Sep 16, 2014
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Drought Might Shave 50% Off Australian Cotton Harvest

August 7, 2014
cotton plants

Cotton production in Australia is set to plummet as much as 50 percent next season as drought curbs water supply in the world’s third-biggest exporter, according to growers and shippers.

Output may be between 2 million and 2.5 million bales in 2014-2015 from about 4 million bales this year, according to Cotton Australia, the Sydney-based producers’ group. Production may total about 2.25 million bales, according to the Australian Cotton Shippers Association, which promotes exports. An Australian bale weighs 227 kilograms (500 pounds).

Cotton futures slumped 24 percent this year and are the biggest losers in the Bloomberg Commodity Spot Index as output in the U.S., the largest exporter, is poised to climb, adding to record global reserves. Australian farmers may plant less after a record drought in Queensland and dry conditions in parts of New South Wales, the biggest producer, according to Cotton Australia Chief Executive Officer Adam Kay.

"Unless we get some pretty serious rainfall in the next two to three months, we’re going to see a reduction in area due to lack of water," Kay said in an interview on the Gold Coast yesterday, giving the crop estimates for this year and next. "Dryland producers would probably be a little nervous about the price and would be looking at the price for small grains and doing the gross margins comparisons."

Strong Corn Demand Ahead

Lower Prices

Cotton fell to 62.02 cents on ICE Futures U.S. on Aug. 1, the lowest for a most-active contract since October 2009, before capping a 13th week of losses, the longest decline since at least 1959, according to data compiled by Bloomberg. The fiber traded at 64.17 cents at 6:53 a.m. in New York. Dryland cotton refers to crops without irrigation that rely on rainfall.

"It’s been very dry out here, a lot of areas are dry," Jonathan Burrell, a grower from Dirranbandi in southern Queensland, said in an interview today. While his cotton planting usually covers nearly 1,500 acres a year, it will be closer to 300 acres in 2014-2015, he said.

"We’ve had very low water-flow levels over the last 12 months," said Burrell, who’s president of the Dirranbandi Cotton Growers Association. In that region, plantings of cotton may decline by more than half, he said.

The predicted harvest would be the smallest since 2009-2010, when output was less than 2 million bales, according to Cotton Australia figures. Output fell 49.8 percent in 2007-2008 and 54 percent in 2006-2007 on drought, the data show.

No Rain

About 75 percent of Queensland is in drought, near the record 79 percent seen in March, according to the state government. Most of the state recorded little or no rain in July, according to the Bureau of Meteorology. New South Wales had its driest July since 2002, according to the weather bureau.

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