executive officer Adam Kay said the key infrastructure was now in place for the crop to propser in the south.

"At the Lachlan and Murrumbidgee we estimate there's about 47,000 hectares planted down there," he said.

"Fourteen (thousand hec- tares) of which are in the Lachlan Valley and about 32,000ha to 33,000ha of which are in the Murrumbidgee Valley."

It's all irrigated cotton and while growers started out with a low allocation, Mr Kay said the feeling is they will have enough water to finish the crop.

For the past four or five years the Griffith area has been following suit, with some expansion further out to the east.

Southern Cotton general manager Kate O'Callaghan, Whitton, said the 32,000ha in the Murrumbidgee looked promising.

"They got off to a flying start and then there was a cold spell but now they're looking pretty good and we are hoping for a big season in 2014," she said, despite the region's reduced water allocation.

The dry conditions and heat in the north has meant growers in areas such as Mungindi to St George, Queensland, are weighing up whether to keep watering all their crop.

"We just hope to see some rain to take the pressure off," Mr Kay said.

James Quinn, extension and development agronomist for Cotton Seed Distributors said it had been a rollercoaster of a year with things looking pretty good at the planning stage.

"Prices were pushing that $500 mark which meant there was a lot of enthusiasm but then we didn't get any rain during the planting period.


From the front page

Sponsored by