The Cotton Industry
How much cotton is produced in Australia?
Australian cotton production has expanded significantly in recent years, increasing from 19 800 tonnes in 1970-71, to a record 795 000 tonnes (3.5 million 227kg bales) for 2000-01. The area of cotton harvested in 2002-03 was estimated by the Australian Bureau of Agricultural and Resource Economics (ABARE) at 527 300 hectares.
Based on the above industry figures, the average Australian lint yield for 2002-03 is 1,673 kilograms (7.37 [227 kg] bales) per hectare, a reduction of just over 3 per cent on the world record yield of 1,731 kilograms of lint per hectare in 2001-02.
How much is the cotton industry worth to Australia?
The Australian cotton growing industry is heavily reliant on exports, with up to 95 per cent of annual production sold on the world market. In 2002-03, a total of 595 402 tonnes of raw cotton, valued at $A1 154 million, was exported. In volume terms this represents a decrease of around 16 per cent over the previous year’s exports.
The Australian cotton industry relies heavily on exports, with around 95 per cent of production sold on the world market. In 2001-02, 674 000 tonnes of raw cotton, valued at $A1 534 million, were exported. Principal export markets in 2001-02 were Indonesia, Japan and the Republic of Korea.
Since 1987-88, the gross value of production of cotton in Australia has more than tripled, while the value of exports has more than quadrupled.
Where is cotton grown in Australia?
Around 80 per cent of total production occurs in New South Wales, in the Macquarie Valley, the Namoi Valley, the Gwydir Valley and Bourke and the remainder in Queensland, in the Macintyre Valley, Darling Downs, St George, Theodore, Biloela and Emerald regions.
About 92% of total production and 85% of total area is under flood irrigation.
The area of cotton harvested in 2002-03 was estimated by ABARE at 203 000 hectares, being significantly reduced because of the drought. In 2000-01, the area harvested was 527 000 hectares.
Most Australian cotton farms are owned and operated by family farmers, with around 1500 spread across the Australian eastern states of Queensland and New South Wales. All of these farmers grow other crops and many graze sheep and cattle as well.
How is cotton harvested?
Australian cotton is picked almost exclusively by mechanical harvesters, up to four rows in width, which collect the harvested seed cotton in on-board bins for transfer to a field module builder. The builder is basically a movable bin in which the seed cotton is compacted to form a module some 10 metres x 2 metres x 2 metres.
Modules are constructed in series as the field is picked, and protected from the weather by tarpaulins.
Following picking, the module is transported to a cotton gin by road transport for processing, ie removal of the lint from the seed
Once ginned, the raw cotton is baled (227kg bales held by metal straps), wrapped in hessian bale covers and stored for export or transport to a domestic spinner.
How is cotton transported?
Following processing, bales of raw cotton are stored under cover at the gin for around 48 hours to allow for cooling, before being transported to a warehouse for storage, to a domestic spinner or direct to a sea-port for export.
Several major processors have warehouses in Sydney or Brisbane, the two major shipping ports for cotton, while other companies have their warehouses situated in the cotton producing regions.
Warehoused cotton is stored under a computerised system by variety, or by category, which allows for ease in filling an order immediately it is received.
The bales are then packed in containers (around 90 bales per 40 foot container - with a volume of 67.6 cubic metres ) for shipment, either from Brisbane or Sydney.
Cotton is generally transported by road to warehouses and domestic spinners.
How is cotton marketed?
The Australian cotton grower has the option of delivering direct to a processor, contracted by the grower to gin and sell the raw cotton on his behalf, or the grower may elect to have his cotton marketed by an independent merchant, who would contract out the ginning of the seed cotton purchased direct from the grower.
Australian raw cotton is marketed under a free market system, with no Government intervention, which has served to attract most major international cotton merchants to operate, to varying degrees, in the Australian market.
The industry in NSW has always been unregulated.
Growers in Queensland voted in 1990 to terminate a statutory authority and relinquish vesting powers, while retaining certain ginning rights for a limited time.
The free market system is characterised by:
- very strong competition among purchasers in respect of domestic as well as export markets
- a large number of sellers (there are around 900 cotton growers in Australia) supplying a relatively small number of purchasers (there are 15 marketers/merchants currently operating in Australia).
Pricing alternatives include:
- cash sale, which is simply sale following harvest for immediate payment
- seasonal pool, where each grower who delivers to the pool receives the average 'realisation price' obtained by the pool for all cotton delivered in a season, with adjustments for quality
- call pool, which is similar to a seasonal pool except that operators assist the growers to hedge, using both futures and options, for both cotton and currency
- minimum price pool, where the operators use options to guarantee a minimum return, while allowing growers to benefit from any price improvements at the time of harvest
- forward contract, which is a binding contract specifying price, quantity and quality of cotton to be delivered at a specified date.
Apart from cash sales, all the above options require commitment prior to harvest, with different risk characteristics associated with each alternative.
Growers may choose to spread their risks by committing proportions of their total production to different marketing options.
How is Cotton tested and graded?
Cotton is classed visually into grades meeting internationally accepted standards and sales are made on the basis of classed lines or on variety, or a combination of the two, depending on customer requirements.
High volume instrument (HVI) testing augments visual grading but generally is carried out for quality control purposes. The advent of HVI testing has allowed for objective measurement of up to 50% of the production of individual ginners.
For further detail contact Field Crops Branch