Newsletter - Australian Cotton Shippers Association

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Hello and welcome to the latest edition of ACSA's e-news. Well at long last we saw some very welcome rain across much of Queensland in February and March. Unfortunately, in a tragic twist of fate many North Queensland cattle graziers, after battling to hold onto the nucleus of their herd through prolonged drought, had to watch as the drought breaking rains that finally arrived produced unprecedented flooding, drowning what stock they had left.  Australian agriculture can be truly heartbreaking.   It is also unfortunate that the heavier falls fell outside the Murray Darling basin catchment leaving the majority of the dams and storages near empty and the Australia cotton growing regions still in extreme drought conditions.  On the bright side Mother Nature has reminded us that it can rain and we remain positive that the next big falls are on their way.

It will come as very little surprise given the amount of red in the diagram below that Australian production for the current 2019 season is likely to fall to 500,000 metric tonnes or 2.1-2.2 million bales. This is half of our 2018 production and at this early stage the 2020 crop outlook is even more pessimistic with a further halving again of Australian production likely to just 250,000 MT or between 1.0 -1.1m bales. We still have a good six months to go to receive potentially number changing rainfall so we remain positive that there is considerable upside in this number.

The small crop combined with the potential for strong high grade demand especially out of China has seen Australian ex-gin basis levels soar.  This combined with a low Australian dollar and reasonable ICE Futures levels have produced FOB gin prices at or over A$600 per bale for a lot of the season.  Growers have welcomed this with enthusiasm and in the main, have heavily sold their crop. Members in general have reported good export demand especially for high grades and most are likely well forward sold.

A smaller crop doesn't necessarily transfer into less to do for the merchandising sector. For most of this year we've been kept busy planning and setting up our export market development visit to China.  This included the production of 4 short film segments totalling 20 minutes in length that enable us to transport our audience into a cotton crop, through a gin and to meet with our progressive research team.  We have also been working on ways to best support the Australian cotton industry to positively promote our industry to the wider Australian community in light of the bad press and allegations resulting from drought and the impact on the Murray Darling river system.

As always this season will bring with it its own set of challenges which I am equally as sure that given the collaborative and progressive nature of our industry we will overcome with little fuss. Wishing you a great season ahead.

TAKING AUSTRALIAN COTTON TO THE WORLD

Each year ACSA embarks on an export market development visit primarily aimed at the generic promotion of Australian cotton to new and existing markets.  This year's mission saw an 11-member delegation travel to our biggest consumer and importer of Australian cotton, China. ACSA were delighted to have Cotton Australia's CEO Adam Kay and Central Queensland grower and Cotton Australia Vice Chairman Nigel Burnett join us.

China is the largest consumer of Australian cotton and by a significant margin. Visiting customers and promoting Australian cotton in this market is critical, especially under the current political climate that has manifested in US cotton imports being subject to restrictive import tariffs.  Murmurs of greater scrutiny being placed on imports of Australian goods by the Department of Commodity Inspection, General Administration of China Customs also needs our careful monitoring.

The week started off with meetings in Beijing with the China Cotton Association, China National Cotton Exchange and the Australian Trade Commission. It's pleasing to say that Australia is still viewed as a very important trading partner particularly for our high quality and highly desired cotton fibre.

Having access to accurate information about China can be somewhat challenging however the Chinese agencies we met with were open to providing and sharing information that will help support our industry into the Chinese market, now and in the future.

We held two seminars in China that reached over 325 spinning mills and industry participants. Our first seminar took place in the seaside city of Qingdao.

Qingdao Port is one of China's largest with more than 50% of all global cotton imported to China entering via Qingdao. From Qingdao, bales make their way to the textile mills located in and around north China.

Our second seminar was held in Nantong which is located roughly 160 kms northwest of Shanghai and covers the spinning industry located in the eastern central provinces. The strong attendance in both locations further demonstrates the interest and support for Australian high grade cotton in China.

Australian fibre plays a significant role within the Chinese textile market due to its consistent high quality, low levels of contamination and superior logistic channels. The lower Australian crop production estimates for this year and for 2020 is a significant concern for Chinese spinners as Australian cotton is their fibre of choice.  Higher prices however on the back of limited supply   provides an opportunity for other competitors to get a foot in the door. The smaller Australian crop and ongoing US – China trade war will likely result in very significant increases in Brazilian cotton imports into China this year. 

ACSA takes very seriously its mantle in the generic downstream promotion of Australian cotton. The export market development tours conducted each year to our new and existing markets plays a very significant part in ensuring the message that Australian cotton is superior is delivered.  The seminars also provide a vital conduit for the textile industry to supply feedback on what they see as any deficiencies in our fibre and what attributes are important to them now and likely to be in the future.