Cotton exports are expected to reach record levels in 2012-13, making Australia the second largest exporter in the world.
The forecast has been made in the National Australia BankΆs latest Rural Commodities Wrap, which this month has cotton as the ΅commodity in focusΆ.
NABΆs Head of Agribusiness for Northern Australia, David Brett, says 2011-12 was a strong year for the industry.
“We had strong prices, abundant water and improved seasonal conditions resulting in record cotton production, allowing an export program this year expected to reach 1.1 million tonnes,” Mr Brett said.
“This comes at a good time. Prices have held their ground following a strong price rally since November 2012 on the back of China re-stocking its reserves, moving from $390 to approximately $445 now per bale in Australian dollar terms.
“As the worldΆs largest producer, consumer and importer of cotton, ChinaΆs sheer power in the global cotton market can strongly influence world prices and production.
“A more optimistic global economic outlook is predicted to see mills worldwide increase their consumption of cotton by around 4 per cent, the first growth weΆve seen in three years.
“This may help cotton to regain some market share from synthetic fibres.”
Despite the rally, 2013 is not without its challenges, with current prices around a third of the peak price in March 2011.
World production is expected to decline 4-6 per cent as a result of the weaker prices, combined with stiffer competition from alternative crops, which are commanding more favourable prices. Despite this, production is expected to exceed consumption, keeping stocks high and prices soft.
In Australia, there has been a significant drop in dryland plantings due to a hot and dry start to the season. Irrigated cotton is forecast to make up around 95 per cent of planting area this year.
In other commodities, the mild strengthening of the Australian dollar and stronger prices for some commodities saw the NAB Rural Commodity Index rise by 0.2 per cent in Australian dollar terms and by 0.7 per cent in US dollar terms.
Driving the Index were price gains in wool, cotton and lamb; partly offset by price falls in wheat, beef and sugar, and to a lesser extent dairy.
The NAB Weighted Feed Grains price hit its highest level since October 2008 after its ninth consecutive rise of 1.1 per cent. This was predominantly due to an increase in feed barley prices, with some support from higher sorghum and triticale prices. While high, the price is still well below the record levels seen in early 2008.
Input prices fell marginally in January, with the NAB Weighted Fertiliser Index down 0.7 per cent. This was on the back of a 3.7 per cent fall in the price of Diammonium Phosphate (DAP). Natural gas prices also fell, while the price of urea rose by 7.2 per cent.