Optimistic expectations of the national cotton crop yielding about 6 million bales have been literally watered down to less than 5 million - and possibly closer to 4m - in the wake of a super soggy spring in NSW and southern Queensland.
After one of the wettest years on record in NSW, which delayed last season's harvest and constrained planting in the Namoi, Macquarie and Lachlan valleys, Rabobank, Cotton Australia, Namoi Cotton and commodity analyst, Cotton Compass, have tipped the 2023 crop to yield between 4.3m and 4.9m bales.
Cotton Australia still believed there was potential to exceed 5m bales, despite cooler than expected weather so far this season and heavy rain damage on farms which prevented, or stalled, planting.
The Australian Bureau of Agricultural Resource Economics and Sciences' December was far more conservative, estimating only 4.3m bales - down a third on the previous crop.
Australia's 2022 harvest, which has only recently seen ginning finish - about two months behind schedule - was a record 5.7m bales.
RELATED READING
ABARES calculated the gross value of 2022-23 production from the delayed harvest would tally around $3.4 billion.
Exports were tipped to hit $5.1b, partly because of shipping delays for the previous year's crop.
Cotton Australia chief executive officer, Adam Kay, said farmers remained confident the abundance of irrigation water available and other favourable conditions, including good soil moisture for dryland plantings, would still ensure another bumper crop in 2023, despite the extensive infrastructure and crop losses experienced by some.
"Our thoughts go out to those impacted by the floods, and some will be facing a long recovery, however, other regions are reporting better than expected outcomes," he said pointing north.
Market pressures
However, after a season when cotton prices surged to highs of $1000 a bale on the back of drought overseas and post-COVID lockdown spending by consumers and textile mills, softening lint prices will see markets starting the new year about $140/bale behind January 2022.
Rabobank associate analyst, Edward McGeoch, said there had been a lot of market fluctuation in 2022, including an 11-year high, but "unfortunately, we have seen a steady decline from those high prices".
ABARES noted rising global interest rates and fears of an economic slowdown in the US and EU would likely reduce discretionary consumer spending, including clothing, although the national commodity forecaster did not foresee significant price downgrades for Australian cotton.
Cotton Australia's Mr Kay said the easing of international container constraints and increasing global demand for fibre sustainability accreditation were likely to work in the local industry's favour.
"An increasing number of major brands are demanding sustainability in the cotton they use," he said.
"Better Cotton is in demand globally, and as members, our certified myBMP cotton more than meets the standards of sustainability and accountability required by Better Cotton."
Potential price positives
He said given demand was still robust for quality Australian cotton, prices may increase.
Also helpful for Australia was a 20pc crop shrinkage in US production by about 3.5m bales this year, combined with low stock levels, and a 1.5m bale reduction in the Pakistani harvest because of floods and heatwaves.
Buyers would likely be looking to premium cotton producers to cover inventories until the next cotton season, which meant local values could lift in coming months.
Mr McGeoch said new export destinations were also opening up for Australian cotton as traders continued finding alternatives to China which imposed import bans in 2020.
With China no longer absorbing two thirds of our export crop, Vietnam had emerged as a key new market, now importing about 38pc of our exports.
Sales to India had also jumped dramatically, lifting from just 4pc in 2020 to 13pc.
"And Turkey has also emerged as a new market, taking roughly 10pc of Australian cotton exports this year," he said.
Dryland expansion
Expectations of a big dryland crop area this summer, compensating for some of the washed out irrigated production, have been noted by Namoi Cotton, which pointed to scope for notable increases on the NSW-Queensland border in the Macintryre and Gwydir valleys.
Australia's biggest processor confirmed it finished the ginning season having handled 1.17m bales, but had downgraded expectations for the 2023 crop.
It earlier forecast lifting ginning throughput to as much as 1.3m bales, but based on rainfall setbacks experienced so far, Namoi now expected to gin between 900,000 and 1.1m bales.
Its earnings outlook for the full 2022-23 year continued to be in the range of $19m and $21m for earnings before interest, tax, depreciation and amortisation.
The delayed 2022 harvest meant it was holding higher cottonseed inventory stocks for marketing than normal, which would now be sold over an extended period into the first quarter of the 2023-24 trading year.
Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
