July 14, 2003

Australian cotton production for 2003/04 is estimated at 1.5 million bales, up just slightly at 0.1 million or 7% from last year’s drought-reduced crop, according to the US Department of Agriculture.

USDA's Foreign Agricultural Service says harvested area is estimated at 220,000 hectares, down slightly from last year’s level (see http://www.fas.usda.gov/gainfiles/200305/145885760.pdf )

Recent rainfall events suggest that drought conditions experienced in 2002/03 are slightly improved, it says. However, this past year’s severe drought has depleted irrigation water supplies and sharply lowered soil moisture levels.

Short-term rainfall (April-June) improved moisture conditions in Queensland and New South Wales. However, long-term rainfall analysis for the 24-month period July 1, 2001, to June 30, 2003, shows that hydrological drought has depleted subsoil moisture and reservoir levels in these areas, which will constrain cotton production to just slightly above last year’s level.

According to FAS attaché reports and field travel, reservoirs in the large cotton producing valleys of Gwydir and Namoi are less than 20% of capacity.

On the brighter side, water levels in the Maquarie Valley catchments (Windamere Dam, 68%) and Lachlan Valley (Lake Cargelligo, 56.2%) are doing considerably better.

Prospects for the 2003/04 cotton crop (September to November planting) are highly dependent upon the return of normal to above normal rainfall in New South Wales and Queensland during July and August.

The strong Australian currency relative to the U.S. dollar does not support cotton area expansion, despite the higher Cotlook A-Index, averaging 55 cents per pound for the August-June period, up nearly 14 cents from last year.

During the same period, the Australian dollar strengthened in terms of the US dollar from 1.905 to 1.504. The gain in cotton price has not been enough to offset the rise in the Australian dollar.

The USDA/FAS report is at http://www.fas.usda.gov/gainfiles/200305/145885760.pdf .