Cotton Harvest in Australia Seen Climbing to Record on Water

Cotton production in Australia, set to be the world’s second-biggest shipper, may climb to a record as water availability boosts yields even as the planted area declines, according to Rabobank International.

The harvest may total 4.95 million bales in 2012-2013, the bank said in a report today. Production was more than 4.5 million bales in 2011-2012, an all-time high, it said. A bale in Australia weighs 227 kilograms (500 pounds).

Cotton fell 67 percent since reaching a record in 2011, reducing costs for clothing retailers including Gap Inc., as supply increased and slowing global growth hurt demand. The U.S. Department of Agriculture on Aug. 10 cut its outlook for global demand 0.8 percent to 108.16 million, 480-pound bales, while boosting the outlook for world stockpiles by 3.1 percent.

“Having water available at a dry time will spur the industry,” Rabobank analyst Tracey Allen said in an interview at a cotton conference on the Gold Coast in Queensland state today. “It really is the irrigated crops that will get us through the season.”

La Nina-linked rains in parts of eastern Australia have boosted water supply. Over the past fortnight, indicators such as the Southern Oscillation Index have shown renewed trends consistent with the early stages of an El Nino, which brings drier-than-normal weather to areas in the country’s east, Australia’s Bureau of Meteorology said on its website today. Temperatures may exceed El Nino thresholds before the end of September, it said.

Cotton Australia

About 34,000 hectares (84,014 acres), or 30 percent of the 2011-2012 dryland cotton area, may be used for alternatives in 2012-2013 on lower prices and the outlook for drier-than-normal weather, according to Rabobank’s report. Australian farmers will sow the crop from about October.

Output in 2012-2013 may be about 4 million bales, according to Adam Kay, Chief Executive Officer of producers’ group Cotton Australia. Production may drop 20 percent from 2011-2012 as farmers curb plantings on lower prices, he said in an interview on the Gold Coast today.

“We’ll see a very slight reduction in irrigated crops in a couple of areas, but most are maintaining area,” Kay said. “There may be a reduction in dryland crop due to the prices.”

Cotton for December delivery climbed as much as 1.6 percent 72.84 cents per pound on ICE Futures U.S. in New York and was at 72.28 cents at 1:36 p.m. Singapore time.

The U.S. is set to be the world’s biggest exporter of cotton in 2012-2013 followed by Australia, according to the USDA.

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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