An analysis report by Rabobank stated that Australia is experiencing the most severe drought in more than a decade. Cotton production in 2019/20 is expected to be only 160,000 tons, and the road to recovery will be very long. Even if the irrigation water situation improves significantly next year, production will have to wait until 2021/22 to return to the level of 4 million bales at the earliest.
The bank’s analysis report believes that the current market forecast for Australian cotton output this year is between 720,000 and 800,000 bales. The bank’s forecast is 735,000 bales (160,000 tons), which is only two years ago. 16%, the lowest level since 2007/08, and export volume will be reduced by half year-on-year.
The bank stated that there will be two situations in Australian cotton production in the future. One is that if the rainfall in Australia, which is now in summer, can continue into autumn or even winter, the cotton production in 2020/21 will return to With the potential of 2-3 million bales, production in 2021/22 is likely to fully recover; the other is that if the current drought continues, cotton production will drop below 500,000 bales.
The bank believes that although the future situation is difficult to predict, the current tight supply of Australian cotton will provide support for Australian cotton prices. By the end of 2020, Australian domestic cotton prices are expected to stabilize at 600 Australian dollars per bag. At the same time, the gradual increase in international cotton prices and the depreciation of the Australian dollar will also provide support for Australian cotton prices. If the Sino-US trade war continues, China will continue to increase its purchases of other non-US cotton, which will also be beneficial to Australian cotton prices. In the long term, Australian cotton competitors will increase. Once Australian cotton production recovers, the competition faced by Australian cotton will become more intense, posing challenges to Australian cotton exports. </p
