Tim Watson is no stranger to coping with drought, but the new Namoi Cotton chairman’s patience and strategic skills could be put to the test in the season ahead.
Paradoxically both drought and diverse cotton industry expansion are happening in Australia this year, catching this enterprising beetroot, grain and cotton grower on the horns of a dilemma.
One one hand, Australia’s next cotton crop is likely to shrink in (year-on-year) size by about 45 per cent to maybe 2.4 million bales as drought cuts summer irrigation water availability to Queensland and NSW croppers.
On the other, big geographic leaps are being made to expand cotton production into new, vastly different locations.
Crops have been planted in North Queensland’s gulf country near Normanton this spring, and up to 350 hectares of wet season crop are currently being harvested in Western Australia’s remote northern Kimberley region – the first commercial wet season cotton crop in the Ord Irrigation Scheme since the 1970s.
The tropical northern cropping push, combined with the increasing confidence of cooler climate croppers in South West NSW and northern Victoria, could see Australia’s typical cotton area double to break 1 million hectares in the next 20 years, say some industry leaders.
Cotton’s being grown from Swan Hill in Victoria to the Gilbert River and Kunanurra in the Top End – we need to see how we can be most effectively support that growth
Namoi Cotton, Australia’s biggest cotton ginner, is eager to service that growth by expanding and diversifying its business, after fully listing on the Australian Securities Exchange last year and shedding its grower co-operative status.
However, Mr Watson said it was also a “difficult balancing act”.
“This season will be a challenge,” admitted the Hillston farmer, who last month took on the top boardroom job as Moree’s Stuart Boydell ended a marathon 23 years as chairman.
“Seasonal challenges like this one make it hard for growers and hard for our business to maintain staff and find the best ways to generate returns.
“You must also keep your infrastructure in readiness to cope with the flip side – a jump back to a capacity irrigated planting and a big dryland crop.”
Aside from a focus on staying efficient and profitable in dry times, Namoi’s board and management were strategically reviewing the changing industry and the company’s own goals as production horizons expanded.
Diverse industry spread
“Cotton’s being grown from Swan Hill in Victoria to the Gilbert River and Kunanurra in the Top End – we need to stand back and see how we can be most effectively support that growth and our existing customers,” Mr Watson said.
“We’re keeping a watching brief on northern Australia.
“We don’t want to rush into a wrong decision.”
Meanwhile, to help buffer itself from cotton’s production and market variations, Namoi has been expanding containerised chickpea, wheat and cottonseed packing activities and will develop more business options to utilise its warehousing, crop handling assets and workforce skills.
However, a planned capital raising to help fund new initiatives, which initially was to follow last September’s full ASX float, is now on ice until management completes its strategic review.
No capital raising rush
“Based on the current crop outlook for 2019 and because we’ve got a revamped board still exploring how best optimise our ginning business and an off-season commodity business model, there’s no need to raise fresh capital just now,” Mr Watson said.
Namoi, which has 13 gins, a market capitalisation of about $50m and gross revenues in the $300m to $500m range, ginned and marketed about 25pc of last season’s 3.7m bale crop.
It posted a $6.2m profit in 2017-18 – up from $300,000 the previous year.
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Namoi Cotton is again tipped to handle a quarter of the 2 million-plus 2018-19 harvest.
However, Mr Watson believed the 56-year-old business could do even better after being bolstered by a capital restructure, improved cash flow and fresh corporate strategy thinking in the past five-plus years.
Easy to do business
“We intend to be the preferred place for growers and anybody in the supply chain to easily do business,” he said.
While no longer a farmer co-operative, Namoi had a grower-focused track record, an impressively loyal workforce committed to growers and the wider cotton industry and 25m bales of ginning and market experience under its belt.
When things got pretty tough in this industry back in 2011, we honoured all our contracts and we survived.
“You don’t just find that depth of commitment anywhere, and I feel we should do more to tout our credentials,” he said.
“It’s not just a profitable business. When things got pretty tough in this industry back in 2011, we honoured all our contracts and we survived.
“We did not walk away, which is not something other companies could say.
“Our bankers give us good support and we’ve got fresh horsepower on our board to take our business much further.”
Top grower record
Mr Watson joined Namoi’s board in 2014 with a fairly impressive track record of his own, including being named Australian cotton grower of the year six months earlier.
Judges were effusive in their praise of the Watsons’ attention to detail, bold ideas and 2000 hectares of southern NSW drip-, overhead pivot- and flood-irrigated crops.
Despite being relative newcomers to cotton, and the millennium drought forcing their Sunland Agriculture to limit its irrigation focus to pumpkins and melons in the early 2000s, by 2014 Tim and Sally Watson were achieving industry-topping fibre yields averaging 12.2 bales a hectare (over eight seasons).
Initially a contract harvester and dryland cropper from Deniliquin and Berrigan for 20 years, Mr Watson and his wife moved from sharefarming to buy the first of three Hillston farms in 1998.
They now have 22 centre pivots irrigating cotton, durum wheat and about 125ha of beetroot.
Sunland is Australia’s biggest supplier of beetroot to Edgell’s cannery business.
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