Required Report - public distribution

**Date:** 11/30/2006

**GAIN Report Number:** AS6077

AS6077

**Australia**

**Cotton and Products**

**Quarterly Update**

**2006**

**Approved by:**

![](media/image1.wmf)Kathleen Wainio, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Mike Darby, Agricultural Specialist

**Report Highlights:**

Australia is now firmly in the grip of widespread drought. Cotton
plantings have declined sharply in line with dramatic cuts in irrigation
water allocations and dwindling irrigation water reserves. Industry
reports put cotton production for 2006/07 at its lowest level in 20
years.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Canberra \[AS1\]

\[AS\]

# SECTION ONE: SITUATION AND OUTLOOK

## Summary {#summary-1}

Australia is now firmly in the grip of widespread drought. Cotton
plantings have declined sharply in line with dramatic cuts in irrigation
water allocations and dwindling irrigation water reserves. Industry
reports put cotton production for 2006/07 at its lowest level in 20
years.

Despite Post's assumption of a return to more normal weather conditions
from December onwards, planted area and subsequent cotton production in
2006/07 is likely to remain at historically low levels.

## Weather Conditions

Since Post's last report, (GAIN Report AS6053) conditions have
deteriorated from drier-than-average to full-blown drought. Spring
rains, which are critical for planting summer crops such as cotton, have
not eventuated. Furthermore, various parts of Australia have experienced
above average temperatures dramatically shortened spring conditions. The
opportunity for effective spring rainfall has now passed.

The month of September experienced below average rainfall and above
average temperatures. These conditions have followed historically low
rainfall periods beginning with the driest June on record. Bureau of
Meteorology reports describe the period from June to October as
suffering "severe rainfall deficiencies" (lowest five percent of
historical records). Some districts have suffered their lowest rainfall
period on record during this time.

Post has assumed average weather conditions from November onwards.
However, even if this occurs (and average rainfall is received), it is
unlikely to provide the relief necessary to achieve a return to normal
production conditions. The moisture deficit created by drought
conditions from June through to October will likely constrain
agricultural production over the next 12 months.

## Water usage

Industry reports state that in an average year, about half of the water
used in cotton production is met by rainfall while the remaining half is
met by irrigation.

The cotton industry accounts for about 15 percent of total agricultural
irrigation water usage while sugar, cereals and rice account for 12, 11
and seven percent respectively. Pasture production accounts for 36
percent of the volume of water used for irrigation. Up to 20 percent of
the planted area can be dryland cotton, which requires no irrigation,
however yields are typically low and the proportion of final production
derived, is much smaller.

According to industry data, without significant rainfall, irrigation
water allocation will likely not improve during the 06/07 seasons. The
catchment area of southern New South Wales has reportedly received its
lowest inflow for 115 years.

## Production

## 

Australian cotton production in 2006/07 is forecast at 290,000 MT, down
sharply from the previous forecast of 430,000 MT and down from the
600,000 MT produced in the previous year (just under 1.3 million bales).
The reduction in production is principally driven by a reduction in
planted area with yield remaining virtually unchanged from Post's
previous report (GAIN Report #AS6053). If realized, production at this
level would represent the smallest crop for 20 years.

Historically low rainfall, both in cotton growing regions and their
adjacent catchment areas, has dramatically reduced irrigation water
reserves and subsequent water allocations. This situation is not likely
to change for the 2006/07 season.

## 

![](media/image2.wmf)

Source: ABARE data

## Exports

Exports of cotton in 06/07 are forecast to fall to 458,000 MT, down
sharply from the 651,000 MT exported in the previous year. It is
important to note that the post-harvest nature of cotton production
requires the majority of the crop to be exported in the year following
its harvest. It is for this reason that exports have not yet fallen to
levels similar to production. Declining stock levels are expected to
further negatively impact exports.

# SECTION TWO: STATISTICAL TABLES

<table style="width:100%;">
<colgroup>
<col style="width: 17%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 14%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><p><strong>PSD Table</strong></p>
<p><strong>Cotton</strong></p></td>
</tr>
<tr class="even">
<td></td>
<td><strong>2004</strong></td>
<td><strong>Revised</strong></td>
<td></td>
<td><strong>2005</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
<td><strong>2006</strong></td>
<td><strong>Forecast</strong></td>
<td></td>
<td><strong>UOM</strong></td>
</tr>
<tr class="odd">
<td></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td><strong>08/2004</strong></td>
<td><strong>08/2004</strong></td>
<td></td>
<td><strong>08/2005</strong></td>
<td><strong>08/2005</strong></td>
<td></td>
<td><strong>08/2006</strong></td>
<td><strong>08/2006</strong></td>
<td><strong>MM/YYYY</strong></td>
</tr>
<tr class="odd">
<td><strong>Area Planted</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(HECTARES)</td>
</tr>
<tr class="even">
<td><strong>Area Harvested</strong></td>
<td>314</td>
<td>321</td>
<td>314</td>
<td>336</td>
<td>336</td>
<td>336</td>
<td>200</td>
<td>225</td>
<td>155</td>
<td>(HECTARES)</td>
</tr>
<tr class="odd">
<td><strong>Beginning Stocks</strong></td>
<td>894</td>
<td>901</td>
<td>894</td>
<td>1957</td>
<td>1877</td>
<td>1957</td>
<td>1938</td>
<td>1653</td>
<td>1805</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>Production</strong></td>
<td>3000</td>
<td>2962</td>
<td>3000</td>
<td>2800</td>
<td>2756</td>
<td>2600</td>
<td>1700</td>
<td>1975</td>
<td>1278</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="odd">
<td><strong>Imports</strong></td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>1</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>MY Imports from U.S.</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="odd">
<td><strong>Total Supply</strong></td>
<td>3895</td>
<td>3864</td>
<td>3895</td>
<td>4757</td>
<td>4634</td>
<td>4557</td>
<td>3638</td>
<td>3629</td>
<td>3084</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>Exports</strong></td>
<td>1998</td>
<td>1998</td>
<td>1998</td>
<td>2884</td>
<td>2990</td>
<td>2762</td>
<td>2450</td>
<td>2563</td>
<td>2018</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="odd">
<td><strong>Use</strong></td>
<td>65</td>
<td>115</td>
<td>65</td>
<td>60</td>
<td>115</td>
<td>110</td>
<td>55</td>
<td>115</td>
<td>110</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>Loss</strong></td>
<td>-125</td>
<td>-125</td>
<td>-125</td>
<td>-125</td>
<td>-125</td>
<td>-120</td>
<td>-125</td>
<td>-125</td>
<td>-120</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="odd">
<td><strong>Total Dom. Cons.</strong></td>
<td>-60</td>
<td>-10</td>
<td>-60</td>
<td>-65</td>
<td>-10</td>
<td>-10</td>
<td>-70</td>
<td>-10</td>
<td>-10</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>Ending Stocks</strong></td>
<td>1957</td>
<td>1877</td>
<td>1957</td>
<td>1938</td>
<td>1653</td>
<td>1805</td>
<td>1258</td>
<td>1077</td>
<td>1076</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="odd">
<td><strong>Total Distribution</strong></td>
<td>3895</td>
<td>3865</td>
<td>3895</td>
<td>4757</td>
<td>4633</td>
<td>4557</td>
<td>3638</td>
<td>3630</td>
<td>3084</td>
<td>1000 480 lb. Bales</td>
</tr>
<tr class="even">
<td><strong>Stock to Use %</strong></td>
<td>94.86185</td>
<td>88.83105</td>
<td>94.86185</td>
<td>65.8288</td>
<td>53.23671</td>
<td>62.84819</td>
<td>50.21956</td>
<td>40.21658</td>
<td>50.56391</td>
<td>(PERCENT)</td>
</tr>
<tr class="odd">
<td><strong>Yield</strong></td>
<td>2080</td>
<td>2009</td>
<td>2080</td>
<td>1814</td>
<td>1786</td>
<td>1685</td>
<td>1851</td>
<td>1911</td>
<td>1795</td>
<td>(KG/HA)</td>
</tr>
</tbody>
</table>

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