Air of Optimism for Cotton

There is an air of optimism in rural communities about future prospects for cotton, triggered by changing weather patterns, a more positive water availability outlook, and potentially favourable supply, demand and price indicators.

Having weathered the prolonged drought, evaporating water resources and price and income erosion, the cotton industry must now re-establish itself as the preferred summer crop, a position it held for most of the decade prior to the drought.

The task will not be easy, given that many irrigators in cotton growing regions are now more attuned to winter cropping programs. The key for future cotton production is how much land these irrigators now commit to fallow for cotton.

Cotton Seed Distributors, the major seed provider in Australia, has prepared some gross margin analyses (available on the CSD website www.csd.net.au) which indicate that cotton is a viable option to irrigated wheat on both a per hectare and per megalitre basis.

In terms of net profit per megalitre, CSD’s analysis shows that irrigated cotton is in front of wheat at today’s prices. Furthermore, significant industry-funded research conducted for well over a decade has shown that wheat and cotton complement each other extremely well in a rotational sense.

A combination of increased global demand for cotton over the past two years, and the reduction in planted area due to increasing prices for competing crops, will see a reduction in world ending stocks, which should further underpin cotton prices over the medium term.

Domestically, the small cotton acreage over the last two seasons in Australia has also seen the cottonseed market strengthen. This market has matured to the point where seed is no longer viewed only as a crushed commodity, but as an integral component of feed rations, both commercial and drought.

It is reasonable to expect that higher prices across the coarse grains complex will support cottonseed values for the foreseeable future.

CSD also notes the potential for considerable upside for cotton yields, exceeding the gains currently envisaged for wheat.

While Sicot 71BR is the most popular high-yielding cotton variety in Australia, a new variety Sicot 70BRF, has the potential to dethrone Sicot 71BR, and Sicot 71BRF is also undergoing development, demonstrating a 2.5 per cent yield increase over 70BRF.

CSD’s gross margin analysis uses the average for all trials conducted with Sicot 71BR (10.33b/ha), but many growers have achieved consistently higher yields than the trial average.

CSD also notes that since the introduction of biotechnology, cotton has become a more secure crop to grow. A number of operations have been reduced along with the pressure to be timely with insecticide and herbicide applications.

Another benefit of biotech cotton is the certainty it provides to budgeting of a cotton crop. Costs of production are known with some accuracy before planting, and in many cases the large seasonal fluctuations in insecticide and herbicide costs have been eliminated. Payment terms developed by the technology provider also aid with cash flow management.

CSD concludes that ultimately the decision on the mix of winter wheat and summer crops will be different for every farming operation. From the perspective of using on-farm water to reduce evaporation, building cash flow, and providing valuable organic matter, wheat remains an excellent prospect.

However, biotechnology available to cotton growers, such as Bollgard II® and Roundup Ready® incorporated in the world’s highest yielding cotton varieties, has allowed cotton production to not only improve but also be more stable.

“We feel that cotton provides an excellent option to maximise returns per hectare but importantly also on a megalitre basis,” CSD says.