Severe Drought In Australia And Cotton Yield Recovery

 

According to the bank's analysis report, the current market forecast is that the Australian cotton output is between 72-80 bales this year, and the bank's forecast is 735 thousand packages (160 thousand tons), only 16% of the two years ago, the lowest level since 2007/08, and the export volume will be reduced by half.

 

The bank said that there will be two kinds of cotton production in Australia in the future. First, if the summer rainfall in Australia can continue to fall or even winter in the summer, the cotton production in 2020/21 will have a potential to recover to 200-300 packages. The output of 2021/22 will be fully recovered in the year. If the current drought continues, the output of cotton will drop to below 500 thousand packs.

 

The bank believes that although the future situation is difficult to predict, but the current tight supply of Australian cotton will provide support for Australia cotton prices, by the end of 2020, Australia's domestic cotton prices are expected to stabilize at 600 Australian dollars / bag. At the same time, the gradual rise of the international cotton prices and the depreciation of the Australian dollar will also provide support for the price of Australia cotton. If the Sino US trade war continues, China will continue to increase its purchase of other non American cotton, which is also advantageous to the price of Australia cotton. In the long run, the number of Australian cotton competitors is increasing. Once Australia cotton production is resumed, the competition faced by Australia cotton will be more intense, which will bring challenges to Australia cotton exports.