Cotton prices surge on back of bumper crop: Australian growers tap into boom

Cotton prices have surged again this week, as forecasts come in of a huge crop on the back of La Nina’s bounty.

Big pick: Growers are lined up for a 5.1 million bale harvest this year on the back of a big lift in prices. Picture: Sourced

Cotton prices have surged again this week to reach $800 a bale for May-June delivery, as desperate Asian mills scour the globe for supplies and drought bites deep into one of the world’s prime production zones – West Texas.

Growers have been enjoying what are widely regarded as good prices of $550-650 a bale for the past three seasons, albeit on the back of drought.

But now as the Murray Darling Basin brims with water growers are enjoying a white gold bonanza.

Cotton Australia is forecasting a 5.1 million bale crop will pour into the nation’s gins this year, just as global demand soars on the back of shortages, compared to 2.9m bales last year and just 589,656 bales in 2020.

LFS Agri broker and Cotton Compass market intelligence group director Peter Johnson said supply chain bottlenecks had created “exaggerated demand”.

“The benefit for Australia is we have shorter transit times to most Asian markets,” Mr Johnson said.

Just how much further the current market bubble will expand and how long it will last is difficult to predict, especially with the United States prime cotton-growing region – West Texas – in the grip of an extreme drought.

The United States’ cotton growing heartland – West Texas – is in the grip of extreme drought. Source: Included

“It (the Texas drought) is an underlying factor in what’s happening in the market, but I wouldn’t hang my hat on what happens,” he said, given it could still rain between now and when US growers started planting in April.

Mr Johnson said Australian growers had already forward sold 50-60 per cent of their crop on the back of the current high prices.

“I think growers should not oversell, (but) should monitor the situation, talk to their agronomists and when they feel safe (on being able to deliver) ramp up sales.”

He said the sector still faced uncertainty on just how long Covid-driven labour shortages, shipping delays and container shortages would work to Australian growers’ advantage.

“If the bottlenecks are to resolve themselves, then you may end up with a glut of supply at the consumer end (of the market).

“It’s like a carpet snake swallowing a wombat, it will eventually get to the shitty end.”