Due to years of drought that severely restricted the irrigation water and cultivation of cotton, the area of cotton planted in Australia has fallen to its lowest level in 40 years. The Australian Bureau of Agricultural Resources and Economics (ABARES) said in its June report that due to insufficient irrigation water supply, cotton lint output is expected to decline by 72% in 2019 - 2020 to 134,000 tons. According to the report, the area under cotton cultivation is estimated to have decreased by 83% to 60,000 hectares, the lowest level since 1978 - 1979.
The low supply of cotton in Australia is in stark contrast to the United States and most countries in the world: due to the continued blockade of the COVID-19 pandemic and the deterioration of the retail environment, global cotton is facing an oversupply situation.
The U.S. Department of Agriculture lowered its forecast for global cotton consumption in 2020 -2021 by 1.8% in June, and raised its forecast for global cotton reserves in August 2021 to at least the second highest level since 1960.
Michael o’rielley, chairman of the Australian Cotton Shippers Association, said the fall in cotton prices was due to lower demand for cotton in the global market, but the smaller scale of cotton cultivation (reduced supply) in Australia compared with competing countries provided some support for the price. However, he said: “As (global) demand continues to fall, prices will face greater pressure than it currently is.”
ABARES pointed out that due to the closure of some factories this year and the price competition of synthetic fibers, the global cotton index price is expected to decline by 12% from the same period last year to an average of 63 cents per pound from 2020 to 2021.
“We expect that this year’s processed cotton output will reach 550,000 to 600,000 bales.” Adam Kay, chief executive of Cotton Australia, said. A bag contains about 227 kg of fiber. “It was 2.2 million bales last year, and 4.1 million bales the year before, so you can see the impact of the drought.” Kai said. However, he said that the rains in February and March this year have caused rivers to flow and dams to store water, so he is optimistic about next year’s harvest, which may be as high as 1.7 million bales. “It is starting to move in the right direction.” Kay said most of this year’s and next year’s production has been pre-sold to China, which has relieved Australian farmers when coronavirus-related demand has declined.
However, the U.S. Department of Agriculture’s June Global Cotton Supply and Demand monthly report predicts that China mainland’s cotton consumption may decline by 218,000 tons from 2020 to 2021.