La Nina good news for cotton

La Nina chances spell good news for cotton | Global Perspective

Cotton
A range of positive factors could see Australian cotton output improve significantly in 2020-21 - possibly up 250 per cent from last year - to more than two million bales.

A range of positive factors could see Australian cotton output improve significantly in 2020-21 - possibly up 250 per cent from last year - to more than two million bales.

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After years of dryness, this potential drought-busting event would be hugely welcome for irrigators.

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PROSPECTS for Australia's 2021 cotton crop are strong.

Widespread 2020 rainfall has refilled the Murray-Darling Basin (MDB) by 7.6 per cent year-on-year, and accessible water volumes are at the highest level since January 2019.

Also, these figures fail to illustrate good inflows into on-farm storages and improved soil moisture across much of NSW and south Queensland.

All of this is set to see Australian cotton output improve in 2020-21 - possibly up 250 per cent year-on-year to exceed two million bales.

Still, it seems mother nature is not quite done with us yet - with much still to happen between now and crop planting in October.

Fortunately, the seasonal outlook is positive.

The Bureau of Meteorology (BoM) is forecasting a wetter than average three-month east coast outlook and - in addition - the latest from the El Nino-Southern Oscillation (ENSO) model highlights an increased possibility of La Nina.

Uncertainty surrounds a possible La Nina event, but its occurrence could be significant for cotton and the broader irrigation industry.

The latest ENSO outlook now sits at La Nina watch, meaning the chance of a La Nina forming in 2020 has increased to near 50 per cent. This is twice the typical likelihood - but no guarantees.

So what does this mean for cotton? First and foremost, a La Nina event often brings higher rainfall across eastern, central and northern Australia.

This event has historically coincided with the two major refills of MDB water storages in the past decade, reaching near capacity in 2011-12 and again in 2016-17.

La Nina occurs every three to seven years on average, so it seems we are certainly due.

After years of dryness, this potential drought-busting event would be hugely welcome for irrigators.

Furthermore, a particularly severe - and wet - event could provide water for several seasons beyond 2021.

This would allow production to reach towards that of the 'gin-busting' 2017 season - prices permitting.

As a global event, La Nina will also have indirect impacts on Australia.

Indonesia, Malaysia, the Philippines and northern Brazil tend to experience above average rainfall, while India receives a stronger monsoon season.

In contrast, Argentina and the southern USA states experience drier than normal conditions.

Already in west Texas - the number one cotton-producing region in the USA - we're noticing emerging drought conditions, ranging from moderate to extreme.

Should this dryness persist - as per a La Nina event - the US will be facing lower 2020 yields and higher abandonment nationally. This is a factor supporting global futures prices.

Potentially higher Indian yields could also lead to a more crowded, lower-quality fibre market - all during the textile demand downturn caused by COVID-19.

In summary, eastern cotton growers will be happy to see conditions having improved already ahead of the 2021 crop. This could be further bolstered by a wetter than average outlook, and/or the emergence of La Nina.

While Rabobank pegs current 2021 cotton production at two million bales, there is potential for this to rise towards three million bales if there is more rainfall.

Rabobank also highlights that La Nina can bring changes lasting several years - either in refilling storages here at home, or adjusting market dynamics abroad.

In short, La Nina is almost always a net benefit.

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