World mill consumption of cotton has increased by an estimated 7 per cent in 2012-13 to 23.7 million tonnes, the first increase in three years.

Driven by a more positive global economic outlook and softer cotton prices, this increase comes as Australia looks set to export a record 1.1 million tonnes of cotton this financial year.

NAB’s Head of Agribusiness for Northern Australia, David Brett, was at the Australian Cotton Trade Show in Moree recently and says it’s been a solid year for Australia’s 1,500 cotton farms. “We’ve had reports of excellent yields and high quality crops as perfect picking conditions in many cotton growing regions rounded out a solid year,” David says.

“Australia’s cotton growers have produced the highest yields in the world for the last 20 years and, with consecutive big domestic harvests, look set to become the second largest exporters in the world behind the United States.”

Australia’s record cotton exports are bucking the global trend as many countries increase their domestic consumption rather than sell their cotton overseas.

Overall, world cotton exports are predicted to fall by 4 per cent in 2012-13, according to the International Cotton Advisory Committee. More than 50 per cent of the forecast decline is expected to take place in India, Brazil and Pakistan.

“The increase in world mill consumption is encouraging, especially as it’s expected to continue in 2013-14, with a forecast increase of 2 per cent to 24.3 million tonnes,” David says.

“Although mill use in China is expected to fall to its lowest levels in a decade by 2013-14, it’s anticipated that this will be partially offset by increases in India, Bangladesh, Turkey and Pakistan.”

The predicted decrease in China is in part due to the uncertainty surrounding the country’s national cotton policy. However, bulk cotton purchases by the Chinese Government to restock its strategic reserve have stoked prices.

This has seen cotton prices defy expectations by strengthening steadily between November 2012 and March 2013 despite a global oversupply.

Although prices have been significantly lower than the March 2011 peak of 214 US cents a pound, they are reasonably favourable compared to the average for many of the past ten years. Prices are currently around the 90 US cent mark, according to the Cotlook ‘A’ Index.

For more cotton insights, download the attached fact sheet:

NAB Agribusiness Australian cotton industry fact sheet  (PDF483 KB)