growers@sgcotton.com.au Roger Tomkins - Greenmount Press

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THE period since the end of May (when last we commented in these pages) has been characterised by a degree of stability in world cotton prices – following the sharp downturn that we described in our last contribution. The international market (as measured by the Cotlook A Index) lost over 18 per cent of its value during the month of May. For most of the period since then, prices have remained within a trading range in the low to mid 80s, rather more familiar territory than that explored over the past couple of years. The Cotlook A Index dipped below the 80-cent level for just a single day – the value (77.65) recorded on June 6, proved to be the lowest of the 2011–12 (August–July) season. The high point of the season had been reached as early as last September. The welcome stability prompted a gradual return of mill buying confidence during the course of July and, by the end of the month a broad range of import markets was daily enquiring for raw cotton to fill their short-term requirements. But demand remained almost exclusively of a hand-to-mouth nature. The market volatility of the past couple of years continues to cast a long shadow, and has instilled an aversion to risk that is evident in the behaviour both of mill buyers and international trade sellers. A glance at the prevailing world supply and demand fundamentals would also tend to argue in favour of a patient Specialists in the Sale and Valuation of Rural Properties • Rural Properties • Cargill Cotton Agents • Town Sales • Registered Valuers • Property Management • Auctions • Clearing Sales MOREE REAL ESTATE www.moreerealestate.com.au Phone: 02 7651 1100 Fax: 02 6751 1766 After Hours: Paul Kelly 0428 281 428 Cliff Brown 02 6752 3970 Allan Gobbert 0428 523 375 marketing The World Cotton Market ■ By Michael Edwards, Cotton Outlook FIGuRE 1: Cootlook A Index since January 2012 raw cotton purchasing policy. At the end of July, Cotton Outlook’s estimates continued to show a surplus of supply over demand during 2011–12 in excess of five million tonnes – an unprecedented addition to world stocks – and a further increase, of more than 1,700,000 tonnes, is forecast for 2012–13. But the location and ownership of this apparently daunting surplus supply repays some scrutiny. As has been well Cargill’s Cotton Division – Buying cotton bales direct from the grower Phil Sloan PO Box 1203 GOONDIWINDI Qld 4390 Ph: (07) 4671 0222 Fax: (07) 4671 3833 AGENTS: Pete Johnson Left Field Solutions Mob: 0409 893 139 Paul Kelly Moree Real Estate MOREE Ph: (02) 6751 1100 David Dugan TRANGIE Ph: (02) 6888 7122 Roger McCumstie BRISBANE Ph: (07) 3367 2629 cotton_aust@cargill.com www.cargill.com.au 36 — The Australian Cottongrower August–September 2012
documented, the Chinese state reserves absorbed over 3.1 million tonnes of raw cotton from the domestic 2011–12 crop between September 2011 and March of this year, to which must be added import purchases by the same organisation estimated at well over one million tonnes. Thus, an amount equivalent to over 80 per cent of the surplus is effectively in control of the Chinese government. Its intentions in respect of this huge accumulation of cotton are thus of paramount importance to the dynamics of global supply and demand, and the direction of prices. Both the domestic and import purchases were concluded at prices well in excess of those currently prevailing on the local market, which in turn are well above world values. When the current policy was unveiled in March 2010, international prices were above $2 dollars per lb, and the authors of that policy could doubtless not have foreseen the radical shift in price relationships that ensued. An intractable problem In pondering its next policy initiative, Beijing has thus faced an intractable problem in seeking to reconcile the interests of all its cotton ‘stakeholders’ – especially if one includes the national exchequer in that category. The predicament of the domestic spinning industry appears particularly acute, as mills struggle to compete with mills abroad that enjoy raw cotton replacement costs far below those with which they must contend. Cotton yarn imports have risen strongly in recent months, and may exceed an unprecedented one million tonnes this year. The government may be wary of undermining the local market: it is interesting to note that even the supportive intervention policy in marketing place during 2011–12 could not prevent a reduction in the area planted to the 2012–13 cotton crop. Moreover, only a month or so remains before the government is committed to begin buying of the domestic 2012–13 crop, at an intervention price that is still further above the current local or international parities. At the time of writing, in early August, speculation is rife as to government intentions for the disposal of a portion of its accumulated reserves on the domestic market, perhaps in conjunction with an additional import quota for use by exportorientated spinners. The eventual release of cotton is presumed to have bearish implications for the international market, simply because it implies a commensurate reduction in Chinese import demand during the 2012–13 season. As the market awaits confirmation of Chinese intentions, crop developments are under scrutiny in the major Northern Hemisphere producing countries, where cotton is approaching maturity. The United States Department of Agriculture’s August crop report (the first of the season based on field surveys) is expected to reveal the scale of abandonment in West Texas, where relief from the prevailing hot, dry conditions has been limited in recent weeks. Elsewhere, the principal focus of attention is upon India, where deficient monsoon rains have brought sowing to a standstill in some key producing regions, and threaten to undermine yield potential. India’s recent position in the international market, as the benchmark against which asking prices for competing origins must be measured, is thus not assured. The announcement in June of quite substantial increases in next season’s Minimum Support Prices for seed cotton may also prove of significance August–September 2012 The Australian Cottongrower — 37
Page 1 and 2: August-September 2012 www.cottongro
Page 3 and 4: In this issue... 2012 Cotton Grower
Page 5 and 6: The trouble with buying old technol
Page 7 and 8: We’re with you from the beginning
Page 9 and 10: BE READY FOR ULTIMATE PRODUCTIVITY
Page 11 and 12: Roger Tomkins: 0409 100 036 Louise
Page 13 and 14: Field proven irrigation power John
Page 15 and 16: 16th Cotton Conference roundup AFTE
Page 17 and 18: Delegates may have found out more t
Page 19 and 20: You’re in control of your future.
Page 21 and 22: 2013 FARM STUDY TOURS For More Info
Page 23 and 24: Water Matters… Series supported b
Page 25 and 26: Valley ® Strongest in the industry
Page 27 and 28: Nutrition feature… Impact of nitr
Page 29 and 30: (ADVERTORIAL) Local Trials Show Bio
Page 31 and 32: SOIL organic carbon (SOC) is an imp
Page 33 and 34: and minimise the loss of stubble-C.
Page 35: WORLD COMMODITY WATCH India Specula
Page 39 and 40: 3100% Australian Cotton 3100% Austr
Page 41 and 42: for the position between the gin st
Page 43 and 44: The trial crop has yielded around s
Page 45 and 46: FIGuRE: 3 Relationship between EM34
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growers@sgcotton.com.au Roger Tomkins - Greenmount Press

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