Soaring cotton prices delight producers caught in China’s ban

“It’s the trio of price, acres and availability of water, and we see them all. They don’t happen very often.

On Tuesday, December ICE cotton futures rose 0.2% to US $ 1.087 a pound. While prices have stabilized in recent sessions, they remain at levels not seen since 2011, when prices exceeded US $ 2 a pound.

Struggling to meet demand

Demand for cotton has been strong, especially in China, where the appetite for textiles has been so high that importers have been forced to turn to Australian imports, according to Chinese trade data.

Like many commodities, cotton prices swung in February and March 2020, dropping to their lowest level in a decade over fears COVID-19 could devastate the global economy and the garment industry.

But the rebound has seen the price more than double in the past 18 months as farmers struggle to keep up with demand and the pace of future deliveries.

“A lot of people sell at least a third of their crop before they even plant it,” Mr. O’Brien said.

Gus O’Brien says the cotton is already sold before it is even planted. Luc Hibbard

“The big sum of money is certainly around cotton which is available now. “

Two years ago, Australia produced 600,000 bales of cotton, its smallest crop since 1983. By 2020, production has grown to 2.9 million and this year is expected to reach 4.5 million bales, generating $ 3 billion in export revenues.

Importantly, the availability of water for producers has enabled farmers to transact well in advance, knowing that they will be able to maintain a crop.

“It’s especially good for guys who can sell two or three years in advance,” said Adam Kay, managing director of Cotton Australia.

“The crop that will be sown in the coming weeks, almost 40 to 50 percent is already sold before it is even in the ground. The water is in the system and they know they can get a crop.

Cotton traded at $ 725 a bale on Tuesday, an extraordinarily high price by historical standards. A physical bale of cotton is equivalent to approximately 500 pounds (227 kilograms). The ICE negotiated price for futures contracts is based on deliverable US cotton, per pound.

“Over the past 30 years, prices have only gone over $ 600 a bale about 10% of the time. We are in thin air above $ 650, ”Mr. Kay said.

Mr O’Brien’s family has been growing cotton since 1984, but he said the past few years have been particularly difficult for Australian growers.

“2018, 2019 and 2020 were really tough years,” he said.

“But the cotton industry can sleep and wake up, and right now it is in full swing. It’s good to see because cotton has so much infrastructure, and it’s a huge engine for regional economies.

The strong cotton price has come at a welcome time for producers, who will be forced to pay more for labor over the summer as the extended Australian border ban prevents backpackers and the migrant labor this season.

“We will employ four other occasional people during the summer watering season, but labor is a big problem and we feel it especially because it is still a labor intensive business,” Mr. O’Brien said.

“Labor prices have increased dramatically, around 25% for us. Traditionally, backpackers have made up a large part of our workforce, especially during this summer time. We have to look much harder.

About Harry Qualls

Harry Qualls

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