Australian Cotton Output Seen Dropping as Drought Hurts Crop

Photographer: Ian Waldie/Bloomberg

Cotton is harvested by a worker operating a picking machine in the Narrabri region of New South Wales, Australia. Close

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Photographer: Ian Waldie/Bloomberg

Cotton is harvested by a worker operating a picking machine in the Narrabri region of New South Wales, Australia.

Cotton production in Australia, the world’s third-biggest exporter, may decline to the lowest level in at least three years as drought curbs crops and water availability, according to a growers’ group. Prices advanced.

Output in 2013-14 may be less than the 4 million bales forecast in September, said Michael Murray, policy manager for Queensland and water at Sydney-based Cotton Australia. That compares with a crop of about 4.4 million bales in 2012-13, and the record 5.3 million bales harvested in 2011-12. An Australian bale weighs 227 kilograms (500 pounds).

The group’s forecast adds to signs that drier-than-usual weather in parts of Australia is hurting farm output in the $1.5 trillion economy. About 65 percent of Queensland is in drought after its driest December since 1938, while New South Wales had its driest January since 2003, Bureau of Meteorology data show. Australia may bring forward income assistance for farmers due to the drought, Prime Minister Tony Abbott said today.

“It’s been a hotter and drier summer than usual and water use has been a little higher than average,” Murray said by phone from Queensland. “That’s meant that in some valleys, some growers are running short of water.”

Benchmark futures in New York advanced 0.5 percent to 85.98 cents a pound on ICE Futures U.S. today. Rising world supply will drive prices to 75 cents in three months, Goldman Sachs Group Inc. says. Global stockpiles on July 31 may reach a record 97.6 million bales of 480 pounds, according to the U.S. Department of Agriculture.

Hungate’s Outlook

“There’s still a lot of uncertainty where it is going to end up,” said Nick Hungate, London-based head of cotton at RCMA Commodities Asia Pte Ltd., referring to the Australian crop. Production may drop below 3.5 million bales, he said.

The area planted to cotton nationwide fell 6.6 percent to 413,000 hectares (1 million acres) in 2013-14 from a year earlier, the Australian Bureau of Agricultural and Resource Economics and Sciences said in December. Production may drop to 975,000 metric tons in 2013-14 from 1 million tons, said the Canberra-based bureau, which is known as Abares. Queensland may account for about 34 percent of national output, it predicts.

The drought is also spurring farmers to cull cattle as pastures wither and the price of feed advances. Slaughterings may increase 5.6 percent to 8.9 million head in the year to June 30, boosting exports to a record, Abares estimates. The price of sorghum, used to feed livestock, climbed to A$346.50 ($310) a ton in January, the highest since 2007.

El Nino

The cotton crop may still be Australia’s third- or fourth-biggest, Murray said yesterday. Rain predicted for Queensland in the next week may provide some relief, he said. The last time Australia produced less than 4 million bales was 2010-11, according to Cotton Australia, an industry group.

Most climate models suggest the tropical Pacific Ocean will warm through the southern autumn and winter, with some models predicting the trend may approach El Nino thresholds by early winter, the Bureau of Meteorology said Jan. 28. An El Nino, which is associated with drier conditions in Australia, particularly the east, may restrict irrigated cotton output, Australia & New Zealand Banking Group Ltd. said yesterday.

“Obviously there is a very serious drought problem in western Queensland,” Abbott told reporters in Brisbane. “Parts of New South Wales and even parts of northern Victoria are suffering from the drought” and the government is looking at bringing forward the start of a plan that provides income support to people in exceptional circumstances, he said.

To contact the reporter on 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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