ABARE'S Outlook For Cotton

04 March, 2003

__In Canberra on Tuesday March 4, 2003 ABARE (Australian Bureau of Agricultural and Resource Economics) issued its latest outlook for cotton.

ABARE is projecting the world cotton price (Cotlook ‘A’ index) to rise by 7 per cent in 2003-04 to average around US58c/lb, due to consumption outstripping production for a second year, and global stocks falling.

World cotton production is forecast to increase by 6 per cent to 20.8 million tonnes in 2003-04, with improved world cotton prices expected to spur increased production in China, India and Pakistan.

US production is expected to remain around 3.7MT, as Government support programs shield farmers from world market price signals.

World cotton production is expected to stabilise before decreasing slightly to 20.85MT in 2007-08. Improving productivity, assisted by the planting of higher yielding varieties, will enable growers to maintain output in an environment of easing real prices.

The area of cotton harvested in Australia in 2003-04 is projected at around 145,000 hectares, around 25 per cent less than this year’s substantially reduced area, and the third consecutive year of decline.

Lint production is forecast to be around 173,000 tonnes, 33 per cent lower than this year’s forecast. (Lint production is estimated to fall 60 per cent in 2002-03 to 262kt).

ABARE acknowledges that these figures will prove pessimistic if water storages are replenished, and the season facilitates significant areas of dryland cotton.

Assuming water access and longer term security of irrigation supplies are assured, ABARE expects Australian plantings of cotton to largely recover from the recent downturn, with lint production projected to rise to 522,000 tonnes by 2007-08.

ABARE’s long term projections for Australia are summarised in the following table. For comparison purposes, in 2000-01 the area harvested was 511,000ha, production 795kt, the value of production $1835 million, the volume of exports 834kt, the value of exports $1957 million, and the export unit value was A$2.35 per kilogram.

Unit 2001-02* 2002-03** 2003-04** 2004-05** 2005-06** 2006-07** 2007-08* *Area *,000ha p. 403

192

145

231

328

390

450

  • Lint* Ktp. 693

262

173

265

390

460

522

  • Value *A$mp. 1605

646

412

627

934

1119

1277

  • Export *Ktp. 718

520

207

178

280

387

454

*Export *A$mp. 1547

1086

512

427

682

949

1134

Export A$/kgp. 2.15

2.09

2.47

2.40

2.43

2.45

2.50

ABARE assumes the Australian dollar to averageUS$0.57 in 2002-03, 59c in 2003-04, 60c in 2004-05, 59c in 2005-06, 58c in 2006-07 and 57c in 2007-08, fluctuating between 50 and 70 cents. Interest rates over the same period are expected to average 8.4 per cent, 8.7 per cent, 9.0 per cent, 9.0 per cent, 8.5 per cent and 8.5 per cent respectively. The currency could move lower towards 2007-08 without continued productivity growth, economic reform, and sound economic management.

ABARE OUTLOOK CONFERENCE 2003