Cotton Australia is reporting strong demand for cotton across global markets currently but warns of a $300 million plunge over the next year.
The peak body claims merchants and shippers are reporting a higher level of engagement with buyers from multiple countries while emerging markets are stepping up their orders.
Raw Australian cotton was exported to 16 different markets in 2023 with Vietnam now taking close to 37%. Vietnam is targeted by Australian cotton merchants under the federal government’s Agricultural Trade and Market Access Cooperation (ATMAC) program.
According to Cotton Australia, the ATMAC program has also allowed stronger engagement with Indonesia and Malaysia, with these countries now taking more than 20% of our total cotton exports combined.
Turkey, Bangladesh and Thailand are importing close to 15% of Australia’s total export offering.
“Our farmers have virtually sold out of the 2023 crop to merchants and indications are we have forward sold about a third of our 2024 crop with prices of $700 per bale remaining steady,” Cotton Australia CEO Adam Kay said.
Kay said the industry was also in talks with India to double the Free Trade Agreement’s 50,000 tonnes of tariff-free cotton.
However, ADM Trading head of cotton Arthur Spellson said there is still some caution about demand from China, with no formal change in the trade relationship.
“We know Australian cotton is being shipped into the country, but we don’t know how much is being cleared by customs for Chinese mills,” Spellson said.
“We continue to work with buyers from all over the world and our merchants have done an excellent job marketing our cotton to new and emerging markets.”
Kay said with Australia again entering an El Nino weather event, there are mixed expectations for the 2024 crop.
“Growers with irrigated cotton are already planning their water budgets to ensure good soil profiles for their crops while dryland growers are weighing up their options and hopeful of rain to provide extra incentive to plant,” Kay said.
Cotton industry forecasts for 2023-24 show a crop range from 4 to 4.5 million bales, with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) latest outlook for natural fibres forecasting the gross value of cotton production to fall to $3.2 billion, down 8% from the estimated $3.5 billion in 2022–23.
Global cotton prices are expected to increase by 2% in 2023–24, driven by expected higher consumption and lower global production.
Kay said despite macroeconomic factors dampening demand for cotton overall, farmers have some cause for optimism.
“Our sustainability efforts are making a major impact and overseas buyers want our cotton because of its reputation for quality, colour and strength,” Kay said.
“The efforts of our Cotton to Market team are also being recognised with more brands demanding our cotton for their consumer items because of our environmental outcomes and our strategic roadmap which is focussed on meeting global sustainability target areas.”
Cotton Australia warned that Australia’s key competitor Brazil has had a good season and has been exporting a substantial amount to China, while the US crop is down by around 4%. Lower production has also been reported in India and China.